%1

Total commercial chapter 11 filings in February 2019 increased 60 percent over the same period last year, according to data provided by Epiq Systems, Inc. The 681 commercial chapter 11 filings in February 2019 were up from the 425 commercial chapter 11 filings in February 2018. Total commercial filings were 3,139 in February 2019, representing a 10 percent increase from the 2,862 business filings recorded in February 2018. Total bankruptcy filings decreased 1 percent to 56,118 in February 2019 from the 56,732 filed in February 2018. Consumer filings decreased 2 percent in February 2019 to 52,979 from the February 2018 consumer filing total of 53,870.

Federal lawmakers say injured veterans who file for bankruptcy shouldn’t be forced to use their disability payments to pay off credit-card companies and other lenders, WSJ Pro Bankruptcy reported. Injured and disabled veterans who receive checks from the Department of Veterans Affairs and Department of Defense must classify those payments as disposable income if they file for bankruptcy protection. “Forcing our veterans and their families to dip into their disability-related benefits to pay off bankruptcy creditors dishonors their service and sacrifice,” said Sen. Tammy Baldwin (D., Wis.). “These benefits are earned, and we must do right by our veterans and protect their economic security, especially during challenging times.” Some legal experts say the rules for veterans’ disability payments are a mistake made when consumer bankruptcy laws were overhauled in 2005. “We have pretty sophisticated support for service members, but for veterans, the support that we’ve promised breaks down,” said Georgia State University law professor Jack F. Williams, who has pushed to make bankruptcy relief easier for veterans for more than a decade. Academic researchers who have studied military issues have found that veterans are more likely to struggle financially. A 2017 study from Stanford University found that veterans make up a larger portion of people who have filed for bankruptcy protection.

U.S. Senators Tammy Baldwin (D-Wis.) and John Cornyn (R-Texas) today introduced the bipartisan Honoring American Veterans in Extreme Need (HAVEN) Act (S. 679) to protect the economic security and well-being of veterans and their families who rely on disability benefits and may be experiencing financial hardship, according to a press release. Under current bankruptcy law, disability benefits paid by the Department of Veterans Affairs (VA) and Department of Defense (DoD) are included in the calculation of a debtor’s disposable income, increasing the portion of the debtor’s income that is subject to the reach of creditors. By contrast, bankruptcy law explicitly exempts Social Security disability benefits from this calculation. To remove this unequal treatment among various disability benefits, the HAVEN Act would exclude VA and DoD disability payments made to veterans or their dependent survivors from the monthly income calculation used for bankruptcy means tests. “Forcing our veterans and their families to dip into their disability-related benefits to pay off bankruptcy creditors dishonors their service and sacrifice. These benefits are earned, and we must do right by our veterans and protect their economic security, especially during challenging times,” said Baldwin. Cornyn added that “disabled veterans fought for their country at great cost, and they shouldn’t need to fight to protect their disability benefits from creditors during bankruptcy.” Holly Petraeus, member of ABI's Veterans' Task Force and former Assistant Director of the Consumer Financial Protection Bureau, Office of Servicemember Affairs, said that she was surprised to learn that a flaw in the Bankruptcy Code was denying disabled veterans the protections that it offered to all other Americans receiving disability income. "The HAVEN Act fixes that flaw, and I’m happy to join its many bipartisan co-sponsors as an individual sponsor of the bill,” Petraeus said. For more information on the HAVEN Act, please click here. 

To read the full bill text, please click here. 

For more on this issue, be sure to read this November ABI Journal article or listen to this special ABI podcast.

Reed Smith’s lawyers should have deposed rap star Rick Ross to possibly escape a malpractice claim brought by rap star and former client 50 Cent, according to a ruling from a Connecticut bankruptcy judge last week, the American Lawyer reported. Reed Smith remains entangled in a case stemming from a long-simmering feud between the two famous rappers. But under last week’s ruling, the window for 50 Cent to succeed in his malpractice claim against the firm was significantly narrowed. The dispute dates back to 2009, when 50 Cent, whose real name is Curtis Jackson III, leaked a sex tape of a woman who has a child with Rick Ross, real name William A. Robert II, during a public feud between the two. 50 Cent’s actions ultimately cost him $7 million, which a 2015 New York state court jury awarded the woman in the tape. That verdict led to a bankruptcy filing for Jackson. Reed Smith had represented 50 Cent in that sex-tape case in New York until the eve of the 2015 trial, when the rapper dismissed the firm from the case citing “lack of effective representation and inadequate pre-trial preparation.” After filing for bankruptcy, the “Just a Lil Bit” singer sued Reed Smith in 2017, asking for $32 million in total damages. Among his claims were that Rick Ross had posted the sex tape online before 50 Cent did and that Reed Smith had failed to depose the rival rapper as a way to enter that evidence into his defense. That fact could have mitigated the damages 50 Cent paid in the New York case, said U.S. Bankruptcy Judge Ann Nevins in Connecticut, ruling on Reed Smith’s motion to dismiss. Nevins, in her opinion last week, said 50 Cent has a long road in front of him to win a malpractice claim against Reed Smith. For one thing, Nevins said Ross’ testimony that he first uploaded the video would not have had an effect on 50 Cent’s liability under New York law.