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July 6, 2009
Analysis: Bankruptcies Low
in States that Don't Seize Wages
States that allow debt collectors to seize consumers'
wages have sharply higher bankruptcy rates than neighboring states that
prohibit or strictly limit the practice, according to an Associated
Press analysis released today. After gathering millions of bankruptcy
records from 2006 until now, AP plotted the number of filings for each
U.S. county in its Economic Stress Map - a geographic, chronological and
visual depiction of economic distress based on unemployment, foreclosure
and bankruptcy data. While bankruptcy rates vary for many reasons, the
five states that prohibit or strongly limit wage seizures - North
Carolina, Pennsylvania, South Carolina, Florida and Texas - all have
drastically lower rates than their neighbors, with particularly striking
differences along borders, where economic conditions are similar but
bankruptcy rates are not. The Carolinas, Pennsylvania and Texas prohibit
wage garnishment, except in special circumstances such as unpaid taxes
or child support. Florida prohibits garnishing wages from the head of a
household. The nationwide bankruptcy rate is 42 percent higher than the
rate in those five states.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/05/AR2009070501333_pf.html'>Read
more.
Autos
Restructuring Plan
Bankruptcy Judge
face='Times
New
Roman' size='3'>Robert E. Gerber yesterday
approved a plan by General Motors to sell its best assets to a new,
government-backed company, a crucial step for the automaker to
restructure and complete its trip through bankruptcy court,
the
face='Times
New
Roman' size='3'>New York Times reported today.
The decision by Judge Gerber came after three days of hearings to
address the 850 objections to the restructuring plan and after he had
received a revised sale order from GM’s lawyers. In his opinion,
Judge Gerber wrote that he agreed with GM’s main contention that
the asset sale was needed to preserve its business in the face of steep
losses and government financing that is scheduled to run out by the end
of the week. With the approval of the restructuring plan, GM and the
government are seeking to close the sale by Thursday afternoon, when a
four-day stay of the judge’s order expires. The government, which
is financing the reorganization, had given GM until Friday to win
approval for the sale or risk losing its bankruptcy financing.
href='http://www.nytimes.com/2009/07/06/business/06auto.html?_r=1&hp=&pagewanted=print'>Read
more.
href='http://online.wsj.com/public/resources/documents/gmcourt.pdf'>Click
here to read Judge Gerber’s ruling.
FTC Urged to Require
Warnings on Chryslers
Consumer groups petitioned the Federal Trade
Commission to require that Chrysler vehicles display stickers warning
prospective buyers of liability risks, the
face='Times
New
Roman' size='3'>Washington Post reported on
Friday. The request comes after Chrysler successfully shed its
obligation for past and future product liability claims on vehicles
manufactured before May 30, when most of the company's assets were sold
to a new company run by Italian automaker Fiat. While consumers can
still file claims if their vehicles were made by the 'old' Chrysler,
that entity remains in bankruptcy and consumers are likely to recover
little, if anything. Consumer Action, the Center for Auto Safety, the
Center for Justice and Democracy, Consumers for Auto Reliability and
Safety, and the National Consumers League asked the commission to make
an emergency amendment to the 'used car rule,' which mandates window
stickers that disclose purchasing and warranty information.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/02/AR2009070203788_pf.html'>Read
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/02/AR2009070203788_pf.html'>
Fights Closings
Jim Tarbox, whose third-generation Chrysler Jeep
dealership business in Attleboro, Mass., is in peril after Chrysler
ended its franchise agreements with his two dealerships in Rhode Island
and Massachusetts as part of its bankruptcy and restructuring plan, is
appealing the terminations, the Associated Press reported on Sunday.
Tarbox says he's the lone dealer to appeal a bankruptcy judge's ruling
that terminated his franchises and those of more than 700 other dealers.
Tarbox said that he's confused by the criteria Chrysler used to
determine which franchises to close. Though his dealership posted a loss
in 2008, he said he made up for it with a profit at the North Kingstown
business and netted $100,000. Chrysler said that while Tarbox performed
above his minimum sales requirement, the fact that he sold only Jeeps
made his dealership less attractive under the new plans. As part of his
attempts to restore his businesses, Tarbox met with Reps. Jim Langevin
(D-R.I.) and Patrick Kennedy (D-R.I.), who have asked President Obama's
auto task force for the criteria Chrysler used and if they were applied
consistently to all dealerships.
href='http://www.usatoday.com/money/industries/2009-07-04-chryslerclosing-appeal_N.htm'>Read
more.
Mortgage-Rescue Plan
Expanded to Cover More Borrowers
The Obama administration is expanding the number of
borrowers who can refinance home loans under its housing-rescue program,
the
size='3'>Wall Street Journal reported on
Friday. The administration said Wednesday that borrowers with mortgages
worth up to 125 percent of their home's value will now be eligible to
refinance under its program, up from a 105 percent limit. To be
eligible, borrowers must be current on their mortgages and have loans
owned or backed by government-controlled mortgage companies Fannie Mae
and Freddie Mac. Nearly 30 percent of homeowners with mortgages owe more
than their homes are worth, according to Moody's Economy.com. The
administration had previously said that the plan could help four million
to five million borrowers who owed 80-105 percent of their home's value.
As many as three million borrowers could be eligible for the expanded
program, according to Credit Suisse.
href='http://online.wsj.com/article/SB124646753743381225.html'>Read
more. (Subscription required.)
Companies, Workers Tangle
Over Law to Curb Layoffs
Severe U.S. job cuts have exposed weaknesses in a
federal law meant to cushion the blow of mass layoffs, the
face='Times New Roman'>Wall Street Journal reported today. The
Worker Adjustment and Retraining Notification act (WARN) is designed to
let workers and their communities brace for big layoffs by providing 60
days of notice. However, a number of companies say that amid the
greatest and swiftest downturn in decades, providing early warning can
be unrealistic. Many employers have invoked exceptions in the law that
allow them to dismiss workers with little or no notice. In recent
months, dozens of employee groups have challenged abrupt terminations in
federal courts, including mortgage-company employees in Arizona,
telemarketers in West Virginia and mill workers in Alabama. Since the
recession began in December 2007, the U.S. Department of Labor says 3.8
million people lost jobs in about 37,000 mass layoffs, which it defines
as groups of 50 or more. In May, 312,880 workers were part of mass
layoffs, the highest level on record. Only a small portion of the appear
to be receiving the two-month cushion. The most recent review by the
Government Accountability Office, in 2003, showed that one-quarter of
mass layoffs met all the conditions for a WARN filing. Of those cases,
only about one-third of companies gave the proper notice.
href='http://online.wsj.com/article/SB124682983549497219.html'>Read
more. (Subscription required.)
Cities Confront
“Ghostboxes” as Retailers Cut Back
As the recession takes its toll on big-box retailers,
more communities across the country are having to confront not just the
eyesore of giant empty stores, but also the loss of jobs and tax revenue
that follow, the Associated Press reported today. With the recent spate
of bankruptcies and store closures, including Circuit City and Linens 'N
Things, more abandoned buildings will be added to a struggling
commercial real estate market. There are already hundreds of empty
'ghostboxes' around the country. Some have been transformed into
museums, community centers, hospitals or schools. Future tenants,
however, can be restricted by the former retail chain. 'Often, they sign
leases that prohibit competitors from moving in there, so they're
willing to pay on an empty building for a long time,' said Julia
Christensen, also a visiting professor at Oberlin College in Ohio. The
International Council of Shopping Centers said 6,913 retail stores - of
all types - announced closures last year, compared with 4,603 in
2007.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/05/AR2009070501365_pf.html'>Read
more.
Tropicana Las Vegas Emerges
from Bankruptcy
Tropicana Las Vegas has emerged from chapter 11
protection with new owners, the Associated Press reported on Friday.
Toronto-based Onex Corporation and former MGM Mirage President Alex
Yemenidjian acquired a majority stake in the Las Vegas hotel-casino this
week, as it completed its year-long bankruptcy process. The new owners
took over the property Thursday from the Las Vegas-based Tropicana
Entertainment LLC. The once-debt ridden casino emerged from bankruptcy
with no debt, more than $10 million in cash and $75 million in
commitments from its new owners and other equity holders to give the
property some long-awaited upgrades. The company is promising to
complete renovations to the casino floor and hotel rooms in
2010.
for Alaska Sale
Setting aside creditor concerns, Bankruptcy
Judge
size='3'>Kevin Carey on Wednesday approved the
sale procedures for some of Pacific Energy Resources Ltd.'s (PER)
assets,
size='3'>Bankruptcy Law360 reported on
Thursday. On June 26, the unsecured creditors’ committee filed its
official response to PER's motion to approve the bidding procedures for
the Beta assets and Alaska assets, accepting the sale timeline but
citing concern over the fast-paced nature of the transaction. Judge
Carey set the deadline for submitting bids related to the sale procedure
for July 13, with the auction set for July 20, according to the order. A
hearing to consider the sale motion will be held on July 27, with
objections due on July 21, according to papers filed in the bankruptcy
court.
href='http://bankruptcy.law360.com/print_article/109511'>Read more.
(Subscription required.)
Accredited Home Sale to
Vericrest Gets Judge's Approval
Over creditor objections, Bankruptcy Judge
size='3'>Mary F. Walrath approved the
controversial sale of the mortgage servicing platform of bankrupt
Accredited Home Lenders Holding Co. to Vericrest Financial
Inc., Bankruptcy Law360 reported on
Friday. In June, Accredited Home Lenders asked to sell the mortgage
servicing platform to Vericrest for $250,000. Vericrest is owned by
private equity manager Lone Star Funds, which acquired Accredited Home
Lenders in 2007 for $296 million. The deal was criticized by creditors,
including JPMorgan Chase Bank NA and two structured investment vehicles
owned by Kodiak Funding LP, which tried to block the sale. Accredited
Home Lenders transferred all but 100 of the mortgages in its portfolio
to Vericrest prior to filing its bankruptcy petition. JPMorgan and
Kodiak claimed that the “facts and circumstances” of that
transfer “have yet to be disclosed” and called the transfer
into question.
href='http://bankruptcy.law360.com/articles/109357'>Read more.
(Subscription required.)
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