| NEWS AND ANALYSIS
ANALYSIS: NEARLY 7 MILLION STUDENT LOANS ARE IN DEFAULT
Nearly 7 million Americans have gone at least a year without making a payment on their federal student loans, a high level of default that suggests that there is a widening swath of those unable or unwilling to pay back their school debt, the Wall Street Journal reported on Saturday. As of July, 6.9 million Americans with student loans hadn't sent a payment to the government in at least 360 days, quarterly data from the Education Department showed this past week. That was up 6 percent, or 400,000 borrowers, from a year earlier. That translates into about 17 percent of all borrowers with federal loans being severely delinquent. Millions of other borrowers are months behind but haven't hit the 360-day threshold that the government defines as a default. Read more. (Subscription required.)
In related news, the Consumer Financial Protection Bureau is considering suing Navient Corp., the largest student loan company in the U.S., for allegedly cheating borrowers, Collections&CreditRisk reported today. Navient officials disclosed Monday in a Securities and Exchange Commission filing that the company received a letter from the CFPB notifying executives that the bureau's enforcement team had found sufficient evidence, after a two-year investigation, to determine that Navient violated consumer protection laws. For-profit college chains Corinthian Colleges Inc. and ITT Educational Services received similar letters from the CFPB before both were ultimately sued. Navient has been under investigation by federal and state authorities for allegedly overcharging borrowers and mistreating them. Read more.
COMMENTARY: DETROIT AND PUERTO RICO, A TALE OF TWO DEBT ISSUERS
In August 2015, two municipal issuers tested the financial markets: the city of Detroit and the Puerto Rico government-owned Puerto Rico Aqueduct and Sewer Authority (PRASA), according to a commentary yesterday in The Hill. Detroit filed for bankruptcy in 2013, its bondholders taking deep discounts. PRASA has always met its credit obligations. Detroit easily placed its debt at 4.5 percent, while PRASA had difficulty in placing debt at more than 9 percent. Meanwhile, the government-owned Puerto Rico Electric Power Authority (PREPA) is shut out of the capital markets. In 2013, Detroit filed for a debt restructuring under chapter 9, which gave the city the possibility for a new financial beginning, and the results thus far are promising, according to the commentary. As Congress has been unwilling to extend chapter 9 protection to Puerto Rico, the result has led to difficult negotiations between bondholders and Puerto Rico government instrumentalities. Puerto Rico is unable to use the possibility of filing for bankruptcy as leverage to reach reasonable agreements. Negotiations could drag on for a long time, becoming an impediment to Puerto Rico's economic recovery. Read the full commentary.
CREDIT CARD DELINQUENCY RATES REMAIN LOW DESPITE INCREASE IN SUBPRIME BORROWERS
Subprime consumers are being offered more credit cards, but delinquency rates remain low, according to the latest TransUnion Industry Insights Report, Collections&CreditRisk reported today. The credit card delinquency rate (the ratio of borrowers 90 days or more delinquent on their general purpose credit cards) remained steady at 1.19 percent in Q2 2015, essentially unchanged from 1.17 percent in Q2 2014. Along with new account growth in the subprime credit tier (those consumers with a VantageScore 3.0 credit score lower than 601), the average new account credit line for subprime consumers continued to drop in Q2 2015. The average new credit line for the tier declined to $923 in Q2 2015, the lowest mark since Q2 2012, when average new account lines reached $896. Read more.
COMMENTARY: TOO MANY LAW STUDENTS, TOO FEW LEGAL JOBS
Ten months after graduation, only 60 percent of the law school class of 2014 had found full-time long-term jobs that required them to pass the bar exam, according to an editorial today in the New York Times. Even that improvement over the class of 2013 (a 57 percent employment rate) came with three asterisks: Last year, the American Bar Association changed the job-reporting rules to give law schools an extra month for the class of 2014 to find jobs; graduates employed in law-school-funded positions count in the employment rate; and the number of jobs that require bar passage fell from 2013 to 2014. Students now amass law school loans averaging $127,000 for private schools and $88,000 for public ones. Since 2006 alone, law student debt has surged at inflation-adjusted rates of 25 percent for private schools and 34 percent for public schools. Read the full commentary.
JUST ANNOUNCED: IRELAND'S FORMER PRIME MINISTER JOHN BRUTON TO KEYNOTE INTERNATIONAL INSOLVENCY & RESTRUCTURING SYMPOSIUM!
Ireland's Former Prime Minister John Bruton will be the keynote speaker at ABI's Eleventh Annual International Insolvency and Restructuring Symposium in Madrid, Spain. The Symposium, taking place on Oct. 23 at the Hotel Ritz Madrid, provides attendees with an interactive learning experience led by a faculty of prominent international insolvency practitioners. The advisory board for the program is chaired by Ian G. Williams of Baker Tilly Restructuring & Recovery LLP (London, England). Sessions at the Symposium will include:
- America Now! Current U.S. Restructuring Trends
- What's Wrong with U.S. Chapter 11? A Guide for European Practitioners
- Current Restructuring Issues in Southern Europe
- Investing in Distressed Assets and Infrastructure in Europe: Market Trends, Successes and Failures
Register here.
ABI WANTS TO SEE YOU IN PHOENIX THIS DECEMBER FOR THE WINTER LEADERSHIP CONFERENCE!
Join ABI on Dec. 3-5, 2015, at the historic Arizona Biltmore in downtown Phoenix for the 27th Annual Winter Leadership Conference. This can't-miss event is always a member favorite and this year will be no exception! There will be topics designed for consumer and business practitioners, as well as financial advisors. Earn up to 12/14 hours of CLE/CPE credit and 2.75/3 hours of ethics, and enjoy a plethora of social and networking events.
Highlights from the conference include:
- Optional events, including a golf tournament, kayaking, tennis, horseback riding and much more
- Great Debates on chapter 11 plans, whether a bankruptcy judge can disband a creditors' committee and must a creditor file a proof of claim
- BAPCPA Consumer Issues: 10-Year Anniversary Special
- Nine joint committee sessions, provided by ABI's 18 committees
- A live Bloomberg "Eye on Bankruptcy" luncheon presentation
- A special Casino Night!
- A judges' roundtable on hot-button issues
Early-bird registration ends Oct. 2 so be sure to register to take advantage of the savings!
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ON-DEMAND VIDEO COURSE HELPS YOU PREPARE FOR THE ABC BOARD CERTIFICATION TEST!
Achieving American Board Certification (ABC) means you have met the rigorous, objective standards of a top professional in the areas of bankruptcy and/or creditors' rights. The ABC Exam is the essential step in this process, and this 5-part on-demand course will prepare you for the test. This intro video explains the benefits of ABC certification, the steps in the process and what to expect in the exam. The full exam prep course will qualify for 6 hours of CLE credit (where permitted for online learning), including 1 hour of ethics. The course is $295 for ABI members; $395 for non-members. The non-member $395 fee also includes 1 year of ABI Membership (a $295 value). Click here for more information and to purchase the course.
NEW CASE SUMMARY ON VOLO: MATTESON V. BANK OF AMERICA (IN RE MATTESON; 6TH CIR.)
Summarized by Michael Coury of Glankler Brown, PLLC
The Sixth Circuit ruled that the bankruptcy court erred in reducing mortgage balances by the amount the secured lender would have received under a chapter 13 plan had the creditor filed proofs of claim. The secured creditor's liens passed through bankruptcy, and completion of the debtors' plan did not discharge the debtors' obligation to the bank. The BAP held that there was no legal or equitable basis for reducing the amount of the mortgage by the amount that the creditor would have received had it filed a proof of claim.
There are more than 1,800 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI's Volo website.
NEW ON ABI'S BANKRUPTCY BLOG EXCHANGE: WELLS FARGO INCORRECTLY SEIZES ASSETS OF CUSTOMERS SEEKING BANKRUPTCY PROTECTION
The country’s fourth-largest bank recently lost a potentially significant decision in bankruptcy court when it seized the assets of a small business owner and his wife that they had set aside to keep their heads above water, according to a recent blog post.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
INSOL INTERNATIONAL
INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 23 member associations worldwide with more than 9,800 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.
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