USTP Issues Guidelines for Enforcement of Bifurcated Chapter 7 Fee Agreements​​​

The U.S. Trustee Program (USTP) issued a memorandum on June 10 providing general guidelines for USTP personnel to follow in evaluating bifurcated fee agreements in individual chapter 7 cases. "'Bifurcated' fee agreements — which split an attorney’s fee between work performed prior to the filing of a bankruptcy petition and work performed postpetition — have become increasingly prevalent in chapter 7 consumer bankruptcy cases," according to the memo. It is the USTP’s position that, absent contrary local authority, bifurcated fee agreements are permissible, provided they do not harm debtors or the integrity of the bankruptcy system. The guidelines generally provide that attorneys’ fees under bifurcated agreements must be fair and reasonable, that attorneys must provide adequate disclosures to their clients and obtain their fully informed consent to a bifurcated agreement, and that attorneys must make adequate public disclosures in compliance with the Bankruptcy Code and Federal Rules of Bankruptcy Procedure. Click here to read more.

Fewer Americans Applied for Unemployment Aid Last Week​​​

Fewer Americans applied for unemployment benefits last week as the U.S. job market remains strong in the face of rising inflation and interest rates. Applications for jobless aid fell by 3,000 to 229,000 for the week ending June 11, down from the previous week’s 232,000, according to a Labor Department report today, the Associated Press reported. The four-week average for claims, which evens out some of the week-to-week volatility, rose by 2,750 from the previous week to 218,500. The total number of Americans collecting jobless benefits for the week ending June 4 was 1,312,000. That figure has hovered near 50-year lows for months. Earlier this month, the government reported that U.S. employers added 390,000 jobs in May, extending a streak of solid hiring that has bolstered an economy under pressure. Though the job growth in May was healthy, it was the lowest monthly gain in a year, and there have been signs that more layoffs could be on the horizon.

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Next Week at ABI's Central States Bankruptcy Workshop: Mass Tort Tidal Wave, Subchapter V, Student Loans and More!​​​

ABI's 2022 Central States Bankruptcy Workshop returns next week to the Grand Geneva Resort & Spa in Lake Geneva, Wis., bringing a flexible workshop format for both consumer and business practitioners. The workshop’s repeating sessions allow attendees to customize their learning experience while earning up to 8.25/9.5 hours of CLE/CPE, including up to 3 hours of ethics. A special judicial roundtable session will feature 13 bankruptcy judges representing Indiana, Illinois, Minnesota, Michigan, Ohio and Wisconsin. For a full list of all the sessions, great networking events and to register, please click here.

U.S. Home Equity Hits Highest Level on Record: $27.8 Trillion​​​

Total U.S. home equity increased almost 20% in the first quarter to $27.8 trillion, a record high, according to the Federal Reserve, the Wall Street Journal reported. The increase is another consequence of a red-hot housing market. Double-digit price gains have driven some would-be homeowners out of the market. At the same time, rising home values are boosting the finances of the Americans who already own them. Still, rising rates have made it more expensive for homeowners to use that equity (the difference between the market value of a property and the mortgage balance). The Federal Reserve raised its benchmark rate by 0.75 percentage point Wednesday, its largest increase since 1994, in an effort to cool persistent inflation. About 60% of equity was withdrawn via cash-out refinances in 2021, according to mortgage-data firm Black Knight. Homeowners are likely to turn to home-equity lines of credit, said Andy Walden, vice president of enterprise research strategy at Black Knight. Borrowing costs on such products are more closely tied to the Fed’s benchmark rate, which has moved less than mortgage rates this year. The Fed is expected to raise rates again at its meeting this week. (Subscription required.)

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Commentary: Examining What the Fed’s Rate Increase Means for Credit Cards, Car Loans and Student Loans*​​​

The Fed’s decision to raise its key interest rate by three-quarters of a percentage point is good news for savers, but less so for borrowers: They can expect to pay more on credit card debt, car loans and certain student loans, according to a New York Times commentary. Credit card rates are closely linked to the Fed’s actions, so consumers with revolving debt can expect to see those rates rise, usually within one or two billing cycles. The average credit card rate was recently 16.73 percent, according to Bankrate.com, up from 16.34 percent in March. Car loans are also expected to climb, but those increases continue to be overshadowed by the rising cost of buying a vehicle (and the pain of what you’ll pay at the gas pump), according to the commentary. Car loans tend to track the five-year Treasury, which is influenced by the federal funds rate — but that’s not the only factor that determines how much you’ll pay. A borrower’s credit history, the type of vehicle, loan term and down payment are all baked into that rate calculation. The average interest rate on new car loans was 5.08 percent in May, according to Dealertrack, which provides business software to dealerships. That’s almost a full percentage point higher than December 2021, when rates had reached their lowest point since 2015 and when the firm began tracking rates. Whether the rate increase will affect student loan payments depends on the type of loan. Current federal student loan borrowers — whose payments are on pause through August — aren’t affected because those loans carry a fixed rate set by the government. But new batches of federal loans are priced each July, based on the 10-year Treasury bond auction in May. Rates on those loans have already jumped: Borrowers with federal undergraduate loans disbursed after July 1 (and before July 1, 2023) will pay 4.99 percent, up from 3.73 percent for loans disbursed during the year-earlier period. Private student loan borrowers should also expect to pay more; both fixed- and variable-rate loans are linked to benchmarks that track the federal funds rate. Those increases usually show up within a month. But the Fed is not finished and has penciled in rates hitting 3.4 percent by the end of 2022.

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*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

U.S. Treasury: Cryptocurrency Market Turmoil Underscores 'Urgent Need' for Regulation​​​

Recent turmoil in the cryptocurrency market underscores the "urgent need" for regulatory frameworks that reduce the risks posed by digital assets, a U.S. Treasury official said today, as investors have been pulling assets out of the sector, Reuters reported. “Treasury is monitoring activity in the crypto market. We believe the recent turmoil only underscores the urgent need for regulatory frameworks that mitigate the risks that digital assets pose," the official said. "We continue to work closely with our regulatory partners, as they take action under their existing authorities, and offer guidance and expertise as Congress considers legislation to further address these risks.”

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