%1

Family caregivers are the backbone of the nation’s long-term care system and provide an estimated $470 billion worth of free care — often at great personal cost, the Wall Street Journal reported. On average, caregivers spend 26% of their personal income on caregiving expenses, according to a 2021 AARP study, with most personal spending going to housing, including home modifications. A third of caregivers dip into their personal savings, like bank accounts, to cover costs, and 12% take out a loan or borrow from family or friends. Amy Goyer is AARP’s family and caregiving expert. She has written two books on the subject and has her own consulting business. “I am a caregiving expert. How did I end up in bankruptcy?” she says. Ms. Goyer depleted her savings and ended up relying on credit cards after being financially drained by costs related to caring for her parents. After more than a decade of caring for her mom, who had a stroke, and her dad, who had Alzheimer’s, Ms. Goyer filed for bankruptcy protection in 2019. She says it shows how the unexpected costs of daily caregiving can accumulate over time and overwhelm even the most experienced of the nation’s 53 million family caregivers. Caregiving is becoming more expensive because people are living longer with more complicated medical needs and hiring help costs more. The median annual cost of in-home care rose to $54,912 in 2020, an 18.5% increase from 2016, according to Genworth, a long-term-care insurance company.

For Brandon Smith, a fourth-generation cattle rancher from Texas, the $1.9 trillion stimulus package that President Biden signed into law nearly a year ago was long-awaited relief, the New York Times reported. Little did he know how much longer he would have to wait. The legislation included $4 billion of debt forgiveness for Black and other “socially disadvantaged” farmers, a group that has endured decades of discrimination from banks and the federal government. Mr. Smith, a Black father of four who owes about $200,000 in outstanding loans on his ranch, quickly signed and returned documents to the Agriculture Department last year, formally accepting the debt relief. He then purchased more equipment for his ranch, believing that he had been given a financial lifeline. Instead, Mr. Smith has fallen deeper into debt. Months after signing the paperwork he received a notice informing him that the federal government intended to “accelerate” foreclosure on his 46-acre property and cattle if he did not start making payments on the loans he believed had been forgiven. Black farmers across the nation have yet to see any of Mr. Biden’s promised relief. While the president has pledged to pursue policies to promote racial equity and correct decades of discrimination, legal issues have complicated that goal. In May 2021, the Agriculture Department started sending letters to borrowers who were eligible to have their debt cleared, asking them to sign and return forms confirming their balances. The payments, which also are supposed to cover tax liabilities and fees associated with clearing the debt, were expected to come in phases beginning in June. But the entire initiative has been stymied amid lawsuits from white farmers and groups representing them that questioned whether the government could offer debt relief based on race. Courts in Wisconsin and Florida have issued preliminary injunctions against the initiative, siding with plaintiffs who argued that the debt relief amounted to discrimination and could therefore be illegal. A class-action lawsuit against the U.S.D.A. is proceeding in Texas this year. The Biden administration has not appealed the injunctions but a spokeswoman for the Agriculture Department said that it was continuing to defend the program in the courts as the cases move forward.

Democrats and Republicans are now weighing an extension of subchapter V's $7.5 million debt limit before it is due to sunset back to the previous amount under the Code on March 27, Bloomberg News reported. Subchapter V elections lets small businesses move through bankruptcy much more quickly and cheaply than a traditional chapter 11. There are no official creditor committees to fight, just a government appointed trustee with limited powers who assesses the company’s finances and helps reach consensus with debtholders. More importantly, company owners don’t risk losing control of their companies to creditors, a common outcome in bankruptcies. The provision grew more important when the pandemic ravaged millions of small businesses, and the government raised the debt cutoff to qualify for subchapter V to $7.5 million, from $2.7 million as part of the CARES Act in 2020, and then extended it an additional year. Without another renewal, the higher limit will expire next month, boxing out thousands of companies that could benefit as they face new challenges like supply chain woes and higher interest rates. “It has enjoyed broad bipartisan support from Congress so far, and I’m hopeful that we can soon come to an agreement to permanently authorize a higher limit,” Iowa Republican Chuck Grassley, the ranking member of U.S. Senate’s judiciary committee, said in a statement. More than 2,800 cases have been filed since the program began, according to court statistics. That number is likely to rise this year as banks and landlords get more aggressive about collecting overdue loans and back rent, restructuring advisers say. “You have a mountain of debt that has not been addressed,” said Robert J. Keach of Bernstein Shur (Portland, Maine) and co-chair of ABI's Commission on the Reform of Chapter 11 that included higher eligibility limits for subchapter V in its Final Report. Government assistance and eviction moratoriums have allowed small businesses to exist in a temporary limbo that can’t last. “I think there will be two or three times as many Sub Vs this year.” Read more.

For more information on subchapter V, be sure to visit ABI’s SBRA Resources website.

A group of Latam Airlines Group SA’s creditors said they are prepared to provide alternative financing if a bankruptcy judge rejects a financial lifeline from another creditor group, WSJ Pro Bankruptcy reported. The splinter group of creditors, which includes Pentwater Capital Management LP, Invictus Global Management LLC and Avenue Capital Group, said it is ready to backstop $400 million of a rights offering and roughly $3.27 billion in the sale of convertible notes. The creditors, whose unsecured debts include lease claims and unsecured notes maturing in 2024 and 2026, said their proposal would increase the restructuring plan’s equity value to $7.79 billion from $7.61 billion, according to the commitment letter and related materials viewed by The Wall Street Journal. The offer is an alternative to an existing financing deal proposed by another group of creditors including Sixth Street Partners that Latam is hoping to get court approval for in order to end the bankruptcy brought on by the COVID-19 pandemic. Since the current offer was presented in November, dissenting creditors, including the holders providing the new deal, have contended that Latam is paying an unreasonable amount of fees to secure the funding it needs.

Fueled by pay gains, solid hiring and enhanced savings, Americans sharply ramped up their spending at retail stores last month in a sign that many consumers remain unfazed by rising inflation, the Associated Press reported. Retail sales jumped 3.8% from December to January, the Commerce Department said Wednesday, a much bigger increase than economists had expected. Though inflation helped boost that figure, most of January’s gain reflected more purchases, not higher prices. Last month’s increase was the largest since last March, when most households received a final federal stimulus check of $1,400. The fact that consumer spending remains brisk even after government stimulus has faded — enhanced unemployment aid ended in September — suggests that Americans’ pay is rising enough to drive a healthy pace of spending and economic growth. Still, those trends could also further accelerate high inflation, which has become the biggest threat to the economy and the reason the Federal Reserve is expected to raise interest rates several times this year beginning in March. Retail sales rose solidly across the spectrum in January. Sales at general merchandise stores rose 3.6% and at department stores 9.2%. Purchases at furniture and home furnishings stores increased 7.2%. Online sales jumped 14.5%.

New York, New Jersey and several other U.S. states are delaying repayment of $40 billion in federal pandemic unemployment loans, saddling businesses with higher payroll costs instead, Bloomberg News reported. Ten states that took advances from the federal government when Covid-related job losses soared, including California and Illinois, are now piling up interest of $327.8 million and counting. The delays are burdening businesses and employees with greater unemployment costs that will continue long after the pandemic is over. An influx of stimulus funds and a surge in tax receipts as the economy rebounds are helping pad state budgets. Almost half of all U.S. states have expanded their taxable wage bases since 2020. Roughly $90 billion of states’ Covid aid remains unallocated as of November, according to the Center on Budget and Policy Priorities. But some states say they‘ve used the money on more immediate Covid-related expenses and other priorities. California committed $26 billion in federal stimulus before it had guidance on using the aid to put toward its loan, officials said.

Illinois lawmakers are considering a bipartisan proposal to authorize selling $1 billion of debt to pay for pension buyouts, in a bid to reduce the worst-rated state’s massive unfunded liability for its retirement systems, Bloomberg News reported. A bill introduced in December by state Representative Bob Morgan, a Democrat, would approve borrowing to extend a buyout option for many employees of the state, its universities and school systems. The debt would be on top of a previous authorization from 2018 to issue $1 billion of so-called pension-obligation acceleration debt, most of which has been sold. The pension-buyout program has already cut Illinois’s liability by $1.4 billion, but that still leaves an unfunded obligation of about $130 billion, state data show. A key distinction of the Illinois program is that it reduces liabilities, instead of replacing them with a bond obligation, as traditional municipal pension debt typically does, Kim said. Illinois has sold traditional pension securities, including $10 billion in 2003.