Supreme Court Won’t Rule on Remedies for Overpayments and Violation of Rule 3002.1
The Supreme Court on June 13 declined to hear two bankruptcy cases in the term to begin next October.
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Janet Yellen Rejects Idea Corporate Greed Is to Blame for Inflation
Treasury Secretary Janet Yellen rejected the idea that corporate greed is causing the U.S. inflation surge, differing with fellow Democrats who have accused big businesses of price gouging, Bloomberg reported. “Demand and supply is largely driving inflation,” Yellen said, when asked about the view that corporate greed is a key cause. She said that it’s true that price-to-cost margins have gone up, but she said that’s not what’s driving inflation. President Joe Biden has threatened price-gouging probes in gasoline, and House Speaker Nancy Pelosi backed a bill in her chamber aimed at combating that practice — saying last month that there was “a major exploitation of the consumer” taking place. Yellen said that she supports a “strong” antitrust policy. She reiterated that, in the battle against inflation, the administration looks “first and foremost” to the Federal Reserve to deal with it. She warned that there’s a risk of higher food and energy prices, including for gasoline. But she said there’s “nothing to suggest a recession is in the works.”
CFPB Seeks Ban Against Operator of Student Loan Debt Relief Scam Reboot
The Consumer Financial Protection Bureau (CFPB) has taken action against the owner of a student-loan debt relief company for allegedly withdrawing hundreds of thousands of dollars from student borrowers’ bank accounts, without authorization, according to a press release on the agency’s website. The CFPB alleges that Frank Gebase, Jr. controlled a company that took the borrowers’ money after obtaining their names and account information from a previous student-loan debt-relief scammer that the CFPB shut down. The CFPB’s proposed settlement, if entered by the court, would ban Gebase from the debt-relief industry and order him to pay a penalty. On March 30, 2016, the CFPB ordered Student Aid Institute to shut down its debt-relief operations and rescind all of its consumer agreements. Gebase had leased office space to Student Aid Institute, and he was a longtime associate of its principal. In 2016, Gebase founded Processingstudentloans in San Diego, and he was the founder, sole owner, CEO, and sole corporate officer. The CFPB alleges that from approximately May 20, 2016 to April 5, 2017, Processingstudentloans was a non-bank provider of student-loan debt-relief services. As alleged in the complaint, without authorization, Processingstudentloans collected recurring fees from customers, typically $39 per month, stealing hundreds of thousands of dollars in total fees from hundreds of student loan borrowers. In addition to controlling Processingstudentloans and facilitating the debits, Gebase was aware or should have known that the debits were unauthorized and unlawful. By April 2017, under this scheme, Gebase’s company had unlawfully debited more than $240,000 from hundreds of student borrowers’ accounts.
ABI Applauds House Passage of the "Bankruptcy Threshold Adjustment and Technical Corrections Act"
Alexandria, Va. — The American Bankruptcy Institute (ABI) applauds the House of Representatives passage (392-21) yesterday of the amended S.3823, the “Bankruptcy Threshold Adjustment and Technical Corrections Act.” The Senate on April 7 had passed the legislation introduced by Sen. Charles Grassley (R-Iowa) to raise the debt limit back to $7.5 million for small businesses electing to file for bankruptcy under subchapter V of chapter 11. Consistent with the recommendations of ABI’s Commission on Consumer Bankruptcy, the substitute also raises the debt limit for individual chapter 13 filings to $2.75 million and removes the distinction between secured and unsecured debt for that calculation. All provisions of the legislation will sunset two years after enactment. The legislation will now be sent to President Biden to be signed into law.
Due to priorities and procedural issues, the Senate was not able to address S.3823 prior to the March 27 sunset of the $7.5 million eligibility limit for small businesses electing to file for bankruptcy under subchapter V of chapter 11. The debt-eligibility limit returned to the original $2,725,625 threshold on March 28 that had been established under the “Small Business Reorganization Act of 2019” (SBRA). In addition to providing a two-year extension of the subchapter V debt limit back to $7.5 million, the bill also covers any subchapter V cases that were pending at the time of the March 27 sunset.
“Amid growing economic challenges, ABI commends Congress on their determined action and efforts to provide greater access for struggling small businesses and families to achieve a financial fresh start,” said ABI Executive Director Amy Quackenboss. “Senator Grassley’s legislation re-establishing the debt limit for subchapter V at $7.5 million and increasing the eligibility of individuals to access relief under chapter 13 provides a cost-effective and efficient path for more consumers and businesses to reorganize their finances.”
As a direct result of the work of ABI’s Commission to Study the Reform of Chapter 11, the Small Business Reorganization Act of 2019 (SBRA) became effective on February 19, 2020, to provide Main Street business debtors with a more streamlined path for restructuring their debts. Since then, more than 3,000 debtors have elected to file under subchapter V of chapter 11. In response to the economic distress caused by the COVID-19 pandemic, the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act; P.L. 116-136) was enacted on March 27, 2020, which increased the debt-eligibility limit from $2,725,625 to $7,500,000 for small businesses looking to file under the SBRA’s subchapter V. Congress extended the limit last year with the enactment of the “COVID-19 Bankruptcy Relief Extension Act of 2021,” but the threshold returned to $2,725,625 on March 27.
Sen. Grassley (R-Iowa) originally introduced the bipartisan S.3823 on March 14, aiming to make the subchapter V debt limit permanent at $7.5 million and index it to inflation, increase the chapter 13 debt limit to $2.75 million and remove the distinction between secured and unsecured debt in that calculation, make Small Business Reorganization Act technical amendments, and make Bankruptcy Administration Improvement Act technical amendments. Senate Judiciary Chair Richard Durbin (D-Ill.) and Sens. Sheldon Whitehouse (D-R.I.) and John Cornyn (R-Texas) are both co-sponsors of the legislation.
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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 10,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org.
ABI Applauds House Passage of the "Bankruptcy Threshold Adjustment and Technical Corrections Act"
The American Bankruptcy Institute (ABI) applauds the House of Representatives passage (392-21) yesterday of the S.3823, the “Bankruptcy Threshold Adjustment and Technical Corrections Act.” The Senate on April 7 had passed the legislation introduced by Sen. Charles Grassley (R-Iowa) to raise the debt limit back to $7.5 million for small businesses electing to file for bankruptcy under subchapter V of chapter 11. Consistent with the recommendations of ABI’s Commission on Consumer Bankruptcy, the substitute also raises the debt limit for individual chapter 13 filings to $2.75 million and removes the distinction between secured and unsecured debt for that calculation. All provisions of the legislation will sunset two years after enactment. The legislation will now be sent to President Biden to be signed into law.
May Total Commercial Chapter 11 Bankruptcy Filings Increased 34 Percent over the Same Period Last Year, Total Bankruptcy Filings Fall 10 Percent
There were 330 commercial chapter 11 filings registered in May 2022, an increase of 34 percent from the 246 filings in May 2021, according to data provided by Epiq Bankruptcy, the leading provider of U.S. bankruptcy filing data. Overall commercial filings decreased 14 percent in May 2022, as the 1,738 filings were down from the 1,813 commercial filings registered in May 2021. Small business filings, captured as subchapter V elections within chapter 11, registered an increase of 21 percent to 123 in May 2022 from 102 in May 2021. Total bankruptcy filings were 31,314 in May 2022, a 10 percent decline from the May 2021 total of 34,783. Noncommercial bankruptcy filings totaled 29,576 in May 2022, also registering a 10 percent decrease from the May 2021 noncommercial total of 32,970.
Embattled San Antonio Lawyer, Accused of Defrauding Clients of Millions, Files Huge Bankruptcy Case
Embattled San Antonio attorney Christopher “Chris” Pettit and his law firm, accused of defrauding clients of millions of dollars, have filed for bankruptcy protection, the San Antonio News-Express reported. Pettit listed assets of almost $27.8 million and debts of $115.2 million in his individual chapter 11 petition, making it one of the largest individual bankruptcy cases ever filed in San Antonio. His firm, Chris Pettit & Associates, reported assets valued at no more than $50,000. The filings on Wednesday trumped plans by six Pettit creditors to file involuntary chapter 7 cases against him and his firm today, said Raymond Battaglia, their San Antonio bankruptcy lawyer. The bankruptcy lawyer representing Pettit and his firm has indicated he intends to ask the court to appoint a trustee to oversee the debtors’ estates, Battaglia said. “This case is going to require someone who can trace assets and trace transfers and things that (Pettit’s) done with other people’s monies over the last couple of years,” he added. The bankruptcies come after numerous lawsuits against Pettit and his firm, most alleging they stole millions of dollars from clients. He has given general denials in responses to some of the suits, but he and his firm also reached an agreed judgment with some plaintiffs who were awarded — at least on paper — millions in economic and punitive damages. Others allege that they lost far less, but that the amounts nonetheless represent their life savings. The FBI also is investigating. Pettit specializes in estate-planning and personal-injury law, according to his firm’s website.
May Total Commercial Chapter 11 Bankruptcy Filings Increased 34 Percent over the Same Period Last Year, Total Bankruptcy Filings Fall 10 Percent
Alexandria, Va. — There were 330 commercial chapter 11 filings registered in May 2022, an increase of 34 percent from the 246 filings in May 2021, according to data provided by Epiq Bankruptcy, the leading provider of U.S. bankruptcy filing data. Overall commercial filings decreased 14 percent in May 2022, as the 1,738 filings were down from the 1,813 commercial filings registered in May 2021. Small business filings, captured as subchapter V elections within chapter 11, registered an increase of 21 percent to 123 in May 2022 from 102 in May 2021. Total bankruptcy filings were 31,314 in May 2022, a 10 percent decline from the May 2021 total of 34,783. Noncommercial bankruptcy filings totaled 29,576 in May 2022, also registering a 10 percent decrease from the May 2021 noncommercial total of 32,970.
“The bankruptcy market continues to navigate uncharted waters as the effect of the global pandemic lingers and the uncertainty around the U.S. public markets enters the mix,” says Chris Kruse, senior vice president at Epiq. “As the economy declines, the bankruptcy market will likely become more active.”
May’s commercial chapter 11 filings increased 32 percent from the 250 filings in April 2022. The commercial filing total represented a 2 percent decrease from the April 2022 commercial filing total of 1,775. Subchapter V elections within chapter 11 increased 23 percent from the 100 filed in April 2022. May’s total bankruptcy filings represented a 4 percent decrease when compared to the 32,518 total filings recorded the previous month. Total noncommercial filings for May also represented a 4 percent decrease from the April 2022 noncommercial filing total of 30,743.
“Rising interest rates, inflationary price increases and global supply concerns are compounding the economic challenges for financially distressed families and businesses,” said ABI Executive Director Amy Quackenboss. “Legislation currently being considered in the House would expand the debt-eligibility limits for small businesses and individuals that would create greater access and a more efficient process for families and businesses looking for a financial fresh start.”
The debt-eligibility limit for small businesses to elect subchapter V reverted in March to the original $2,725,625 threshold from the expanded amount of $7.5 million first established under the CARES Act of 2020. Legislation was passed in the Senate in April to restore the eligibility limit back to $7.5 million and cover any subchapter V cases that were pending at the time of the March 27 sunset. Consistent with the recommendations of ABI’s Commission on Consumer Bankruptcy, the substitute also continues to push for the debt limit for individual chapter 13 filings to be increased to $2.75 million and to remove the distinction between secured and unsecured debt for that calculation. Both of the expanded eligibility limits for small business subchapter Vs and consumer chapter 13s would sunset after two years.
ABI has partnered with Epiq Bankruptcy to provide the most current bankruptcy filing data for analysts, researchers, and members of the news media. Epiq Bankruptcy is the leading provider of data, technology, and services for companies operating in the business of bankruptcy. Its new Bankruptcy Analytics subscription service provides on-demand access to the industry’s most dynamic bankruptcy data, updated daily. Learn more at https://bankruptcy.epiqglobal.com/analytics.
For further information about the statistics or additional requests, please contact ABI Public Affairs Officer John Hartgen at 703-894-5935 or jhartgen@abiworld.org.
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Epiq Bankruptcy is a division of Epiq, a global technology-enabled services leader to the legal services industry and corporations that takes on large-scale, increasingly complex tasks for corporate counsel, law firms, and business professionals with efficiency, clarity, and confidence. Clients rely on Epiq to streamline the administration of business operations, class action and mass tort, court reporting, eDiscovery, regulatory, compliance, restructuring, and bankruptcy matters. Epiq subject-matter experts and technologies create efficiency through expertise and deliver confidence to high-performing clients around the world. Learn more at https://www.epiqglobal.com.
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 10,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abi.org. For additional conference information, visit http://www.abi.org/calendar-of-events.
Bankruptcy Courts in Colorado and Minnesota Bar Bifurcated Fee Arrangements
Local rules require lawyers to prepare and fill all required chapter 7 papers regardless of whether the debtor pays the fee or agrees to pay the fee.