Puerto Rico

COLLEGE LOAN REFINANCING LEGISLATION RETURNS TO CONGRESS

The 114th Congress is again considering legislation to allow borrowers with outstanding student loan debt to refinance at rates set for new borrowers, Collections & Credit Risk reported today. The legislation would allow people with outstanding student loan debt to refinance at interest rates approved last year for new borrowers, according to Sen. Elizabeth Warren (D-Mass.), who re-introduced the Bank on Students Emergency Loan Refinancing Act along with Rep. Joe Courtney (D-Conn.). Warren first introduced the legislation in May 2014. It was voted on in the 113th Congress, and all Senate Democrats, along with three Senate Republicans, voted to move the bill forward, but it fell just short of breaking a Republican filibuster. President Barack Obama then followed that defeat by proposing two plans designed to ease the burden of student loan debt. "Since last year, nearly a million more borrowers have fallen behind on their student loan payments," Warren said. "Young people who are working hard to build a future deserve a real opportunity to succeed, and that means letting struggling borrowers refinance their student loans to take advantage of lower interest rates -- the same way people refinance a mortgage, a car loan or business debt." Read more.

Not able to catch the remarks by Sen. Warren at the opening reception of ABI's 33rd Annual Spring Meeting last Thursday? Watch them here.

For further analysis of student loans and bankruptcy, be sure to pick up a copy of ABI's Graduating with Debt: Student Loans under the Bankruptcy Code.

COMMENTARY: CONGRESS SHOULD CONSIDER ALTERNATIVES TO PUERTO RICO BANKRUPTCY

While Congress is considering a measure that would allow Puerto Rico to declare bankruptcy, a measure that could turn into a short-term bailout, it would be much wiser to insist on responsible measures that focus on comprehensive, long-term remedies, according to a PennLive.com commentary yesterday. Puerto Rico has a staggering $73 billion in debt, and Puerto Rico Gov. Alejandro Garcia Padilla has exacerbated the financial situation by signaling his intent to avoid paying debts, which has left the island's credit rating at junk status and reduced investor appetite. A House Judiciary subcommittee in February heard arguments for granting Puerto Rico eligibility under chapter 9. This seems innocuous at first glance, according to the commentary, but a closer look reveals bankruptcy could pose a threat to taxpayers as well as to Americans' retirement savings. Many Americans are invested in Puerto Rico's bonds through their 401(k)'s and mutual funds and could take a financial hit as a result of chapter 9 being extended to Puerto Rico. Lawmakers should reject any sort of bailout and demand comprehensive changes in Puerto Rico's governance and finances, according to the commentary. Read more.

CASE PUTS FOCUS ON THE THREAT OF JAIL TO PAY CHILD SUPPORT

Walter Scott’s controversial death in South Carolina has focused national attention not just on police violence, but also on the use of jail to pressure parents to pay child support, a policy employed by many states today, the New York Times reported yesterday. While investigations continue into the scuffle and traffic stop that led to his death, Scott's family alleged that he attempted to flee the scene because of a warrant out for his arrest for nearly $18,000 of unpaid child support. Though the threat of jail is considered an effective incentive for people who are able but unwilling to pay, many critics assert that punitive policies are trapping poor men in a cycle of debt, unemployment and imprisonment. The problem begins with child support orders that, at the outset, can exceed parents' ability to pay. When parents fall short, the authorities escalate collection efforts, withholding up to 65 percent of a paycheck, seizing bank deposits and tax refunds, suspending driver’s licenses and professional licenses, and then imposing jail time. "Parents who are truly destitute go to jail over and over again for child support debt simply because they're poor," said Sarah Geraghty, a lawyer with the Southern Center for Human Rights, which filed a class-action lawsuit in Georgia on behalf of parents incarcerated without legal representation for failure to pay. There is no national count of how many parents are incarcerated for failure to pay child support, and enforcement tactics vary from state to state, as do policies such as whether parents facing jail are given court-appointed lawyers. But in 2009, a survey in South Carolina found that one in eight inmates had been jailed for failure to pay child support. In Georgia, 3,500 parents were jailed in 2010. The Record of Hackensack, N.J., reported last year that 1,800 parents had been jailed or given ankle monitors in two New Jersey counties in 2013. Read more.

ANALYSIS: CEOS AWARDED MORE CASH PAY

Cash compensation for chief executives rose at its fastest rate in at least four years in 2014, swelling to 37.3 percent of total CEO compensation, higher than it has been since 2010, according to a survey of early proxy filings by the Hay Group for the Wall Street Journal. The rise in cash pay contrasts with trends just after the financial crisis, when shares had cratered and companies filled out their top officers’ pay packages with equity grants. Overall CEO pay rose more rapidly last year than it has in recent years, according to the Hay Group survey, which looked at 50 companies that posted more than $8.7 billion in revenue and filed their annual proxy statements by early March. Total pay was up by a median 6.9 percent to $12.2 million, bigger than the 4.3 percent increase a year earlier. Shareholders did better, with a total return of 23 percent in 2014 among the companies that were analyzed. Read more. (Subscription required.)

LATEST ABI PODCAST LOOKS AT CFPB'S PROPOSED REGULATIONS ON PAYDAY AND VEHICLE TITLE LOANS

ABI Resident Scholar Prof. Anne Lawton talks with Jon Pearson of Ballard Spahr LLP about the Consumer Financial Protection Bureau's recently proposed regulations on payday and vehicle title loans. Click here to listen to the podcast.

NEW OFFICERS AND DIRECTORS ELECTED DURING ABI’S 33rd ANNUAL SPRING MEETING

The following members of the American Bankruptcy Institute (ABI) were elected to leadership positions as officers and directors during ABI's 33rd Annual Spring Meeting, held April 16-19 in Washington, D.C.:

James Patrick Shea of Armstrong Teasdale LLP (Las Vegas) becomes ABI President for a one-year term, succeeding Brian L. Shaw of Shaw Fishman Glantz & Towbin LLC (Chicago), who now assumes the position of Immediate-Past President. Jeffrey N. Pomerantz of Pachulski Stang Ziehl & Jones LLP (Los Angeles), formerly ABI Vice President- Education, was named President-Elect and will become President in April 2016. Patricia A. Redmond of Stearns, Weaver, Miller, Weissler, Ahadeff & Sitterson, PA (Miami) succeeds James T. Markus of Markus Williams Young & Zimmermann LLC (Denver) as Chairman of the Board for a one-year term. Douglas E. Deutsch of Chadbourne & Parke, LLP (New York) was named to a two-year term as ABI's Vice President-Education, succeeding Pomerantz. Bankruptcy Judge Dennis R. Dow (W.D. Mo.; Kansas City) was elected to serve as Secretary, succeeding Rudy J. Cerone of McGlinchey Stafford, PLLC (New Orleans, La.). Newly named to ABI's 17-member Executive Committee are Bankruptcy Judge Eugene R. Wedoff (N.D. Ill.; Chicago) and Douglas Lutz of Frost Brown Todd (Cincinnati). For more information, including the full list of new Board of Directors, please click here.

DISCOUNTED SUBSCRIPTIONS TO AUDIO ABI JOURNAL AVAILABLE FROM MODIOLEGAL!

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NEW CASE SUMMARY ON VOLO: O&S TRUCKING INC. V. MERCEDES BENZ FINANCIAL SERVICES USA (IN RE O&S TRUCKING INC.; 8TH CIR.)

Summarized by William Wallo ofWeld, Riley Prenn & Ricci SC

The Eighth Circuit BAP dismissed the debtor's appeal from an order confirming its third amended plan on the grounds that the debtor did not have standing and that the debtor's arguments were moot.

There are nearly 1,700 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: HOW LONG DOES BANKRUPTCY STAY ON A CREDIT REPORT, EVEN IF CASE IS DISMISSED?

A recent ABI Blog Exchange post examined why a debtor continues to have a bankruptcy on his credit report, even though the chapter 13 case was dismissed.

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 43 member associations worldwide with more than 9,000 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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2015

May
- Credit and Bankruptcy Symposium
May 7-8, 2015 | Uncasville, Conn.
- New York City Bankruptcy Conference
May 14, 2015 | New York, N.Y.
- Forty-Hour Bankruptcy Mediation Training
May 17-21, 2015 | New York, N.Y.
- Litigation Skills Symposium
May 19-22, 2015 | Chicago, Ill.

June
- Memphis Consumer Bankruptcy Conference
June 5, 2015 | Memphis, Tenn.
- Central States Bankruptcy Workshop
June 11-14, 2015 | Traverse City, Mich.
- Cross-Border Insolvency Program
June 18, 2015 | New York

July
- Northeast Bankruptcy Conference
July 9-12, 2015 | North Falmouth, Mass.
- Northeast Consumer Bankruptcy Forum
July 9-11, 2015 | North Falmouth, Mass.
- Beijing Insolvency & Restructuring Symposium
July 13-14, 2015 | Beijing, China
- Southeast Bankruptcy Workshop
July 23-26, 2015 | Amelia Island, Fla.

August
- Mid-Atlantic Bankruptcy Workshop
Aug. 6-8, 2015 | Hershey, Pa.

CHAPTER 11 REFORM ANALYSIS: THE ABSOLUTE PRIORITY RULE PROBLEM FOR SMALL BUSINESS DEBTORS

by Prof. Anne Lawton
ABI Resident Scholar

In this article, the third in a series outlining the Commission's recommendations for SMEs, I discuss the Commission's proposals for amending the Code's current rules in cases involving unsecured creditor cramdown. Small business owners seeking to reorganize their businesses want to retain their pre-petition ownership interests as they have a personal stake in seeing the business succeed. Chapter 11's absolute priority rule, however, raises the prospect that small business owners may be unable to keep their ownership stake in the reorganized business. If a class of unsecured creditors rejects the plan and the firm cannot afford to pay those creditors' allowed claims in full (with interest if paid out over time) or satisfy the jurisdiction’s new value exception, then the debtor's reorganization fails. In order to address this problem, the Commission recommends two significant amendments to the Code's rules on unsecured creditor cramdown. First, it proposes codifying the new value corollary, a recommendation applicable to SME and non-SME debtors alike. Second, for SME debtors without sufficient financial resources to use the new value corollary, the Commission recommends allowing SME debtors to confirm a plan, notwithstanding the absolute priority rule, if they pay the face amount of their unsecured creditors' claims within four years of the plan’s effective date. Click here to read the full analysis.

Make sure to attend ABI's 33rd Annual Meeting, starting Thursday, to hear panels of experts discuss the Final Report of the ABI Commission to Study the Reform of Chapter 11. To register, please click here.

NEW YORK FED CHIEF: DETROIT, STOCKTON BANKRUPTCIES MAY FLAG WIDER PROBLEMS

New York Fed President William Dudley said today that the municipal bankruptcies of Detroit and Stockton, Calif., may foretell more widespread municipal problems in the U.S. than is implied by current bond ratings, Reuters reported today. "We need to focus our attention today on addressing the underlying issues before any problems grow to the point where bankruptcy becomes the only viable option," Dudley said. He did not mention by name any municipalities or states that risked going the way of Detroit and Stockton, but Dudley highlighted the difficulties some jurisdictions face when they issue debt to finance operating deficits, and when they underfund public pensions. In Chicago, for example, unfunded pension liabilities for the city, the board of education and other local governments that draw taxes from it exceed $35 billion, according to the Civic Federation, an independent fiscal watchdog. The city, which received a warning last week from ratings agency Standard & Poor's, has $8.3 billion in general obligation bond debt and frequently uses debt to close its budget shortfalls. Puerto Rico, meanwhile, is struggling with more than $70 billion in total debt and must overcome opposition from local lawmakers, as well as demands from investors for extra security, as it attempts to sell more debt. Dudley said borrowing to pay off a current-year operating deficit is inconsistent with running a balanced budget, leaves the municipality with no new asset, and is "equivalent to asking future taxpayers to help finance today's public services." Read more.

To hear the latest on chapter 9 trends and "at-risk" municipalities, be sure to attend sessions focused on chapter 9 at ABI's Annual Spring Meeting, including a Great Debate on chapter 9, panel session and keynote forum with Bankruptcy Judge Steven Rhodes on the lessons learned from Detroit.

For further analysis on municipal bankruptcies, be sure to pick up a copy of Municipalities in Peril: The ABI Guide to Chapter 9 Second Edition available in the ABI Bookstore.

ANALYSIS: HOW CASINOS FAILED ATLANTIC CITY AND WHY THEY'RE STILL PART OF ITS FUTURE

In the past 18 months, four casinos -- Revel AC, Trump Plaza Hotel and Casino, the Atlantic Club Casino Hotel and Showboat Atlantic City -- have closed their doors, costing 8,000 workers their jobs, according to an analysis yesterday from The Deal. The fading fortunes of Atlantic City's gaming industry have taken a toll on the municipality's fiscal situation. An emergency manager has been tapped to look into the city's dire finances. Three of the four recently shuttered casinos have gone through bankruptcy. Wayne Weitz, managing director at restructuring firm Gavin/Solomonese, pointed out that part of the problem for Atlantic City is the proliferation of other casinos in the Northeast. For many in the Northeast, "you're not going to A.C. for the casino; you can get the casino elsewhere," according to Weitz. Nonetheless, developers haven't given up on the city as new projects promise to make the town an attractive destination for a wider population. The state and local governments are considering regulatory and financial reforms that should make the city more business-friendly. For now, while policymakers and investors try to revive the business, the workers whose jobs depend on the casinos, and those 1.5 million New Jersey residents who bet on the industry, can only watch and hope. Read more.

STUDY: MORE THAN 15 PERCENT OF NFL PLAYERS GO BANKRUPT WITHIN 12 YEARS OF RETIRING

A recent study found that players who make it through six years in the NFL earn more than a typical college graduate does in a lifetime, but they go bankrupt more often, and more quickly, once they retire, according to QZ.com yesterday. Researchers from the California Institute of Technology, the University of Washington and George Washington University took a look at all NFL players drafted from 1996 to 2003, from their entry to the league up to their first 12 years after retirement, to find out more about when those bankruptcies occur. Active players almost never declare bankruptcy, according to the study, but quite a few are bankrupt just two years after retirement. Even the most conservative estimate, according to the study, predicts that about 15 percent of all NFL players will have declared bankruptcy within 25 years after retiring. Read more.

For more on sports player/celebrity bankruptcies, be sure to read this article from the ABI Journal.

DISCOUNTED SUBSCRIPTIONS TO AUDIO ABI JOURNAL AVAILABLE FROM MODIOLEGAL!

Subscribe now to our new streaming audio Journal, offered by ModioLegal. Narrated articles from each issue of the ABI Journal can now be accessed through your web browser -- on your computer, smartphone, or tablet -- for a low monthly fee. For a limited time, subscribe to this new service now for just $9.95 a month (regularly $12.95) with coupon code abi-early. Sign up for any audio Journal plan, and your first month is free! Go to http://www.modiolegal.com/subscribe to learn more, or send an email to accounts@modiolegal.com for a free demo.

NEW CASE SUMMARY ON VOLO: MASTAN V. SALAMON (IN RE SALAMON; 9TH CIR.)

Summarized by Joel Newell of Lane & Nach, P.C.

The Ninth Circuit BAP affirmed the bankruptcy court's order disallowing the amended proof of claim filed by chapter 7 trustee Peter Mastan. A condition precedent to a creditor's enjoyment of the status set forth in 11 U.S.C. Sect. 1111(b) is that the creditor must hold "a claim secured by a lien on property of the estate."

There are nearly 1,700 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: WHY MARKETPLACE LENDERS MAY SNUFF OUT CREDIT CARDS

Marketplace lenders are aggressively marketing their loans as a way to refinance expensive credit card debt, according to a recent blog post. And with more affordable interest rates and faster loan application processes, there's reason to believe that firms like Lending Club and SoFi will beat out banks.

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 43 member associations worldwide with more than 9,000 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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2015

April
- Annual Spring Meeting
April 16-19, 2015 | Washington, D.C.

May
- Credit and Bankruptcy Symposium
May 7-8, 2015 | Uncasville, Conn.
- New York City Bankruptcy Conference
May 14, 2015 | New York, N.Y.
- Forty-Hour Bankruptcy Mediation Training
May 17-21, 2015 | New York, N.Y.
- Litigation Skills Symposium
May 19-22, 2015 | Chicago, Ill.

June
- Memphis Consumer Bankruptcy Conference
June 5, 2015 | Memphis, Tenn.

- Central States Bankruptcy Workshop
June 11-14, 2015 | Traverse City, Mich.
- Cross-Border Insolvency Program
June 18, 2015 | New York

July
- Northeast Bankruptcy Conference
July 9-12, 2015 | North Falmouth, Mass.
- Northeast Consumer Bankruptcy Forum
July 9-11, 2015 | North Falmouth, Mass.
- Beijing Insolvency & Restructuring Symposium
July 13-14, 2015 | Beijing, China
- Southeast Bankruptcy Workshop
July 23-26, 2015 | Amelia Island, Fla.

August
- Mid-Atlantic Bankruptcy Workshop
Aug. 6-8, 2015 | Hershey, Pa.