New York Fed: Americans’ Credit Card Debt Had the Biggest Jump in More than 20 Years​​​

In a sign of the continuing toll from decades-high inflation, Americans loaded an extra $46 billion on their credit cards during the second quarter, and their balances saw the sharpest increase in more than 20 years, according to the Federal Reserve Bank of New York, MarketWatch.com reported. Credit card debts grew 5.5% from the first to second quarters and 13% year-over-year. The annualized increase was the sharpest cumulative increase in more than two decades, New York Fed researchers said. The trend was highlighted in the New York Fed’s quarterly report on household debt released on Tuesday. The report suggests that Americans are experiencing financial strain at a time when potential recession talk keeps rumbling and borrowing costs on debts are climbing. Overall, Americans added $312 billion in mortgage and non-mortgage debt during the second quarter — an increase that New York Fed researchers called “pretty sizable.” In fact, it’s the largest nominal increase since 2016, a New York Fed statement noted.

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Analysis: Already Battered by High Inflation, Fed’s Rate Hike Will Hit Lower-Income and Rural Americans Hard​​​

The Federal Reserve hiked its benchmark rate by 0.75 percentage points on July 27 in an effort to temper the rising costs of consumer goods and services. While economists say that raising the interest rate will help cool consumer demand and hopefully ease record-high inflation, it will also raise the cost of borrowing for everything from houses to car loans. Lower-income households with credit card debt — those with a median income of between $16,290 per year and $35,630 per year — typically have a higher debt-to-income ratio than wealthier Americans, according to Federal Reserve data, MarketWatch.com reported. The Fed’s four rate hikes this year could hurt low-income families more than most, said Radha Seshagiri, the public policy and system change director at SaverLife, a nonprofit that helps families with low and moderate incomes save money. They are already struggling to pay back credit card loans and purchase big-ticket items like automobiles due to the rising costs, she said. Inflation hit a 41-year high in June, with prices on consumer goods and services increasing 9.1% from the year before. The price of groceries last month shot up by 12.2% on the year, and gas has risen by more than $1 from this time last year to $4.25 on Thursday. However, the recent rise in the cost of living has had an even bigger impact on rural America, according to a report by Iowa State University Professor Dave Peters that studied the impact of inflation on small towns. “The biggest inflationary impact on rural households has been the increased cost of transportation, which is essential in rural areas where residents have to drive longer distances to work, school, or to shop for daily needs.” Prof. Peters wrote.

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Applications for U.S. Jobless Claims Up Again Last Week​​​

More Americans applied for jobless benefits last week as the number of unemployed continues to rise modestly, though the labor market remains one of the strongest parts of the U.S. economy, the Associated Press reported. Applications for jobless aid for the week ending July 30 rose by 6,000 to 260,000 from the previous week’s 254,000, the Labor Department reported Thursday. First-time applications generally reflect layoffs. The four-week average for claims, which evens out the weekly ups and downs, also rose from the previous week, to 254,750. The total number of Americans collecting jobless benefits for the week ending July 23 rose by 48,000 from the previous week, to 1,416,000. That figure has been near 50-year lows for months. On Tuesday, the Labor Department reported that American employers posted fewer job openings in June as the economy contends with persistently high inflation and rising interest rates. Job openings fell to a still-high 10.7 million in June from 11.3 million in May. Job openings, which never exceeded 8 million in a month before last year, had topped 11 million every month from December through May before dipping in June. The Labor Department’s jobs report for July, due out Friday, is expected to show that employers tacked on another 250,000 jobs last month, which would be a healthy number in normal times but would be the lowest since December 2020, when the global economy was being ravaged by the pandemic. Though the labor market is still considered strong, there have been some high-profile layoffs announced recently by Tesla, Netflix, Carvana, Redfin and Coinbase. A host of other companies, particularly in the tech sector, have announced hiring freezes.

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Analysis: How Landlords Are Evading Taxes and Fueling the Housing Crisis​​​

Opaque ownership laws that make it easier for property owners to avoid paying taxes are compounding a national housing crisis fueled by inflation and a shortage of low- and moderate-income homes, The Hill reported. Limited liability companies — or LLCs — are a common way for landlords to own the real estate on which they can charge rents. But LLCs often hide the identities of the people that stand behind them, allowing property owners to be shielded from legal consequences when they fail to pay their property taxes. Properties can then go into tax foreclosure and be effectively taken off the market in cities where housing is in short supply, further driving up prices and forcing renters to live far away from where they work. Studies have “linked LLC ownership to property disinvestment, tax abandonment, even completely walking away from properties,” Princeton sociology professor Matthew Desmond told the Senate Banking, Housing and Urban Affairs Committee on Tuesday. A 2019 study by Harvard Joint Center for Housing Studies Fellow Adam Travis linked disrepair and disinvestment in housing to LLCs, which became widely available to property owners during the 1990s. “Over the past two decades, the advent and diffusion of the limited liability company (LLC) has reshaped the legal landscape of rental ownership,” the study found. “Increasingly, rental properties are owned by business organizations that limit investor liability, rather than by individual landlords who own property in their own names.” The study found “that signs of housing disinvestment increase when properties transition from individual to LLC ownership.” The share of rental properties owned by professional landlords is increasing across the country as rents and mortgage rates are driven higher by interest rate increases from the Federal Reserve. Professional “investors made 28.1 percent of all single-family [home] purchases in February, a record high,” a July report from real estate market data firm CoreLogic found.

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Don't Miss the "Dealing with Digital Assets" abiLIVE Webinar on August 24!​​​

Sponsored by ABI's Secured Credit Committee, the August 24 abiLIVE webinar will delve into issues involving digital accounts, cryptocurrency and NFTs, including how to get secured and perfected, how to liquidate, and bankruptcy-specific considerations. The panelists also will discuss UCC Article 12 and its impact on the digital-asset world for secured parties. The presentation will help practitioners better understand the considerations and issues they should be spotting when advising their constituents on dealing with digital assets. Register for free!

International Committee Seeking Nominations for the First Annual "Matter of the Year" by Sept. 15​​​

ABI's International Committee is proud to announce its First Annual International Committee Matter of the Year Award! The nominated matter needs to involve the U.S. and other jurisdictions and be of some international legal significance and/or impact to international insolvency, as well as international cooperation. Nominations are due September 15, 2022, by 5:00 PM EDT. For more information, visit the International Committee page.

USTP Seeking Applicants Interested in Serving as Subchapter V Trustees​​​

The U.S. Trustee Program is seeking resumes from persons wishing to be considered for inclusion in a pool of trustees who may be appointed on a case-by-case basis to administer cases filed under the Small Business Reorganization Act of 2019 (subchapter V), according to a release from the U.S. Department of Justice. Those with business, managerial, consulting, mediation and operational experience are encouraged to apply. The appointment is for cases filed in the U.S. Bankruptcy Court for the Western District of Michigan. Subchapter V trustees may receive compensation and reimbursement for expenses in each case in which they serve, pursuant to court order under 11 U.S.C. § 330. Trustees are not federal government employees. For additional information, qualification requirements and application procedures, click here.

Bankruptcy Judgeship Applications Being Sought for C.D. Ill. and E.D.N.Y.​​​

The following two court vacancies are listed below with links and application deadlines:

- Bankruptcy Judgeship for C.D. Ill. (Application deadline Aug. 29)

- Bankruptcy Judgeship for E.D.N.Y. (Application deadline Aug. 26)

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