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April 21, 2005
Bush Signs Bankruptcy Bill
President Bush yesterday signed the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (S. 256) into law. In a signing ceremony
attended by House and Senate bill sponsors, and Attorney General
Gonzales, Bush said “America is a nation of personal
responsibility where people are expected to meet their
obligations,” adding, that the law “will protect those who
legitimately need help, stop those who try to commit fraud and bring
greater stability and fairness to our financial system.”
The new law will make for some of the most significant changes in
consumer and business bankruptcy practice. The new law is generally
effective in 180 days, applicable only to cases filed on or after the
effective date (Oct. 17, 2005).
However, there are some important departures from this default rule,
including some provisions that are effective now. For
example,
- Sections 308, (reduction of the exemption for fraud), 322 (limiting
the exemption) and 330 of the bill, relating to the homestead exemption,
are effective to cases filed today. - Section 324, relating to the courts’ exclusive jurisdiction
over matters concerning professional employment, applies to cases filed
after today. - Section 325, changing the filing fee structure, is effective for the
two year period beginning today (subsections (b) and (c) regarding the
U.S. Trustee system fund and the allocation of fees collected by
courts). - Section 1213, amending Section 547 of the Code, overruling the
DiPrezio rule on insider preferences, applies to any case
now pending or commenced on or after today, and is thus
retroactive. - Section 1223, providing for the authorization of new bankruptcy
judges, is effective today. - Section 1234, amending Section 303 of the Code regarding involuntary
cases, is effective today and applies to cases commenced before, on or
after today and is thus retroactive. - Section 1401, increasing the cap on the wage priority from $4,000 to
$10,000 and doubling the look-back period from 90 to 180 days, is
effective today, but applies only to cases filed after today. - Section 1402, enlarging the look-back period to allow avoidance of
certain transfers to or for the benefit of insiders applies to cases
filed on or after today. - Section 1403, regarding retiree benefit plans, applies to cases
filed on or after today. - Section 1404, which makes certain debts nondischargeable if incurred
in violation of securities fraud laws is retroactive to July 30, 2002,
the effective date of the Sarbanes–Oxley Act. - Section 1405, amending Section 1104 of the Code, requiring the U.S.
Trustee to move for the appointment of a trustee where there are
“reasonable grounds to suspect” fraud, dishonesty or
criminal conduct on the part of certain corporate insiders, is effective
today, and applicable to cases filed after April 20.
Separately, CongressDaily reported that House Minority
Whip Steny Hoyer’s (D–Md.) support of the bankruptcy bill
angered some members of the more liberal faction of the Democratic
Party, underscoring old tensions with Minority Leader Nancy Pelosi
(D–Calif.) and offering Republicans a clear shot to criticize
Democratic unity. Hoyer, the number two Democrat, was one of 73
Democrats—including six others in the leadership—who voted
with the GOP. Pelosi characterized the bill on the House floor as one
that “would bind hardworking and honest Americans to credit card
companies and other lenders as modern-day indentured servants.”
“There were some folks who were not happy about it,” one
senior Democratic aide said on Tuesday.
Specter Still Open to Asbestos Changes
Supporters of asbestos legislation yesterday vowed to hold firm
against major changes to the bill in committee, although the
bill’s chief sponsor allowed there could be some modifications,
CongressDaily reported. Senate Judiciary Chairman Arlen
Specter (R–Pa.) said he could envision modifying in committee
provisions in the bill banning asbestos altogether, saying there might
be “defense uses” or other special circumstances that might
warrant the use of asbestos.
The bill Specter introduced on Tuesday would eliminate the future use
of asbestos. Likewise, he said another amendment that might be debated
would call for the re-evaluation of medical criteria outlined in the
bill if the proposed asbestos trust fund was running out of money in 20
years, the newswire reported.
Time Warner, Comcast Unveil Deal to Buy Adelphia
Time Warner Inc. and Comcast Corp. said they reached an agreement to
buy the assets of bankrupt cable company Adelphia Communications Corp.
for about $17.6 billion in cash and stock, the Wall Street
Journal reported. Time Warner and Comcast will pay $12.7 billion
in cash and 16 percent of the stock in Time Warner’s cable
subsidiary, Time Warner Cable Inc., which will become a publicly traded
company at the time the deal closes, the companies said.
Schwab and Boys & Girls Clubs of America Survey Shows Teens Need
Personal Finance Education
While youth are commonly looked to as the beacon of the future,
today’s youth may be destined to repeat the previous
generation’s missteps in money management unless they get help,
according to a recent survey by the Charles Schwab Foundation and Boys
and Girls Clubs of America, KFVS12 reported. Teens’ uncertain
grasp of basic financial concepts underscores a dramatic need for more
personal finance education—not just during April, which is
National Financial Literacy Month.
FiberMark Announces Court Decisions Regarding its Chapter 11
Process
FiberMark Inc. yesterday announced that the U.S. Bankruptcy Court for
the District of Vermont has issued orders on various matters related to
the company’s chapter 11 financial reorganization. In one of the
orders, the court directed the U.S. Trustee to appoint an independent
examiner to investigate, over the next 45 days, intercreditor disputes
and associated issues. The court set a $200,000 spending cap on the
examination process, ordered that the examiner submit written findings
by June 8 and set a status conference date of June 15 to review the case
status and the examiner’s report and recommendations.
MG Rover Cos. in Bankruptcy Protection
Eight European subsidiaries of MG Rover Group Ltd., the collapsed
British automaker, have been placed in a form of bankruptcy protection,
PricewaterhouseCoopers LLP (PwC) said yesterday, Forbes
reported. PwC said three of its partners have been appointed to run the
eight companies, which connect Rover’s manufacturing divisions
with distribution channels in Europe by coordinating branding, sales and
marketing and logistics and transportation.
Board Oks Early Payoff of Bankruptcy Debt
The financial difficulties from the Orange County bankruptcy will end
a decade early under a refinancing plan unanimously approved yesterday
by county supervisors, the Orange County Register reported.
Similar to a home-mortgage refinancing, supervisors are taking advantage
of historically low interest rates to refinance nearly $800 million in
debt leftover from the 1994 bankruptcy of county government. That year,
the county’s investment pool suffered $1.6 billion in losses after
the county treasurer’s investment schemes exploded. Supervisors
decided to forgo immediate use of savings from the refinancing, deciding
instead to retire the debt early.
AMR, Continental Post Losses as Fuel Bills Surge
Leading U.S. airlines AMR Corp. and Continental Airlines Inc.
yesterday both posted steep quarterly losses as record fuel prices
outweighed efforts to cut costs and raise fares, Reuters reported. But
the carriers’ shares rose as their losses fell short of
analysts’ forecasts.
Black’s Ravelston to Seek Bankruptcy Protection
The private holding company will file for bankruptcy protection,
Reuters reported. The closely held Ravelston group will ask an Ontario
court for protection under the Companies’ Creditors Arrangement
Act, which is similar to U.S. chapter 11 bankruptcy law.
“Ravelston Inc. has substantial assets, but a series of judicial
and regulatory decisions has denied the company the ability to realize
value from, or exercise effective control of, those assets,“
Ravelston said a statement, the newswire reported.
Continental to Raise Liquidity to Meet Target-CEO
Continental Airlines Inc. “will look to raise some liquidity
over the rest of the year” as it seeks to meet a year-end cash
target of $1.5 billion, its chief executive said today, Reuters
reported. Larry Kellner also said the airline had no plans to file for
bankruptcy protection.
Delta Posts Steep Loss Battered by Fuel Prices
Delta Air Lines posted another round of steep losses during the first
quarter on high fuel costs and transformation-plan charges, coming after
of its $5.2 billion loss in 2004, the biggest in aviation history, the
Wall Street Journal reported. Delta’s loss plummeted
to $1.07 billion, or $7.64 a share, from a loss of $383 million, or
$3.12 a share, in the year-earlier quarter.
W.R. Grace’s Bankruptcy Costs Hurt Profits
W.R. Grace and Co.’s quarterly profit fell sharply as increased
costs from its chapter 11 reorganization cut into improved sales, the
chemical maker said today, Reuters reported. Net income dropped to $3.1
million, or 5 cents per share, in the first quarter, compared with $15.8
million, or 24 cents, a year earlier, the company said.