Consumer Debt

RESTRUCTURING EXPERTS: RECESSION DID NOT IMPROVE CORPORATE GOVERNANCE



The Great Recession taught businesses some valuable lessons, but a recent survey found that restructuring experts do not think companies learned enough about changing their corporate governance practices, the Wall Street Journal reported today. In its 2013 Outlook Survey of restructuring experts, advisory firm AlixPartners said that slightly less than half of the 98 professionals questioned believe corporate governance is better now than it was before the recession. Corporate governance breakdowns have indeed been a major factor in several bankruptcies of the past few years, including the collapse of MF Global Holdings Ltd. and the massive fraud at Peregrine Financial Group Inc. Despite those events, more than two-thirds of the restructuring professionals who think corporate governance is worse said that it was because of liquidity oversight. When asked which sectors might face increases in distressed situations, the restructuring gurus picked industries facing scrutiny in Washington, D.C. Forty-one percent of those surveyed picked health care, up from just 20 percent last year. The restructuring experts also expect an uptick in distressed situations at energy companies, along with aerospace and defense. Read more. (Subscription required.)

PRIVATE EQUITY BRACING FOR BUYOUT-BOOM SHAKEOUT



The private-equity industry, comprised of nearly 4,500 firms with $3 trillion in assets, is bracing for a shakeout that has been brewing since the collapse of credit markets choked off a record leveraged-buyout binge, Bloomberg News reported today. Firms that attracted an unprecedented $702 billion from investors from 2006 to 2008 must replenish their coffers for future deals and avoid a reduction in fee income when the investment periods on those older funds run out, typically after five years. As many as 708 firms face such deadlines through 2015, according to London-based researcher Preqin Ltd. Many firms are suffering from below-average profits on their boom-period funds, and top executives from Carlyle Group LP co-founder David Rubenstein to Blackstone Group LP President Tony James say that future returns will be far more modest than those investors got used to in the past. As investors gravitate to the best-performing managers and cut loose others, 10 to 25 percent of the firms may find themselves without fresh money. Read more.

REPORT: SEC'S REVOLVING DOOR HURTS ITS EFFECTIVENESS



The Project on Government Oversight, a nonprofit watchdog group long critical of the SEC's revolving door, released a study yesterday highlighting a pattern of SEC alumni going to bat for Wall Street firms, the New York Times DealBook blog reported yesterday. The report, similarly skeptical of Wall Street lawyers joining the SEC, cites recent enforcement cases and scuttled money market regulations to underscore its concerns. "Former employees of the Securities and Exchange Commission routinely help corporations try to influence SEC rule-making, counter the agency's investigations of suspected wrongdoing, soften the blow of SEC enforcement actions, block shareholder proposals and win exemptions from federal law," the report says. Read more.

SPECULATIVE BETS PROVE RISKY AS SAVERS CHASE PAYOFF



Regulators across the country are confronting a wave of investor fraud that is saddling retirement savers with steep losses on complex products that until a few years ago were pitched only to the most sophisticated investors, the New York Times reported yesterday. The victims are among the millions of Americans whose mutual funds and stock portfolios plummeted in the wake of the financial crisis, and who started searching for ways to make better returns than those being offered by bank deposits and government bonds with minuscule interest rates. Tens of thousands of them put money into speculative bets promoted by aggressive financial advisers. The investments include private loans to young companies like television production firms and shares in bundles of commercial real estate properties. Those alternative investments have now had time to go sour in big numbers, state and federal securities regulators say, and are making up a majority of complaints and prosecutions. "Since the crisis, we've seen more and more people reaching out into different types of exotic investments that are a big concern to us," said William F. Galvin, the Massachusetts secretary of the commonwealth. Last Wednesday, Galvin's office ordered one of the nation's largest brokerage firms, LPL Financial, to pay $2.5 million for improperly selling the real estate bundles, known as nontraded REITs, or real estate investment trusts, to hundreds of state residents from 2006-09, in some cases overloading clients' accounts with them. Read more.

COMMENTARY: QUIETLY KILLING A CONSUMER WATCHDOG



Having failed to block the creation of the Consumer Financial Protection Bureau (CFPB) in the 2010 Dodd-Frank financial reform bill, Senate Republicans are now trying to take away its power by filibuster, and they may well succeed, according to a New York Times editorial today. Under the Dodd-Frank law, most of the CFPB's regulatory powers -- particularly its authority over nonbanks like finance companies, debt collectors, payday lenders and credit agencies -- can be exercised only by a director. Knowing that, Republicans used a filibuster to prevent President Obama's nominee for director, Richard Cordray, from reaching a vote in 2011. Obama then gave Cordray a recess appointment, but a federal appeals court recently ruled in another case that the Senate was not in recess at that time because of the Republicans' tactics. That opinion, if upheld by the Supreme Court, is likely to apply to Cordray as well, which could invalidate the rules the bureau has already enacted. The president has renominated Cordray, but Republicans have made it clear that they will continue to filibuster to block his confirmation. Earlier this month, 43 Senate Republicans wrote a letter to the president vowing to block any nominee until "key structural changes" are made, including a bipartisan commission to run the bureau instead of one director, and congressional control of its appropriations. Other bank regulators, like the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, are not subject to the appropriations process, as a shield against political interference. Congress does, however, control the budgets of the Securities and Exchange Commission and the Commodity Futures Trading Commission, and House Republicans have voted to strip those agencies of money needed to regulate derivatives and curb abuses. Read the full editorial.

ANALYSIS: S&P'S TOXIC AAA RATINGS OF MORTGAGE DEBT HAD FAR-REACHING EFFECTS



Institutions throughout the financial services industry felt the effects of the damages inflicted when S&P allegedly inflated rankings of mortgage debt that contributed to the biggest financial crisis since the Great Depression, according to a Bloomberg News analysis yesterday. As a result, the Justice Department sued New York-based S&P and parent McGraw-Hill Cos. last week. The world's leading financial institutions suffered more than $2.1 trillion of writedowns and losses after soaring U.S. mortgage defaults caused the credit crunch. Some of the biggest losers were banks, including Citigroup and Bank of America Corp., which created and purchased collateralized debt obligations. Many of these investments -- created by packaging mortgage-backed bonds, derivatives and other CDOs and dividing them into new securities with varying degrees of risk -- imploded within a year after they were sold, even though they had pristine credit ratings. Smaller financial institutions were also ruined by mortgage-backed debt. Western Federal Corporate Credit Union failed after its executives employed an improperly "aggressive investment strategy" that had no limits on highly rated mortgage bonds, according to a regulatory report on its collapse. Read more.

ABI LIVE WEBINAR: REVISITING RADLAX AND HALL – NEW LEGAL AND PRACTICAL IMPACT OF THE DECISIONS



See why this was the top-rated panel at the ABI Winter Leadership Conference last month! Join the expert panel on Feb. 19 from 12:00-1:15pm EST as they summarize and discuss the legal impact and practical implications of the Supreme Court’s 2012 decisions in Radlax and Hall. Participants include:

• Susan M. Freeman of Lewis and Roca LLP (Phoenix)

• Adam A. Lewis of Morrison & Foerster LLP (San Francisco)

• Prof. Charles J. Tabb of the University of Illinois College of Law (Champaign, Ill.)

• Eric E. Walker of Perkins Coie LLP (Chicago)

Click here to register!

POWER TO VETO BANKRUPTCY SALES AMONG ISSUES TO BE EXAMINED AT ABI'S 31ST ANNUAL SPRING MEETING



The 2013 Annual Spring Meeting, to be held April 18-21, 2013, at the Gaylord National Resort and Convention Center in National Harbor, Md., features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various “tracks,” including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. More than 16 hours of CLE/CPE is offered in some states, along with ethics credit totaling 3 hours, making the cost only about $50 per credit. In addition, committee sessions will drill down on other topics to provide you with the most practical and varied CLE/CPE experience ever. Sessions include:

- 17th Annual Great Debates

- Mediation: An Irrational Approach to a Rational Result

- Creditors' Committees and the Role of Indenture Trustees and Related Issues

- Current Issues for Financial Advisors in Bankruptcy Cases

- The Individual Conundrum: Chapter 7, 11 or 13?

- Real Estate Issues in Health Care Restructurings

- Law Firm Bankruptcies

- How to Be a Successful Expert

- The Ethical Compass: Multiple Ethical Schemes Applicable to Financial Advisors

- Chapter 9s, Nonprofits and Other Nontraditional Restructuring Processes

- And much more!

The Spring Meeting will also feature a field hearing of the ABI Commission to Study the Reform of Chapter 11, a report from the ABI Ethics Task Force, a luncheon panel discussion moderated by Bill Rochelle of Bloomberg News, and a Final Night Gala Dinner featuring a concert by Joan Jett and the Blackhearts!

Enter code "LOVEASM50" at checkout to save $50 on a new registration this week! Click here to register today!

ABI IN-DEPTH

DON'T MISS THE 9TH ANNUAL WHARTON RESTRUCTURING AND DISTRESSED INVESTING CONFERENCE ON FEB. 22!



The University of Pennsylvania's Wharton School of Business will be holding the 9th Annual Wharton Restructuring and Distressed Investing Conference on Feb. 22 at the Hyatt at The Bellevue in Philadelphia. The theme of this year's conference is “Health of Nations: Distress, Recovery or Revival?” It will offer a unique opportunity to hear from a distinguished gathering of keynote speakers and panelists in their discussion of the current economic climate and issues of debt, investing, and restructuring across the globe. To register, please click here.

NEW BANKRUPTCY PROFESSIONALS: DON'T MISS THE NUTS AND BOLTS PROGRAM AT ABI'S ANNUAL SPRING MEETING! SPECIAL PRICING IF YOU ARE AN ASM REGISTRANT!



An outstanding faculty of judges and practitioners explains the fundamentals of bankruptcy in a one-day Nuts and Bolts program on April 18 being held in conjunction with ABI's Annual Spring Meeting. Ideal training for junior professionals or those new to this practice area!

The morning session covers concepts all bankruptcy practitioners need to know, and the afternoon session splits into concurrent tracks, focusing on consumer and business issues. The session will include written materials, practice tip sessions with bankruptcy judges, continental breakfast and a reception after the program. Click here to register!

LATEST CASE SUMMARY ON VOLO: LEAVITT V. FINNEY (IN RE FINNEY; 9TH CIR.)



Summarized by David Hercher of Miller Nash LLP

The Ninth Circuit ruled that because the chapter 13 debtor received a chapter 7 discharge in a prior case commenced during the four-year period before the current petition date, she was not entitled to a discharge in the current chapter 13 case, even though the first case was commenced under chapter 13 and converted to chapter 7 before discharge.

There are more than 750 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: CASE FOCUSES ON A COMMERCIAL LANDLORD'S CLAIM FOR INDEMNIFICATION



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post examines the case of In re Mervyn's Holdings, LLC, in which the U.S. Bankruptcy Court for the District of Delaware held that a claim arising from an indemnification provision, in a non-residential commercial lease, which was rejected post-petition, was entitled to administrative priority pursuant to § 365(d)(3) of the Bankruptcy Code.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

After Stern, bankruptcy courts do not have the constitutional authority to enter final judgments on fraudulent conveyance claims.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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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2013

February

- ABI Live Webinar: Revisiting RadLAX and Hall- New Legal and Practical Impact of the Decisions

     February 19, 2013

- VALCON 2013

     February 20-22, 2013 | Las Vegas, Nev.

- 9th Annual Wharton

Restructuring and Distressed Investing Conference

     February 22, 2013 | Philadelphia, Pa.

March

- 37th Annual Alexander L. Paskay Seminar on Bankruptcy Law and Practice

     March 7-9, 2013 | St. Petersburg, Fla.

- Bankruptcy Battleground West

     March 22, 2013 | Los Angeles, Calif.

April

- "Nuts and Bolts" Program at ASM

     April 18, 2013 | National Harbor, Md.

- Annual Spring Meeting

     April 18-21, 2013 | National Harbor, Md.

May

- "Nuts and Bolts" Program at NYCBC

     May 15, 2013 | New York, N.Y.

- New York City Bankruptcy Conference

     May 16, 2013 | New York, N.Y.

- Litigation Skills Symposium

     May 21-24, 2013 | Dallas, Texas

June

- Memphis Consumer Bankruptcy Conference

     June 7, 2013 | Memphis, Tenn.

ANALYSIS: CRITICS OF DETROIT'S BANKRUPTCY HAVEN'T OFFERED UP ALTERNATIVES

Objections to Detroit’s historic chapter 9 bankruptcy have been coming from the usual suspects. But none of them offers to change the fundamental reality facing America’s poorest major city, according to an analysis in The Detroit News on Tuesday. They can’t. Detroit’s government is insolvent and managerially spent, facts unaltered by complaints that Emergency Manager Kevyn Orr and his team failed to bargain in good faith. One month into the largest municipal bankruptcy in American history, it is clear that this won’t be a quick-rinse job akin to the General Motors Corp. or Chrysler LLC bankruptcies — but it is moving along nonetheless. The precedent-setting legal fight’s outcome could have a profound impact on unions, pension funds and the municipal finance market. The stakes are enormous, and financial creditors, unions, pension funds, retirees and ordinary citizens are objecting to Detroit’s bankruptcy filing because there are few opportunities otherwise to do so. Should U.S. Bankruptcy Judge Steven Rhodes accept the objections following an eligibility trial scheduled to begin Oct. 23, Orr, the city and their sponsors in Lansing would be back at square one with no Plan B. But experts say that Detroit’s case is progressing relatively rapidly. "For a case of this size — think about how complex it is — it’s moving quickly," says Douglas Bernstein, managing partner of Plunkett Cooney’s banking, bankruptcy and creditors’ rights practice group in Bloomfield Hills, Mich. Judge Rhodes is "way quicker than any of the others" in Alabama, California and Rhode Island, "and he’s got the biggest case of them all," Bernstein said. Click here to read the full analysis.

INVESTORS ARE SELLING MUNICIPAL BONDS AGAIN

Municipal bonds usually don’t get much attention unless something’s wrong, but they’re getting attention now, the Associated Press reported today. Investors have been running away from bonds issued by state and local governments for several months, even though they offer tax-free income. The worries began when interest rates started to rise in the spring and heightened after Detroit became the biggest city in the country ever to file for bankruptcy. The selloff is reminiscent of one that smacked municipal bonds in late 2010 and early 2011, following a prediction that a wave of defaults would hit the market. But now, like then, managers of municipal-bond mutual funds say that the worries have created a buying opportunity. Investors who bought in late 2010 did well: The average intermediate-term municipal bond fund returned 9 percent in 2011. Managers say such big gains aren’t likely this year, but long-term municipal bonds can offer tax-free yields of 5 percent and have the potential to increase in price if interest rates don’t take off, says John Miller, co-head of global fixed income for Nuveen Investments. Nearly every municipal bond mutual fund has lost money over the last three months. For a rebound in the municipal bond market to happen, it needs to snap out of the self-feeding selling cycle that has overtaken it. Click here to read the full article.

BANKRUPTCY, EVEN FOR DETROIT, COMES WITH A COST

As if Detroit doesn’t have enough money problems, now the cash-strapped city faces a huge bill from its bankruptcy lawyers — which, according to a Marketplace.org report today, begs the question: Is bankruptcy worth it? For example, Lehman Brothers’s bankruptcy fees topped $2 billion. "It can get very expensive," says Prof. David Skeel of the University of Pennsylvania. He says plenty of bankruptcies cost millions of dollars these days. One reason is that no one wants to speak up. "Nobody that’s in the case wants to rat on somebody else and say, ‘Your fees are way too high,’" he says. Over the past 10 years, Skeel says more companies have decided to fold rather than deal with bankruptcy costs. But there’s also more oversight now, especially since the Department of Justice updated its fee guidelines to make bankruptcy fees more transparent. "I’ll call up the professional and say, ‘Tell me why you made this choice,’" says Prof. Nancy Rapoport of the University of Nevada, Las Vegas, who has been a fee examiner. "Sometimes it’s a great choice. Sometimes we talk about a reduction in fees." Oversight, she says, is essential. "If reasonable fees aren’t being charged, then something is wrong with the system," she says. Click here to read the full article.

In related news, ABI held a webinar on Tuesday about the new U.S. Trustee Fee Guidelines, which will affect all attorneys and firms who work on larger chapter 11 cases filed on or after Nov. 1. Presented by ABI’s Ethics & Professional Compensation Committee, a panel of experts, including Clifford J. White, the director of the U.S. Trustee Program, discussed some of the ways that the new guidelines could change day-to-day operations in firms, issues relating to the new market rate benchmarks, and how these changes might alter insolvency practice. Click here to download a recording of the webinar.

CREDIT CARD DEBT IS FALLING, BUT STILL VERY HIGH

Consumer credit card debt in the U.S. has been edging down in recent years after peaking in July 2008 at $1 trillion (about the size of Mexico's annual GDP), IB Times reported yesterday. According to data from the Federal Reserve, as of July 2013 the average indebted household in the U.S. carries average credit card debt of $15,325, although that figure is somewhat skewed by a small number of extraordinarily debt-stricken families and couples. But that average credit card balance pales in comparison with average mortgage debt ($147,924) and average student loan debt ($32,041). On the whole, American consumers currently owe an aggregate of $856.5 billion in credit card debt. This figure has been falling since the height of the global financial crisis — not just because some debtors are paying off their balances, but also due to rising defaults as credit card companies and banks simply wrote off seriously delinquent debts, a phenomenon that coincided with soaring unemployment and personal bankruptcies. Thus, credit card balances are falling for both good and bad reasons. "Overall, consumers have been much more cautious about spending on credit since the recession; they discovered what overleveraging can do when the economy is struggling," said Leslie Levesque, U.S. economist at IHS Global Insight. Click here to read the full article.

BILL ON BANKRUPTCY VIDEO: AFSCME SAYS BANKRUPTCY LAW UNCONSTITUTIONAL

The AFSCME labor union is opposing the Detroit bankruptcy by contending that the entire municipal bankruptcy scheme violates the U.S. Constitution, as Bloomberg Law's Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle discuss in their new video. Again this week, Rochelle and Pacchia cover the American Airlines bankruptcy, this time focusing on whether parent AMR Corp. can persuade the bankruptcy judge to approve the reorganization plan before there's resolution to the government's antitrust suit. Rochelle also mentions the newest statistics showing no increase in business for bankruptcy professionals. The video ends with discussion of an important new decision from the U.S. Eleventh Circuit Court of Appeals in Atlanta adopting a new theory for taking assets outside of a bankrupt estate. Click here to watch the video.

ABI GOLF TOUR UNDERWAY; LAST STOP FOR 2013 IS WINTER LEADERSHIP CONFERENCE IN DECEMBER

The 7th and final stop for the 2013 ABI Golf Tour is on Dec. 5 at the Trump National Golf Club, held in conjunction with ABI’s Winter Leadership Conference. Final scoring to win the Great American Cup — sponsored by Great American Group — is based on your top three scores from the seven ABI events. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! A 22-handicapper won the tour event at July’s Southeast Bankruptcy Workshop. There's no charge to register or participate in the Tour.

ABI IN-DEPTH

ABI’S VOLO PROJECT POSTS 1,000TH CIRCUIT COURT OPINION: PATRIOT COAL CORP. V. PEABODY HOLDING CO. (IN RE PATRIOT COAL CORP.; 8TH CIR.)

ABI now hosts more than 1,000 circuit court opinion summaries on its circuit court first-responder site, volo.abi.org. Appellate opinions are summarized within 24 hours of being issued and are then posted by a team of editors, led by Scott F. Gautier (Peitzman Weg LLP; Los Angeles). Opinion summaries also include links to the full text of each opinion.

Reversing the decision of the bankruptcy court, in Patriot Coal Corp. v. Peabody Holding Co. (In re Patriot Coal Corp.), Case No. 13-6031 (B.A.P. 8th Cir. Aug. 21, 2013), the Eighth Circuit Bankruptcy Appellate Panel held that Peabody Holding must continue to pay health care benefits for certain retired miners and dependents who worked for Heritage Coal Co., a Peabody subsidiary that was transferred to Patriot Coal in 2007.

Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: TAX REFORM PROPOSAL BACKS CREDIT UNIONS INTO A CORNER

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post explains how credit unions’ advocating to keep their tax-exempt status alive merely pass tax increases along to American businesses.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

A class of claims should not be considered impaired for purposes of § 1129(a)(10) if the impairment results from the plan proponents' exercise of discretion (i.e., artificial impairment) and not driven by economic need. (In re Village at Camp Bowie I LP).

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

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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2013

August

- Southwest Bankruptcy Conference

    August 22-24, 2013 | Incline Village, Nev.

September

- ABI Endowment Golf & Tennis Outing

    Sept. 10, 2013 | Maplewood, N.J.

- ABI Endowment Baseball Game

    Sept. 12, 2013 | Baltimore, Md.

- Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization

    Sept. 18-19, 2013 | New York

- abiLIVE Webinar: Complex Requirements and Ethical Duties of Representing Consumer Debtors

     Sept. 24, 2013

- Bankruptcy 2013: Views from the Bench

    Sept. 27, 2013 | Washington, D.C.

October

- Midwestern Bankruptcy Institute Program and Midwestern Consumer Forum

    Oct. 4, 2013 | Kansas City, Mo.

- Professional Development Program

    Oct. 11, 2013 | New York, N.Y.

- Chicago Consumer Bankruptcy Conference

    Oct. 14, 2013 | Chicago, Ill.

- International Insolvency & Restructuring Symposium

    Oct. 25, 2013 | Berlin, Germany

November

- Complex Financial Restructuring Program

   Nov. 7, 2013 | Philadelphia, Pa.

- Corporate Restructuring Competition

   Nov. 7-8, 2013 | Philadelphia, Pa.

- Austin Advanced Consumer Bankruptcy Practice Institute

   Nov. 10-12, 2013 | Austin, Texas

- Detroit Consumer Bankruptcy Conference

   Nov. 11, 2013 | Detroit, Mich.

- Delaware Views from the Bench

   Nov. 25, 2013 | Wilmington, Del.

December

- Winter Leadership Conference

    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.

- ABI/St. John’s Bankruptcy Mediation Training

    Dec. 8-12, 2013 | New York

ADMINISTRATION’S STUDENT DEBT PLAN WOULD EASE BURDEN, BUT CRITICS SAY IT COULD PROMOTE OVERBORROWING



The White House proposal that the government forgive billions of dollars in student debt over the next decade is supported by student advocates, but critics say that it would expand a program that already encourages students to borrow too much and stick taxpayers with the bill, the Wall Street Journal reported yesterday. The proposal, included in President Barack Obama's budget for next year, would increase the number of borrowers eligible for a program known as income-based repayment (IBR), which aims to help low-income workers stay current on federal student debt. Borrowers in IBR programs make monthly payments equivalent to 10 percent of their income after taxes and basic living expenses, regardless of how much they owe. After 20 years of on-time payments—10 years for those who work in public or nonprofit jobs—the balance is forgiven. Under the program today, most borrowers with loans issued since October 2007 are eligible to participate. The budget proposal—which requires congressional approval—would let all borrowers with pre-2007 loans participate and would make tax exempt any debt forgiven through the program. (Loan forgiveness can be considered taxable income.) Read more. (Subscription required.)

SURVEY: MILLIONS STRUGGLING WITH MEDICAL DEBT



A recent survey found that medical debt continues to weigh on the shoulders of millions of consumers, according to a column in yesterday’s Dallas Morning News. Last year, 41 percent of adults ages 19 to 64 said that they had problems paying medical bills or were paying off medical debt over time, according to a survey by the Commonwealth Fund, a private foundation that promotes improvements in the health care system. Twenty-nine percent of those paying off medical bills said they were carrying more than $4,000 in debt, and 16 percent reported $8,000 or more in medical debt. Gaps in health insurance, inadequate coverage and large medical bills have left millions with medical debt, said Sara Collins, vice president of Affordable Health Insurance at the Commonwealth Fund. The Affordable Care Act, which goes into full effect next year, has improved the situation somewhat, she said. In particular, a provision that allows adult children to remain on their parents’ health insurance policies until they are age 26 has had an impact. Another bill currently being considered in Congress, the "Medical Debt Responsibility Act," would prohibit credit bureaus from using paid-off or settled medical debt collections in determining a consumer’s creditworthiness. The bureaus also would have 45 days from the date the medical debt collection is paid off or settled to expunge the collection from the consumer’s credit report. Read more.

TRANSUNION: CREDIT QUALITY OF MORTGAGE BORROWERS NATIONWIDE HAS IMPROVED



Widely reported mortgage delinquency rates are being weighed down by older mortgages and loans long past due, but more recent mortgages are performing at pre-housing-bubble norms, according to an analysis of national lending data by TransUnion, the Chicago Tribune reported today. In a study of 52 million mortgages, the credit information provider found that mortgages originated before 2009 comprised 50 percent of all outstanding loans and 86 percent of all loans that were 60 days or more past due. That translates to 14.5 percent of loans originated in 2007 falling delinquent within their first three years, compared with only 2.5 percent of mortgages originated in 2010, after the housing bubble burst and lending standards tightened. Read more.

CREDIT-RATING AGENCIES POISED TO AVOID OVERHAUL



Three years after Congress told federal regulators to consider changing the way credit-rating agencies are paid, the industry appears poised to dodge a major overhaul, the Washington Post reported today. The ratings firms have been widely criticized for contributing to the 2008 financial crisis by issuing high ratings to toxic securities backed by residential mortgages. Since then, the way these firms are compensated has come under scrutiny, with critics arguing that the agencies have a conflict of interest because they are paid for their analysis by the very banks and corporations whose products they are rating. One proposal designed to end this “pay to play” dilemma comes from Sen. Al Franken (D-Minn.), who is pushing to have the Securities and Exchange Commission set up an independent board that would assign financial products such as bonds to credit-rating agencies to rate, rather than allow banks and companies to choose which agencies to use. The approach will be debated today when the SEC holds a day-long roundtable to discuss the credit-rating agencies’ business model with industry officials, academics and investor advocates. But several analysts who track the issue say it is unlikely that the SEC will adopt a plan that separates hiring from payment, in part because doing so is not as simple as it appears. Read more.

ANALYSIS: IP TRANSACTIONS NEED SPECIAL CARE WHEN COMPANY IS IN FINANCIAL DISTRESS



In intellectual property licensing deals where one party is in financial distress, practitioners must take particular care as the transaction unfolds, according to experts on the topic, Reuters reported yesterday. IP counsel Daniel Ilan and bankruptcy partner Lisa Schweitzer, both of Cleary Gottlieb Steen & Hamilton, who in 2011 represented Nortel Networks in the $4.5 billion bankruptcy sale of its residual patents, said that caution is especially needed when balancing the fate of intellectual property during bankruptcy. Due to the way that recent transactions are scrutinized by bankruptcy courts for fairness, they may be voided or challenged if they appear to have been made for less than market value, said Schweitzer. If the company seeking to license its IP is financially distressed, including on the verge of bankruptcy, the company that pays for the license must make sure it is paying a fair price for the property, Schweitzer said. U.S. appeals courts have disagreed over whether certain obligations under IP licensing contracts, including the responsibility of the licensor to protect the "quality" of the trademark, constitute obligations that are absolutely necessary in order to complete the contract, Ilan said. Read more.

For more information about intellectual property in bankruptcy or valuation issues in bankruptcy, be sure to pick up a copy of Bankruptcy and Its Impact on Intellectual Property Law, Second Edition and A Practical Guide to Bankruptcy Valuation from ABI's Bookstore.

NEW ABI LIVE WEBINAR ON MAY 29 WILL FOCUS ON CLASS ACTIONS IN BOTH BUSINESS AND CONSUMER CASES



Class action lawsuits in both chapter 11 and 13 cases are becoming more prevalent. Are you wondering whether your clients’ WARN Act claims would be better pursued against a debtor company in a class action adversary proceeding or in a class proof of claim, or both? If your client has been sued in a debtor’s consumer class action adversary proceeding, do you know the best defenses against class certification? ABI's panel of experts will highlight the case law and explore the potential benefits and pitfalls of class actions by creditors against debtor companies in chapter 11 cases and by debtors/trustees against creditors in chapter 13 cases on May 29 from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.

ASSOCIATES: ABI'S NUTS & BOLTS ONLINE PROGRAMS HELP YOU HONE YOUR SKILLS WHILE SAVING ON CLE!



Associates looking to sharpen their bankruptcy knowledge should take advantage of ABI's special offer of combining general, business or consumer Nuts & Bolts online programs. Each program features an outstanding faculty of judges and practitioners explaining the fundamentals of bankruptcy, offering procedures and strategies tailored for both consumer and business attorneys. Click here to get the CLE you need at a great low price!

ABI GOLF TOUR UNDERWAY; NEXT STOP IS CENTRAL STATES BANKRUPTCY WORKSHOP IN JUNE



Rob Schwartz and Scott Gautier are tied at 34 Stableford Points atop the closely bunched leaderboard after the ABI's Golf Tour's first stop at Lake Presidential Golf Club. Next up for the Tour is the famed Bear course at the Grand Traverse Resort at the Central States Bankruptcy Workshop on June 14. Final scoring to win the Great American Cup—sponsored by Great American Group—is based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! There's no charge to register or participate in the Tour, and women are most welcome.

ABI MEMBERS WELCOME TO ATTEND INSOL'S LATIN AMERICAN REGIONAL SEMINAR ON JUNE 13 IN SAO PAULO



ABI members are encouraged to attend INSOL’s Latin American regional seminar in São Paulo, Brazil, on June 13. The one-day seminar has been organized by INSOL in association with TMA Brasil to cover current cross-border insolvency and restructuring topics. The seminar is designed to be interactive and to allow the attendees to discuss and debate about practical issues with speakers who are leading players in the insolvency and restructuring field and with experience in insolvency proceedings involving different countries. The seminar will benefit from simultaneous translation in English, Portuguese and Spanish. For more information and to register, please click here.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: BRANIGAN V. DAVIS (IN RE DAVIS; 4TH CIR.)



Summarized by Ann Brogan of Crowley, Liberatore, Ryan & Brogan, P.C.

In two “Chapter 20” cases, the Fourth Circuit affirmed confirmation orders stripping off valueless junior liens against debtors’ property. In a 2-1 ruling, the Court rejected the argument of the chapter 13 bankruptcy trustee that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 created a per se rule that barred lien-stripping in Chapter 20 cases.

There are more than 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: FURTHER ANALYSIS OF THE SUPREME COURT'S RULING IN BULLOCK V. BANKCHAMPAIGN

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post takes a closer look at the Supreme Court's ruling yesterday in Bullock v. BankChampaign NA involving the definition of "defalcation" in 11 U.S.C. § 523(a)(4).

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

Bankruptcy courts should implement constructive trusts in any case where applicable state law would recognize them.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

2013

May

- "Nuts and Bolts" Program at NYCBC

     May 15, 2013 | New York, N.Y.

- ABI Endowment Cocktail Reception

     May 15, 2013 | New York, N.Y.

- New York City Bankruptcy Conference

     May 16, 2013 | New York, N.Y.

- Litigation Skills Symposium

     May 21-24, 2013 | Dallas, Texas

- ABI Live Webinar: Consumer Class Actions

     May 29, 2013

June

- Memphis Consumer Bankruptcy Conference

     June 7, 2013 | Memphis, Tenn.

- Central States Bankruptcy Workshop

     June 13-16, 2013 | Grand Traverse, Mich.

- INSOL’s Latin American Regional Seminar

     June 13, 2013 | São Paulo, Brazil

- Charity Golf Tournament

     June 14, 2013 | City of Industry, Calif.

July

- Northeast Bankruptcy Conference and Northeast Consumer Forum

     July 11-14, 2013 | Newport, R.I.

- Southeast Bankruptcy Workshop

     July 18-21, 2013 | Amelia Island, Fla.

August

- Mid-Atlantic Bankruptcy Workshop

    August 8-10, 2013 | Hershey, Pa.

- Southwest Bankruptcy Conference

    August 22-24, 2013 | Incline Village, Nev.

September

- ABI Endowment Golf & Tennis Outing

    Sept. 10, 2013 | Maplewood, N.J.

- ABI Endowment Baseball Game

    Sept. 12, 2013 | Baltimore, Md.

SEVEN MILLION STUDENTS BRACE FOR SURGE IN LOAN RATES



Interest rates on student loans subsidized by the government will most likely double to 6.8 percent on July 1, CNNMoney.com reported today. Congress and the White House agree that something should be done to prevent that, but they are having a difficult time hammering out an agreement. The Republican-controlled House passed a bill last week that would stop the rates – lowered by Congress six years ago – from doubling now, but through a mechanism that might allow them to rise later. President Obama vowed to veto it, calling it the "wrong approach." Chances are that about 7 million students taking out subsidized loans for the next school year will face bigger balances when they start paying off their loans after graduation. The rate hike will only affect a third of all undergraduate students who have subsidized loans, in which the federal government absorbs some of the interest rate. The president and House Republicans disagree on how to let students "lock in" their rates from year to year. They also disagree on how to spend any extra revenue that they might make through student loans. Senate Democrats have an entirely different approach that would charge students only what it costs the federal government to make the loans. To pay for the program, Democrats say that Congress could get rid of tax breaks for the oil and gas industry. Read more.

REPORT: HOME PRICES POST LARGEST ANNUAL GAIN IN 7 YEARS



Home prices in March rose by 10.9 percent from a year earlier, the largest such gain in seven years, according to an index tracking home prices in 20 U.S. cities, the Wall Street Journal reported today. Standard & Poor's Case-Shiller index, released today, shows that all 20 cities have posted year-over-year growth for a third straight month, the latest sign of how tight inventories and growing housing demand have led to a surge in home prices after several years of declines. Prices increased in March by 1.4 percent from February and by 0.3 percent in February from January, a period in which sales volumes—and, consequently, home-price growth—are typically muted because of winter weather. Home prices during the first quarter of the year have not increased since 2006, and the first quarter gain of 1.8 percent this year has been the largest first quarter jump since 2005. Read more. (Subscription required.)

FANNIE MAE PROFITING AS MARKET MIDDLEMAN ANGERS LENDERS



Fannie Mae is snatching potential profits away from mortgage lenders and posting record earnings that are fueling industry concerns about the government-backed company, Bloomberg News reported yesterday. The company has ramped up its purchases of home loans from lenders for cash, in the process cutting out originators from the more profitable business of creating and selling bonds backed by the debt. About 31 percent of the $305 billion in new Fannie Mae-guaranteed securities in the first four months of this year were tied to so-called cash-window purchases, almost triple the shares from early 2011, according to data compiled by Bloomberg and JPMorgan Chase & Co. analyst estimates. The shift is morphing Fannie Mae into more of a middleman between homeowners and the bond market, a role typically played by originators or the larger banks that buy their loans, such as JPMorgan and Wells Fargo & Co. Read more.

VISA, MASTERCARD SUE INTERCHANGE-FEE SETTLEMENT DROP-OUTS



Visa Inc. and MasterCard Inc. sued trade groups and retailers that rejected a $7.25 billion settlement in a price-fixing suit and asked a court to rule that the card companies’ fee practices were not illegal, Bloomberg News reported on Saturday. The settlement, described by plaintiffs in that case as the largest in an antitrust lawsuit, would end an eight-year legal battle over the swipe, or interchange, fees charged to merchants when customers use credit cards to pay. The plaintiffs accused Visa and MasterCard, the two largest U.S. payment-card firms, of illegally fixing the fees. Visa, MasterCard and several banks said in a complaint filed on Friday in a federal court that their suit is “necessary to prevent the continuation of endless, wasteful litigation.” They seek to bar the trade groups and retailers from seeking antitrust damages for the fee practices. Read more.

TOMORROW’S ABI LIVE WEBINAR WILL FOCUS ON CLASS ACTIONS IN BOTH BUSINESS AND CONSUMER CASES



Class action lawsuits in both chapter 11 and 13 cases are becoming more prevalent. Are you wondering whether your clients’ WARN Act claims would be better pursued against a debtor company in a class action adversary proceeding or in a class proof of claim, or both? If your client has been sued in a debtor’s consumer class action adversary proceeding, do you know the best defenses against class certification? ABI's panel of experts will highlight the case law and explore the potential benefits and pitfalls of class actions by creditors against debtor companies in chapter 11 cases and by debtors/trustees against creditors in chapter 13 cases on May 29 from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.

ASSOCIATES: ABI'S NUTS & BOLTS ONLINE PROGRAMS HELP YOU HONE YOUR SKILLS WHILE SAVING ON CLE!



Associates looking to sharpen their bankruptcy knowledge should take advantage of ABI's special offer of combining general, business or consumer Nuts & Bolts online programs. Each program features an outstanding faculty of judges and practitioners explaining the fundamentals of bankruptcy, offering procedures and strategies tailored for both consumer and business attorneys. Click here to get the CLE you need at a great low price!

ABI GOLF TOUR UNDERWAY; NEXT STOP IS CENTRAL STATES BANKRUPTCY WORKSHOP IN JUNE



Rob Schwartz and Scott Gautier are tied at 34 Stableford Points atop the closely bunched leaderboard after the ABI's Golf Tour's first stop at Lake Presidential Golf Club. Next up for the Tour is the famed Bear course at the Grand Traverse Resort at the Central States Bankruptcy Workshop on June 14. Final scoring to win the Great American Cup—sponsored by Great American Group—is based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! There's no charge to register or participate in the Tour, and women are most welcome.

ABI MEMBERS WELCOME TO ATTEND INSOL'S LATIN AMERICAN REGIONAL SEMINAR ON JUNE 13 IN SAO PAULO



ABI members are encouraged to attend INSOL’s Latin American regional seminar in São Paulo, Brazil, on June 13. The one-day seminar has been organized by INSOL in association with TMA Brasil to cover current cross-border insolvency and restructuring topics. The seminar is designed to be interactive and to allow the attendees to discuss and debate about practical issues with speakers who are leading players in the insolvency and restructuring field and with experience in insolvency proceedings involving different countries. The seminar will benefit from simultaneous translation in English, Portuguese and Spanish. For more information and to register, please click here.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: SMITH V. SA CHALLENGER INC. (IN RE WEST COAST REAL ESTATE & MORTGAGE INC.; 9TH CIR.)



Summarized by Laury Macauley of Lewis and Roca LLP

In an unpublished decision, the Bankruptcy Appellate Panel for the Ninth Circuit vacated and remanded orders of the bankruptcy court granting sanctions against the chapter 11 debtor and certain related individuals for reimbursement of a secured creditor's attorneys' fees, because the court had not indicated on the record how it had determined the sanction amount of $20,000 under the "lodestar approach." The BAP affirmed the bankruptcy court's denial of a request for sanctions to the extent that they were based on "missing rents" that were allegedly never received by the secured creditor after a bad-faith transfer of the subject property by the sanctioned parties. The BAP determined that the bankruptcy court had not abused its discretion and could have reasonably concluded that the secured creditor had not made a strong enough showing to justify the larger sanction award based on the "missing rents."

There are nearly 900 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: MANDATING CEO-CHAIRMAN DIVISION AT TOO-BIG-TO FAIL BANKS

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post suggests that regulatory proposals to ensure good governance at too-big-to-fail banks include the division of the CEO and chairman positions.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

Bankruptcy courts should implement constructive trusts in any case where applicable state law would recognize them.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

2013

May

- ABI Live Webinar: Consumer Class Actions

     May 29, 2013

June

- Memphis Consumer Bankruptcy Conference

     June 7, 2013 | Memphis, Tenn.

- Central States Bankruptcy Workshop

     June 13-16, 2013 | Grand Traverse, Mich.

- INSOL’s Latin American Regional Seminar

     June 13, 2013 | São Paulo, Brazil

- Charity Golf Tournament

     June 14, 2013 | City of Industry, Calif.

July

- Northeast Bankruptcy Conference and Northeast Consumer Forum

     July 11-14, 2013 | Newport, R.I.

- Southeast Bankruptcy Workshop

     July 18-21, 2013 | Amelia Island, Fla.

August

- Mid-Atlantic Bankruptcy Workshop

    August 8-10, 2013 | Hershey, Pa.

- Southwest Bankruptcy Conference

    August 22-24, 2013 | Incline Village, Nev.

September

- ABI Endowment Golf & Tennis Outing

    Sept. 10, 2013 | Maplewood, N.J.

- ABI Endowment Baseball Game

    Sept. 12, 2013 | Baltimore, Md.

- Bankruptcy 2013: Views from the Bench

    Sept. 27, 2013 | Washington, D.C.

October

- ABI Endowment Football Game

    Oct. 6, 2013 | Miami, Fla.

December

- ABI/St. John’s Bankruptcy Mediation Training

    Dec. 8-12, 2013 | New York

SENATE DEADLOCKS ON STUDENT LOANS



In what is becoming an annual June ritual, the Senate deadlocked today over federal student loan interest rates, with no consensus in sight on how to prevent rates on certain loans from doubling for about 7 million borrowers on July 1, the Washington Post reported today. Amid a swirl of competing proposals from lawmakers and the White House, preliminary votes showed that no Senate bills have the 60 votes needed to overcome a filibuster in the Democratic-led chamber. A Republican bill to peg rates on a variety of loans to the yield on the government’s 10-year Treasury bill, plus 3 percentage points, was blocked today on a 40 to 57 vote. A Democratic bill to freeze for two years the current 3.4 percent rate for subsidized loans to students in financial need also was thwarted. A procedural vote on the bill was 51 to 46, nine short of the 60 needed. The votes were largely symbolic measures expected to fail short of an agreement. Read more.

SEC PROPOSES CHANGES TO MONEY-MARKET FUND RULES



The portion of the money-market fund industry that suffered extreme disruptions during the financial crisis would be revamped under a plan proposed yesterday by federal regulators, who have been struggling to address the industry’s vulnerabilities for years, the Washington Post reported today. The nearly $3 trillion industry has fiercely opposed major changes to money-market funds, but regulators have persisted, citing the losses and panic they sparked during the crisis. These mutual funds have been popular with investors because they have been perceived to be as reliable as savings accounts. But that perception was shattered in September 2008, when a major money-market fund “broke the buck,” meaning its value fell below $1 a share. A run on money-market funds ensued, with investors withdrawing $300 billion in a week. The government intervened and temporarily guaranteed that investors would be repaid. The SEC said that its plan is designed to avoid a repeat of the meltdown. The agency offered two alternatives focused solely on “prime” funds, which invest in short-term corporate debt. The options could be adopted separately or in combination, depending on the public feedback the SEC receives during the next three months. A plan could be finalized this year, experts tracking the issue said. Read more.

INVESTORS RETURN TO RISKY "SYNTHETIC CDOS"



Investors are once again clamoring for a risky investment blamed for helping unleash the financial crisis: synthetic collateralized debt obligations (CDOs), the Wall Street Journal reported today. In a sign of how hard Wall Street is trying to satisfy voracious demand for higher returns amid rock-bottom interest rates, JPMorgan Chase & Co. and Morgan Stanley bankers in London are moving to assemble the synthetic CDOs. Basic CDOs pool bonds and offer investors a slice of the pool. Synthetic CDOs pool insurance-like derivative contracts on the bonds, rather than the bonds themselves. Like their crisis-era predecessors, the new CDOs would be sliced up into different levels of risk and returns. Investors who want a chance at the highest returns would have to buy the riskiest slice. While spreading risk in some ways, synthetic CDOs also can multiply the financial damage if companies fall behind on their debt payments. During the financial crisis, CDOs pegged to soured mortgage loans caused losses to careen around the world. Some details of the deals being worked on at J.P. Morgan and Morgan Stanley aren't clear, including the size of the CDOs and which investment firms have expressed an interest in buying slices of them. Read more. (Subscription required.)

REGULATORS INVESTIGATING "DARK POOL" STOCK TRADING



The Financial Industry Regulatory Authority (Finra), Wall Street's self-regulatory body, last month sent 15 examination letters to operators of "dark pools"—lightly regulated, off-exchange trading venues that have been a rising concern for regulators and some investors as more activity shifts away from exchanges, the Wall Street Journal reported today. Finra is seeking details about how the increasingly popular venues operate, what they disclose to clients and whether they adequately police trades. It could bring enforcement actions against dark-pool operators or issue recommendations for tighter oversight, depending on the answers it receives and additional examinations, said John Malitzis, executive vice president of market regulation at Finra. The letters are a follow-up to an initial round of questions the regulator circulated last fall. "We want to understand whether [dark pools] are disclosing to their customers how their orders work [and] whether customers are informed who their orders will interact with," Malitzis said in an interview. "A big part of this is to get an understanding of practices that may or may not be problematic." Read more. (Subscription required.)

U.S. HOUSEHOLD WORTH TOPS PRE-RECESSION PEAK FOR FIRST TIME



Household wealth in the U.S. jumped to a record in the first quarter, exceeding its pre-recession peak for the first time, bolstered by gains in the stock and housing markets that are helping Americans mend finances, Bloomberg News reported today. Net worth for households and nonprofit groups increased by $3 trillion from January through March, or 4.5 percent from the previous three months, to $70.3 trillion, the Federal Reserve said today in its financial accounts report, previously known as the flow-of-funds survey. Household wealth eclipsed its pre-recession level as gains in the stock and housing markets are helping Americans withstand an increase in the payroll tax this year. Household net worth is $2.29 trillion above its pre-recession peak of $68.1 trillion reached in the third quarter of 2007. It was at $67.3 trillion in the last three months of 2012. Read more.

REPORT: ENTITLEMENT CHANGES TO PUT SENIORS AT FINANCIAL RISK



The Economic Policy Institute reported that nearly half of the nation’s elderly population is “economically vulnerable” and would be particularly hard hit by even modest changes in the Social Security and Medicare programs being considered to slow the growth of the nation’s long-term debt, the Washington Post reported today. The report said that 48 percent of the elderly population earns less than double the supplemental poverty threshold, putting those seniors at financial risk if their income is cut even slightly. Older blacks and Hispanics are especially vulnerable, the report said, as the vast majority of them live on the financial edge. Read more.

LIVE WEBCAST AVAILABLE FOR ABI'S CHAPTER 11 REFORM COMMISSION HEARING TOMORROW LOOKING AT USE OF EXAMINERS, LABOR ISSUES AND PROBLEMS IN RESTRUCTURING TODAY'S COMPANIES



ABI’s Commission to Study the Reform of Chapter 11 will hold its seventh public hearing of 2013 on Friday from 3-5 p.m. CT (4-6 p.m. ET) at the Association of Insolvency & Restructuring Advisors (AIRA) 29th Annual Bankruptcy Restructuring Conference at the Westin Chicago River North; Chicago, Ill. The hearing will feature witness testimony from two leading scholars on the use of examiners in bankruptcy and labor issues including § 1113 and 1114. A panel of experts from the AIRA will also identify current problems faced by financial advisors. To view the witness list and watch a live webcast of the hearing tomorrow, please visit http://commission.abi.org.

ABI WEBSITE (ABI.ORG) WILL BE DOWN THIS WEEKEND FOR SCHEDULED MAINTENANCE



From 10 p.m. ET on Friday, June 7, through Sunday evening, June 9, the ABI homepage (abi.org) will be down for scheduled maintenance. During this period, members will not be able to access certain features, including registering for conferences, printing and viewing CLE certificates, and purchasing publications. Other ABI sites, like Search.abi.org, Volo.abi.org, Journal.abi.org, law.abi.org, blogs.abi.org and news.abi.org, will be operational during this time, but users may experience limited functionality. ABI intends to limit this downtime as much as possible. If you have any questions, please email support@abiworld.org.

NEW ABI LIVE WEBINAR ON JULY 15 WILL FOCUS ON THE § 1111(b) ELECTION, PLAN FEASIBILITY AND CRAMDOWN ISSUES



Utilizing a case study, ABI's panel of experts on July 15 will explore issues surrounding a lender’s decision on whether or not to make an election under § 1111(b), plan feasibility and voting. The abiLIVE panel will also walk attendees through the necessary mathematical analyses used to analyze these issues. The webinar will take place from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.

ABI GOLF TOUR UNDERWAY; NEXT STOP IS CENTRAL STATES BANKRUPTCY WORKSHOP NEXT WEEK



Rob Schwartz and Scott Gautier are tied at 34 Stableford Points atop the closely bunched leaderboard after the ABI Golf Tour's first stop at Lake Presidential Golf Club. Next up for the Tour is the famed Bear course at the Grand Traverse Resort at the Central States Bankruptcy Workshop on June 14. Final scoring to win the Great American Cup—sponsored by Great American Group—is based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! There's no charge to register or participate in the Tour, and women are most welcome.

ABI IN-DEPTH

NEW ABI "BANKRUPTCY IN DEPTH" ON-DEMAND CLE PROGRAM LOOKS AT PRINCIPLES OF PROPERTY OF THE ESTATE: DEMYSTIFYING EQUITABLE INTERESTS



In this 90-minute seminar, Profs. Andrew Kull of Boston University School of Law and Scott Pryor of Regent University School of Law provide an in-depth analysis of a legal principle that has become, in their words, "a long-lost area of the law": § 541 of the Bankruptcy Code. Seeking to demystify what is meant by "property of the estate" and, in particular, the distinction between legal or equitable interests of the debtor in property, Kull and Pryor describe the legal entanglements that ensue when legal title belongs to one person but the equitable title belongs to someone else. The cost of the seminar, which includes written materials and qualifies for 1.5 hours of CLE, is $95. To order or to learn more, click here.

ASSOCIATES: ABI'S NUTS & BOLTS ONLINE PROGRAMS HELP YOU HONE YOUR SKILLS WHILE SAVING ON CLE!



Associates looking to sharpen their bankruptcy knowledge should take advantage of ABI's special offer of combining general, business or consumer Nuts & Bolts online programs. Each program features an outstanding faculty of judges and practitioners explaining the fundamentals of bankruptcy, offering procedures and strategies tailored for both consumer and business attorneys. Click here to get the CLE you need at a great low price!

NEW CASE SUMMARY ON VOLO: STEINBERG V. BANK OF AMERICA N.A. (IN RE STEINBERG; 10TH CIR.)



Summarized by Andrew Johnson of Onsager, Staelin & Guyerson

The Tenth Circuit Bankruptcy Appellate Panel reversed the bankruptcy court's order granting relief from stay to Bank of America to foreclose on the debtor's house because the bankruptcy court failed to conduct an evidentiary hearing on whether Bank of America was in possession of the note secured by debtor's residence, or if Bank of America had some other legal basis to enforce the note. The court rejected Bank of America's argument that a debtor's failure to schedule a debt as disputed estops the debtor from challenging relief from stay.

There are more than 900 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: FURTHER EXAMINATION OF GE AND CITI'S SETTLEMENTS WITH FHFA

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A new blog post takes a closer look at the reason behind GE and Citi's recent settlements with the Federal Housing Finance Agency (FHFA).

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

Bankruptcy courts should implement constructive trusts in any case where applicable state law would recognize them.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

2013

June

- Central States Bankruptcy Workshop

     June 13-16, 2013 | Grand Traverse, Mich.

- INSOL’s Latin American Regional Seminar

     June 13, 2013 | São Paulo, Brazil

- Charity Golf Tournament

     June 14, 2013 | City of Industry, Calif.

July

- Northeast Bankruptcy Conference and Northeast Consumer Forum

     July 11-14, 2013 | Newport, R.I.

- abiLIVE Webinar

     July 11-14, 2013 | Newport, R.I.

- Southeast Bankruptcy Workshop

     July 18-21, 2013 | Amelia Island, Fla.

August

- Mid-Atlantic Bankruptcy Workshop

    August 8-10, 2013 | Hershey, Pa.

- Southwest Bankruptcy Conference

    August 22-24, 2013 | Incline Village, Nev.

September

- ABI Endowment Golf & Tennis Outing

    Sept. 10, 2013 | Maplewood, N.J.

- ABI Endowment Baseball Game

    Sept. 12, 2013 | Baltimore, Md.

- Bankruptcy 2013: Views from the Bench

    Sept. 27, 2013 | Washington, D.C.

October

- Midwestern Bankruptcy Institute Program and Midwestern Consumer Forum

    Oct. 4, 2013 | Kansas City, Mo.

- ABI Endowment Football Game

    Oct. 6, 2013 | Miami, Fla.

- Chicago Consumer Bankruptcy Conference

    Oct. 14, 2013 | Chicago, Ill.

November

- Detroit Consumer Bankruptcy Conference

   Nov. 11, 2013 | Detroit, Mich.

December

- ABI/St. John’s Bankruptcy Mediation Training

    Dec. 8-12, 2013 | New York

ANALYSIS: DOCTORS BEING DRIVEN INTO BANKRUPTCY



As many doctors struggle to keep their practices financially sound, some are buckling under money woes and are being pushed into bankruptcy, CNNMoney.com reported yesterday. It is a trend that has accelerated in recent years, industry experts say, with potentially serious consequences for doctors and patients. Some physicians are still able to keep practicing after bankruptcy, but for others, it's a career-ending event. Chapter 11 bankruptcy filings by physician practices have spiked recently, noted Bobby Guy, co-chair of the American Bankruptcy Institute's Health Care Committee, who tracks bankruptcy trends tied to distressed businesses. The weak economy has taken a toll on doctors' revenue, as consumers cut back on office visits and lucrative elective procedures, said Guy. Doctors also blame shrinking insurance reimbursements, changing regulations, and the rising costs of malpractice insurance, drugs and other business necessities for making it harder to keep their practices afloat. Read more.

For more on medical insolvencies, be sure to pick up a copy of ABI’s Health Care Insolvency Manual, Third Edition, of which Mr. Guy is a co-author. Click here for more information.

NEW FEE ON BANKRUPTCY TRADES WILL BOOST COURTS' REVENUE



A new fee tied to trades of bankruptcy claims will bring in hundreds of thousands of dollars in revenue for the nation's bankruptcy courts when it takes effect next month, Dow Jones Daily Bankruptcy Review reported yesterday. Starting May 1, those who trade claims against companies under bankruptcy court protection will have to pay a $25 fee for each transaction they file with the court, according to the Administrative Office of the U.S. Courts. Last year saw 18,632 trades of claims worth more than $41 billion in 500 bankruptcy cases, according to SecondMarket Inc. If the fees had been in effect, bankruptcy courts would have earned $465,800 from those trades. For more information from the AOUSC on the fees, effective May 1, please click here.

REGULATORS CONCERNED ABOUT MUNICIPAL-BOND DEALS



U.S. regulators are probing whether securities firms are circumventing the rules that were implemented in the wake of the financial crisis to protect municipalities against potentially biased investment advice, the Wall Street Journal reported today. At issue is whether banks are attempting to skirt post-crisis rules, including those restricting firms that provide financial advice to municipalities from underwriting certain municipal-bond transactions. Lawmakers and regulators implemented the changes to avoid situations similar to those leading up to the crisis in which some municipalities were steered into risky and complex deals that municipal officials did not fully understand. The 2010 Dodd-Frank law stipulates that banks hired as financial advisers act as fiduciaries, or in their clients' best interests. Regulators have also restricted banks from underwriting municipal-bond transactions if they were initially hired to advise on the deals. Yet the Securities and Exchange Commission is concerned that banks may be mischaracterizing their role in order to preserve their ability to underwrite bonds. The SEC is investigating several municipal contracts entered into by banks, including such banks as Goldman Sachs Group Inc., Piper Jaffray Cos., Robert W. Baird & Co. and Stifel Financial Corp. Read more. (Subscription required.)

INVESTORS PUT UP MILLIONS OF DOLLARS TO FUND LAWSUITS



A new generation of investors is plunging into "litigation finance" opportunities, putting up millions of dollars to fund lawsuits in hopes of collecting when the verdicts come down, the Wall Street Journal reported yesterday. Established financiers are expanding into new areas, including loans to law firms, and are finding clients among the biggest American companies. Law firms themselves are starting to jump on the bandwagon, seeking funding arrangements for clients who need help going after opponents with deeper pockets or who simply want to keep litigation costs off their balance sheets. Critics complain that the trend will enable frivolous lawsuits, and they have argued—including at a congressional hearing last month—that the government should step in to regulate funders of litigation. But as corporate legal budgets shrink, litigation-finance options are proliferating. One of the latest entrants is Gerchen Keller Capital LLC, a Chicago-based team that includes former lawyers from Gibson Dunn & Crutcher LLP and Bartlit Beck Herman Palenchar & Scott LLP. The group has raised more than $100 million and says there is plenty of room for newcomers given the size of the U.S. litigation market, which they put at more than $200 billion, measuring the money spent by plaintiffs and defendants on litigation. Read more. (Subscription required.)

DEMAND RETURNS FOR COMMERCIAL MORTGAGE-BACKED SECURITIES



Growing demand for subordinated commercial-mortgage debt is the latest example of investors seeking new opportunities for yield, the Wall Street Journal reported today. After years of near-zero benchmark interest rates, under which most fixed-income investments offer little return, some investors are becoming more willing to take risks. Despite the risks of subordinated commercial-mortgage debt, Cerberus Capital Management and other hedge funds are being lured by annual returns that typically top 20 percent for the least-safe portions of commercial mortgage-backed securities (CMBS). Cerberus is the latest large hedge fund to expand into this emerging hot market, which is raising concerns that lenders may make loans on properties with weak credit profiles to produce volume—a phenomenon that spun out of control in the mortgage markets during the years leading up to the financial crisis. The firm aims to launch the "Cerberus CMBS Opportunities Fund," which plans to both buy up and short commercial mortgage debt. Read more. (Subscription required.)

SENATE FINANCE COMMITTEE CHAIR MOVES TO RESHAPE TAX CODE



Last month, Senate Finance Committee Chairman Max Baucus (D-Mont.) summoned members of the committee to a closed-door meeting to discuss the first full-scale rewrite of the 5,600-page U.S. tax code in more than 25 years, the Washington Post reported yesterday. Baucus agrees with Sen. Orrin G. Hatch (R-Utah), the ranking Republican on the panel, that the committee should aim to produce a tax-reform plan by August, when Congress will once again need a deal to justify raising the legal limit on the $16.8 trillion in federal debt. Privately, senior Democrats dismiss Baucus's activities, saying that tax reform will not happen unless President Obama strikes a broad deal with Republicans that includes $600 billion more in taxes over the next decade. But Republicans are unlikely to agree to higher revenue without a tax code rewrite; aides said House Ways and Means Committee Chairman Dave Camp (R-Mich.) is pressing GOP leaders to demand tax reform in exchange for supporting a higher federal debt limit. Read more.

TOMORROW! DON’T MISS ABI’S LIVE WEBINAR, "STUDENT LOANS: BANKRUPTCY MAY NOT HAVE THE ANSWERS – BUT DOES CONGRESS?"



ABI's Consumer Bankruptcy Committee tomorrow presents the "Student Loans: Bankruptcy May Not Have the Answers – But Does Congress?" webinar from noon-1:15 ET. A panel of experts will provide an overview of the student loan industry, examine the numbers behind and causes of student loan debt, and discuss federal loan programs as well as federal consolidation and forgiveness programs. Faculty on the webinar includes:

• Prof. Daniel A. Austin of Northeastern University School of Law (Boston)

• Edward "Ted" M. King of Frost Brown Todd LLC (Louisville, Ky.)

• Craig Zimmerman of the Law Offices of Craig Zimmerman (Santa Ana, Calif.)

CLE credit will be available for the webinar. Register now for the special ABI member rate of $75!

HOTEL BLOCK FOR ABI'S ANNUAL SPRING MEETING ALMOST SOLD OUT! REGISTER TODAY!



The hotel block at the Gaylord National Resort and Convention Center in National Harbor, Md., is almost sold out for ABI’s 2013 Annual Spring Meeting! Held April 18-21, 2013, ASM features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various “tracks,” including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. More than 16 hours of CLE/CPE is offered in some states, along with ethics credit totaling 3 hours, making the cost only about $50 per credit. In addition, committee sessions will drill down on other topics to provide you with the most practical and varied CLE/CPE experience ever. Sessions include:

• 17th Annual Great Debates

• Mediation: An Irrational Approach to a Rational Result

• Creditors’ Committees and the Role of Indenture Trustees and Related Issues

• Current Issues for Financial Advisors in Bankruptcy Cases

• The Individual Conundrum: Chapter 7, 11 or 13?

• The Power to Veto Bankruptcy Sales

• Real Estate Issues in Health Care Restructurings

• How to Be a Successful Expert

• The Ethical Compass: Multiple Ethical Schemes Applicable to Financial Advisors

• Chapter 9s, Nonprofits and Other Nontraditional Restructuring Processes

• And much more!

The Spring Meeting will also feature a field hearing of the ABI Commission to Study the Reform of Chapter 11, a report from the ABI Ethics Task Force, a luncheon panel discussion moderated by Bill Rochelle of Bloomberg News, and a Final Night Gala Dinner featuring a concert by Joan Jett and the Blackhearts!

Make sure to register today!

ABI IN-DEPTH

LATEST CASE SUMMARY ON VOLO: COMMODITY FUTURES TRADING COMMISSION V. WALSH (2D CIR.)



Summarized by Carrie Hardman of Winston & Strawn LLP

The Second Circuit held that (1) securities fraud victims may be considered "similarly situated" for purposes of pro rata distributions when they are similarly situated in relationship to the fraud, losses, fraudsters and nature of their investments in a uniform Ponzi scheme; (2) absent further disparate treatment of the victim-investors, for purposes of distribution, there is no difference between victims that invested in a regulated entity versus a related non-regulated entity, as the protections afforded by regulation were designed not for the victim investors' benefit, but for the benefit of others; and (3) Till v. SCS Credit Corp., 541 U.S. 465, 477 (2004), does not apply in the securities fraud context, and no statutory provision exists to require the receiver to adjust distributions on account of inflation.

There are more than 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: EXPLORING WHEN CONSUMERS SHOULD FILE FOR CHAPTER 11 VS. CHAPTER 13

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post explores situations in which a consumer should consider filing for chapter 11 protection rather than chapter 13.

Want to explore further perspectives on consumer filing choices? Be sure to register for ABI's Annual Spring Meeting, which will feature a session on the Consumer Bankruptcy Track titled "The Individual Conundrum—Chapter 7, 11 or 13?" For more information or to register, be sure to click here.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

TEE OFF ON THE NEW ABI GOLF TOUR!



Starting with the Annual Spring Meeting, ABI will offer conference registrants the option to participate in the ABI Golf Tour. The Tour will take place concurrently with all conference golf tournaments. The Tour is designed to enhance the golfing experience for serious golfers, while still offering a fun networking opportunity for players of any ability. As opposed to the format used at ABI’s regular conference events, Tour participants will "play their own ball." They will be grouped on the golf course separately from other conference golf participants and will typically play ahead of the other participants, expediting Tour play. Tour participants will be randomly grouped in foursomes, unless otherwise requested of the Commissioner in advance of each tournament. Prizes will be awarded for each individual Tour event, which are sponsored by Great American Group. The grand prize is the "Great American Cup," also sponsored by Great American Group, which will be awarded to the top player at the end of the Tour season. Registration is free. Click here for more information and a list of 2013 ABI Golf Tour event venues.

ABI Quick Poll

The scope of protection of "financial contracts" in bankruptcy should be rolled back to what it was before BAPCPA expanded it in 2005.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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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2013

April

- ABI Live Webinar: "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?"

     April 10, 2013

- "Nuts and Bolts" Program at ASM

     April 18, 2013 | National Harbor, Md.

- Annual Spring Meeting

     April 18-21, 2013 | National Harbor, Md.

May

- "Nuts and Bolts" Program at NYCBC

     May 15, 2013 | New York, N.Y.

- ABI Endowment Cocktail Reception

     May 15, 2013 | New York, N.Y.

- New York City Bankruptcy Conference

     May 16, 2013 | New York, N.Y.

- Litigation Skills Symposium

     May 21-24, 2013 | Dallas, Texas

June

- Memphis Consumer Bankruptcy Conference

     June 7, 2013 | Memphis, Tenn.

- Central States Bankruptcy Workshop

     June 13-16, 2013 | Grand Traverse, Mich.

July

- Northeast Bankruptcy Conference and Northeast Consumer Forum

     July 11-14, 2013 | Newport, R.I.

- Southeast Bankruptcy Workshop

     July 18-21, 2013 | Amelia Island, Fla.

August

- Mid-Atlantic Bankruptcy Workshop

    August 8-10, 2013 | Hershey, Pa.

OBAMA TO PUSH CONGRESS ON MORTGAGE RELIEF



President Obama yesterday called on Congress to act on home mortgage relief when it returns for a brief legislative session in September, The Hill reported today. The housing market is widely believed to be the most significant drag on the economy, and Obama was under fire in a recent New York Times front-page story for the inability of his administration to address the burden of homeowner debt. "We are going to be pushing Congress to see if it can pass a refinancing bill that puts $3,000 in the pocket of the average family that has not yet refinanced their mortgage," he said. The White House is supporting a trio of Senate Democratic bills that streamline refinancing:

• Sens. Robert Menendez (D-N.J.) and Barbara Boxer (D-Calif.) in May introduced the “Responsible Homeowners Refinancing Act of 2012.” The bill would streamline refinancing for Fannie Mae and Freddie Mac borrowers by eliminating upfront fees and appraisal costs, among other changes.

• Sen. Jeff Merkley (D-Ore.) has a bill called the “Rebuilding Equity Act” for loans of 20 years or less. It would require Fannie Mae or Freddie Mac to pay all closing costs.

• Sen. Dianne Feinstein (D-Calif.) has a bill to aid underwater homeowners by allowing them to receive Federal Housing Administration mortgage insurance.

While significant, the White House-backed legislation falls short of the extensive housing action urged by some. Liberal groups and unions want Obama to replace Edward DeMarco — acting director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac — to force the agency to approve principal mortgage reductions. Others want legislation to allow bankruptcy judges to approve principal reductions in chapter 13. Read more.

CASE AGAINST FORMER FREDDIE MAC EXECUTIVES HINGES ON DEFINITION OF "SUBPRIME"



Figuring out the definition of a "subprime mortgage" by a U.S. judge could determine whether three former Freddie Mac executives misled investors about loans backed by the mortgage giant before it sank, the Wall Street Journal reported today. Lawyers for the former executives, including Chief Executive Richard Syron, sparred at a hearing with the Securities and Exchange Commission over the definition of "subprime" and "subprime-like." The fight came as lawyers for the former Freddie Mac executives urged U.S. District Judge Richard Sullivan to throw out an eight-month-old fraud lawsuit by the SEC alleging that the former executives made "materially false and misleading public disclosures" about the company's housing-market exposure in 2007 and 2008. Lawyers for Syron, Patricia Cook, a former Freddie Mac executive vice president, and Donald Bisenius, a former senior vice president, asked the judge to dismiss the suit because Freddie Mac told investors it did not classify single-family loans using the words "prime" or "subprime." Instead, Freddie Mac provided investors with tables outlining the characteristics of loans, allowing investors to draw their own inferences about loan quality, the lawyers said. The lawyers cited an investor document that said the amount of loans that would have been subprime if the term that Freddie Mac used was "not significant." Suzanne Romajas, a lawyer for the SEC, agreed that there is no universally accepted definition of "subprime," but she said Freddie Mac used a combination of factors to decide whether a certain loan was high-risk, and the former executives should have disclosed all of the mortgages that were vulnerable to potential default. For example, including mortgages with "subprime-like" characteristics would have increased Freddie Mac's overall high-risk loan exposure to 10 percent of its portfolio, not the 0.1 percent claimed by the company, she added. Read more. (Subscription required.)

SUPREME COURT CASE COULD CURB DEBT-COLLECTION LAWSUITS



Fearing that the legal playing field could be tilted against consumers, a group of federal and private consumer agencies have filed briefs in a U.S. Supreme Court case that threatens to shift the cost of a lawsuit to consumers in debt-collection cases, CreditCards.com reported today. In the past, collectors have absorbed court costs in "good faith" suits by consumers, even if the consumer loses, unless the consumers sued in bad faith or for purposes of harassment. Without this protection from fee shifting, people would be discouraged from suing debt collectors, say the Federal Trade Commission, the Consumer Financial Protection Board and a group of private consumer advocacy groups in legal briefs filed this month. There has been a surge in the number of cases filed against debt collectors under the Fair Debt Collection Practices Act, the 1977 federal law that regulates the activities of third-party debt collectors. The case that made it to the Supreme Court, though, could discourage such suits, the agencies say. The case, known as Marx v. General Revenue Corp., revolves around the experience of Olivea Marx, a Colorado woman who racked up student debt and failed to pay it, then was contacted by a debt collector. Marx, a single mother with two young children and a low-paying job, claimed that the collector's vigor went beyond the limits of the law. The collector called her several times a day, she said, and illegally threatened to garnish half her wages and sent a collection-related fax to her employer. She sued, but the lower court disagreed, finding that the debt collector's contact with the woman's employer did not violate the law because it did not specifically mention her debt. The court ordered her to pay $4,543 in costs -- nearly all of which compensated the debt collector for hiring a court reporter and bringing in witnesses. Read more.

TRANSUNION: U.S. AUTO LOAN DELINQUENCY RATE IN SECOND QUARTER AT LOWEST LEVEL



Credit-information company TransUnion Corp. said that the national delinquency rate of auto loans in the U.S. hit its lowest level for the second consecutive quarter since the firm began tracking the data in 1999, Dow Jones Newswires reported today. Auto loan delinquency rates in the second quarter dropped to 0.33 percent, down from 0.36 percent in the first quarter and 0.44 percent in the period a year ago. In addition to increased demand in new and used autos, bank auto debt per borrower rose to $13,427 in the second quarter from $12,689 in the previous year. TransUnion said that despite growing bank auto debt, the majority of states and cities are experiencing declines in their auto loan delinquency rates. Read more.

REGIONAL AIRLINES FACE CLOSINGS, BANKRUPTCY



Regional airlines operate half the nation's scheduled flights, but several of those carriers are being closed or are in bankruptcy court protection, USA Today reported today. They face significant challenges, as the big airlines they often fly for are phasing out smaller and costlier regional jets and cutting some low-traffic regional routes to focus on those that are more lucrative. Delta, the largest operator of 50-seat aircraft among U.S. airlines, will shutter regional carrier Comair after Sept. 29. Pinnacle Airlines, with subsidiaries such as Colgan that have flown for United, US Airways and Delta, filed for bankruptcy protection in April. AMR, the parent company of American Airlines and regional carrier American Eagle, filed for bankruptcy protection in November. "Airlines are finding these smaller jets just don't make them any money," says industry analyst Mike Boyd. "That's why they're shutting down Comair. That's why Pinnacle is in bankruptcy. It's a sector of (the) industry that provides a type of aircraft that's rapidly becoming obsolete." Read more.

ORCHESTRAS FIGHT HARD TIMES THROUGH BANKRUPTCY SEEKING NEW MODEL



Orchestras across the country continue to struggle financially, and some are following the lead of the Philadelphia Orchestra, Bloomberg News reported today. The Philadelphia Orchestra was the biggest among at least five U.S. symphonies to seek court protection in the wake of the 2008 economic collapse. Others include music organizations in Louisville, Ky., Syracuse, N.Y., Albuquerque, N.M., and Honolulu. Though subject to the same harsh realities of bankruptcy as corporations, the recent reorganization in Philadelphia -- and the decreased debt and expenses the group emerged with -- may serve as a model for other symphonies struggling with fewer donors and lower ticket sales. With its turnaround plan approved, the Philadelphia Orchestra Association exited court protection on July 30 after 15 months, having resolved $100 million in claims with a $5.5 million settlement, shrinking its payroll and winning a release from its pension obligations. Read more.

Click here to listen to an ABI podcast that focuses on orchestra bankruptcies.

DON'T MISS THE "WHEN IS AN INDIVIDUAL CHAPTER 11 THE BEST FIT?" WEBINAR ON SEPT. 27!



Chapter 11 can offer significant relief for certain individuals who need a restructuring of their finances. Learn when and how to use this tool in a 75-minute live webinar on Sept. 27 at noon ET. An expert panel will guide you through a successful individual chapter 11 and discuss key issues such as plan confirmation, modification and treatment of future income and secured debt.

Panelists on the webinar include:

• James F. Molleur of the Molleur Law Office (Biddeford, Maine)

• John P. Fitzgerald, III, of the Office of the U.S. Trustee (Boston)

• Raymond J. Obuchowski of Obuchowski & Emens-Butler, PC (Bethel, Vt.)

• Jennifer Rood of Bernstein Shur (Manchester, N.H.)

This panel was the highest rated at ABI's Northeast Bankruptcy Conference in July. The webinar is available to ABI members for $75. To register, please click here.

ABI IN-DEPTH

ABI MEMBERS WELCOME TO ATTEND ACB'S FREE HALF-DAY "BANKRUPTCY: BACK TO THE FUTURE" PROGRAM IN SEPTEMBER



The American College of Bankruptcy invites you to attend a free half-day program on Sept. 28 in Chicago for a discussion of many of the challenging topics facing current bankruptcy and reorganization professionals. Topics to be addressed include recent decisions of the U.S. Supreme Court and Court of Appeals, important work of the Advisory Committee on Bankruptcy Rules, and developments in the field of bankruptcy ethics. The nation’s leading judges, academics and bankruptcy professionals are among the speakers for the program. While there is no cost to attend, seating is limited, so early reservation is suggested. For more information and to register, please click here.

LATEST CASE SUMMARY ON VOLO: NUVEEN MUNICIPAL TRUST V. WITHUMSMITH BROWN, P.C. (3D CIR.)



Summarized by Matthew Heimann of Porzio, Bromberg & Newman, PC

Affirming the district court, the Third Circuit held that the district court did have "related to" jurisdiction under 28 U.S.C. § 1334(b) to adjudicate Appellant's action against the debtor’s accounting firm and counsel regarding an audit report and opinion letter that was prepared for the pre-petition transaction. The Third Circuit enunciated the principles of "related to" jurisdiction and its "conceivability" inquiry that applies to such analyses.

There are more than 600 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: FURTHER EXAMINATION OF THE FIFTH CIRCUIT’S RULING IN THE PILGRIM’S PRIDE CASE



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post examines the Fifth Circuit's ruling in the Pilgrim's Pride case. The court ruled in the case that a $1 million “enhancement fee" is OK after the company's reorganization plan paid a 100 percent dividend to unsecured creditors.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

The Twombly/Iqbal rule for pleading ‘plausible’ claims has been applied too stringently in dismissing avoidance actions for failure to state a claim.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

HAVE YOU TUNED IN TO BLOOMBERG LAW'S VIDEO PODCASTS?



Bloomberg Law's video podcasts feature top experts speaking about current bankruptcy topics. The podcasts are available via Bloomberg Law's YouTube channel so that you can access the programs from your computer or device of your choice! Click here to view the Bloomberg Law video podcasts.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

September

- 7th Annual Golf and Tennis Outing

     September 11, 2012 | Maplewood, N.J.

- Complex Financial Restructuring Program

     September 13-14, 2012 | Las Vegas, Nev.

- Southwest Bankruptcy Conference

     September 13-15, 2012 | Las Vegas, Nev.

- 38th Annual Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization

     September 19-20, 2012 | New York, N.Y.

- "When Is an Individual Chapter 11 the Best Fit?" Live Webinar

     September 27, 2012

- American College of Bankruptcy's "Bankruptcy: Back to the Future" Program

     September 28, 2012 | Chicago, Ill.

October

- Nuts & Bolts for Young and New Practitioners - KC

     October 4, 2012 | Kansas City, Mo.

- Midwestern Bankruptcy Institute Program, Midwestern Consumer Forum

     October 5, 2012 | Kansas City, Mo.

- Bankruptcy 2012: Views from the Bench

     October 5, 2012 | Washington, D.C.

- Chicago Consumer Bankruptcy Conference

     October 8, 2012 | Chicago, Ill.

- "Trending Issues: Examiners and Select Plan Confirmation Issues" Webinar

     October 15, 2012

- International Insolvency and Restructuring Symposium

     October 18, 2012 | Rome, Italy

November

- U.S./Mexico Restructuring Symposium

     November 7, 2012 | Mexico City, Mexico

- Professional Development Program

     November 9, 2012 | New York, N.Y.

- Detroit Consumer Bankruptcy Conference

     November 12, 2012 | Detroit, Mich.

- Winter Leadership Conference

     November 29 - December 1, 2012 | Tucson, Ariz.

HOUSING COMMENTARY #1: WHY HAS CONGRESS LEFT HOUSING TO FANNIE MAE AND FREDDIE MAC?



Fannie Mae and Freddie Mac, along with their regulator, are doing more to dismantle themselves than Congress can be bothered to do, according to a commentary in the Washington Post Tuesday. On Monday, their regulator, Ed DeMarco of the Federal Housing Finance Agency, said that a new company will be formed that will do much of the back-office work of both firms, setting the stage for whatever Congress decides to do next to overhaul the mortgage sector. The two government-sponsored mortgage finance companies are nearing the five-year anniversary of when the feds took them over, a bailout that has cost taxpayers $131 billion so far. They have been vilified, particularly by conservatives, as representing the worst of crony capitalism (fairly) and as being major drivers of the financial crisis (unfairly). For many Republicans, their stated objection to the Dodd-Frank financial reform act was that it didn't do anything to reform Fannie and Freddie. No legislation to overhaul the nation's mortgage finance has passed either the Republican-led House or the Democratic-led Senate. The White House unveiled a plan for what to do—more than two years ago—that was less a plan than a menu of options from which Congress might choose in sculpting its own approach to reforming the government-sponsored enterprises, or GSEs. So what is going on here? How is this an area where seemingly everybody agrees there needs to be an overhaul, yet no actual legislative action has taken place? The answer boils down to this: Too many people benefit from the current system, and too many people have something to lose in any overhaul, according to the commentary. But something will have to change in order to give the U.S. a system of housing finance that doesn't leave taxpayers on the hook for everyone who wants a place to live. Click here to read the full commentary.

HOUSING COMMENTARY #2: HOW TO REPEAT THE MORTGAGE MESS



In September 2008, amid the financial panic and collapse of the housing market, the federal government bailed out and took control of Fannie Mae and Freddie Mac—two government-sponsored enterprises that dominated the mortgage market. After four years and $180 billion of taxpayer funds to keep them afloat, they are beginning to make profits from their near monopoly. This week, the head of the federal agency that supervises Fannie and Freddie, Edward DeMarco, outlined a sensible plan that would prepare the companies—which remain the dominant players in housing finance—for either full privatization or government ownership. These are the obvious alternatives, but there is a third idea in the mix, one that is as seductive as it is dangerous: a private system with an explicit government mechanism for future bailouts when they prove necessary, according to a commentary in the Wall Street Journal yesterday. The rationale? If there's a problem in housing finance, the government will inevitably step in as it did in 2008. So why not create a government insurance program now, compensating taxpayers for the burdens they will have to shoulder eventually anyway? This argument has been advanced many times since Fannie and Freddie went under, most recently by the Bipartisan Policy Center, a Washington think tank. A system for private housing finance with a government insurance backstop may sound reasonable, even sophisticated. But it is seriously flawed. At the end of this road is bailout nation: a government insurance backstop for every industry. Also, taxpayers never get compensated from insurance funds, and federal insurance encourages careless behavior by those who know that if things go bad, someone will be there with a bailout. Once a fund of any size is created to back a particular industry, the arguments against a bailout virtually disappear. The reality is that sufficient funds are not going to be there. The only way to ensure a stable mortgage market is to get the government out, and keep it out. Click here to read the full commentary (subscription required).

ANALYSIS: STUDENT DEBT IS A DRAG ON ECONOMIC RECOVERY



Roughly 39 million Americans have a total of $966 billion in educational debt—a sum that has tripled since 2004, the Federal Reserve Bank of New York finds, according to an analysis in the Financial Times Tuesday. It was the only type of borrowing that expanded through the Great Recession, and in 2010 it jumped ahead of car loans, credit card debt and home equity credit to become the largest source of indebtedness behind mortgages. Faced with tighter scrutiny from banks and their own cautious behavior about running up balances, this new generation of borrowers has cut back on spending. They keep their credit cards in their wallets, put off purchasing houses and cars, and delay starting savings accounts for their own children's education. Experts warn that this trend raises the possibility that the explosion in student debt will sap economic growth in the U.S., where consumer spending accounts for around 70 percent of gross domestic product. "Consumers with large student debt burdens may spend less and are more likely to have difficulty securing a mortgage," the U.S. Treasury's Office of Financial Research said in its 2012 annual report. "These factors could significantly depress demand for mortgage credit and dampen consumption." Those fears have been supported by recent studies, such as a Pew Research Center report last month showing that young adults are less likely to own homes, cars and other "big-ticket consumer durables," such as refrigerators and washing machines, than their peers were in 2001. Simply put, more people are paying more money for school. Click here to read the full analysis (subscription required).

HOMEOWNERS ARE INCREASINGLY TURNING TO SHORT SALES OVER FORECLOSURES



The number of American homes that end up in foreclosure has started to decline, a welcome development that partly reflects an improving housing market. But a look at data that tracks distressed home sales reveals another reason why foreclosures are becoming less prevalent: More homeowners are turning to so-called short sales—where they sell their homes for less than what they owe in mortgage debt and the bank typically eats the difference, the Wall Street Journal reported Tuesday. In the past, short sales were rare. Now they are becoming increasingly common in part because lenders, homeowners and real estate agents have become more experienced at marketing and pricing the properties, and because short sales are considered a more efficient way than foreclosure to sell underwater properties. The shift is helping the housing market pare the backlog of distressed mortgages while cutting the amount of time that vacant homes sit empty. That in turn has helped keep home prices firm at a time when the real estate industry is still recovering from its multiyear slump. Foreclosures accounted for 11.5 percent of total home sales in October, down from 17.3 percent in October 2011 and close to 30 percent during the depths of the recession, according to CoreLogic, a real estate research firm that tracks foreclosure and home-sales data. Over the same period, short sales have climbed to 10.4 percent from 8.1 percent. From an economic perspective, short sales leave everyone better off: Banks and investors see narrower losses, homeowners incur less damage to their credit, and neighboring homes are less likely to be dragged down in value because of the typically higher sale prices and reduced vacancy times. But despite the progress being made in the housing market in general, there are still millions of homeowners who are in some form of pre-foreclosure distress—a "shadow inventory" that could hit the market and spell trouble for the housing recovery. Click here to read the full article (subscription required).

U.S. HOUSEHOLD WEALTH AT HIGHEST LEVEL SINCE LATE '07



The net worth of U.S. families rose by $1.17 trillion at the end of 2012 to the highest level since late 2007, as rising home values and gains in stock holdings boosted household balance sheets, the Wall Street Journal reported today. The net worth of U.S. households—the value of homes, stocks and other investments minus debts and other liabilities—rose 1.8 percent to $66.07 trillion from October through December, the highest level since the fourth quarter of 2007, according to a Federal Reserve report released Thursday. The recession began in December 2007 and ended in June 2009.
Household net worth was up 9 percent at the end of 2012 compared with the fourth quarter of 2011, the latest sign that Americans are repairing their balance sheets in the wake of the financial crisis. Stocks have recovered from their sluggish performance in the fourth quarter. Americans also have much more equity in their homes. A measure of owners' equity in household real estate as a percentage of household real estate hit 46.6 percent, the highest since the first quarter of 2008. The Fed report also showed that household debt grew at an annual rate of 2.4 percent in the fourth quarter after contracting in the third quarter. Click here to read the full article (subscription required).

DON’T MISS THE ABI LIVE WEBINAR ON APRIL 5 - "LEGACY LIABILITIES: DEALING WITH ENVIRONMENTAL, PENSION, UNION AND SIMILAR TYPES OF CLAIMS"



A panel of experts has been assembled for a webinar on April 5 from 1-2:15 p.m. ET to discuss environmental and pension liabilities, the statutory schemes under which these liabilities arise and the key players involved. Are non-monetary environmental claims dischargeable? Do post-petition expenditures for environmental cleanup constitute administrative expenses? When can an employer terminate a pension plan in bankruptcy, what is the process and what are the consequences? Learn the answer to these questions and more from the comfort of your own office. Special ABI member rate is available! Register here as this webinar is sure to sell out.

ABI'S ANNUAL SPRING MEETING: CONSUMER PROGRAMMING WITH CROSS-OVER APPEAL



With four session tracks looking at issues geared toward chapter 11 restructurings, financial advisors, professional development and consumer bankruptcy, a number of sessions at ABI's Annual Spring Meeting have cross-over appeal for both consumer and business practitioners. Sessions include:



• The Appellate Process: This distinguished panel will explore recent issues in appellate practice that are of interest to both consumer and business practitioners, including the ability to bypass intermediary appellate courts and take appeals directly to the circuit courts.

• Consumer Class Actions: This panel will explore the potential benefits and pitfalls of class actions by debtors/trustees against creditors in chapter 13 cases, which are highlighted by two recent decisions of the Fifth Circuit. Many of the issues discussed during this panel will be useful in business cases as well.

• The Individual Conundrum - Chapter 7, 11 or 13?: Deciding on the appropriate chapter for a high net worth individual contemplating a bankruptcy filing can be a daunting task. This panel will explore the considerations that guide the practitioner in advising individual clients in making this decision.

To register for the Annual Spring Meeting and to see the full schedule of program tracks and events, please click here.

ABI IN-DEPTH

MARK YOUR CALENDARS FOR APRIL 10 TO TAKE PART IN ABI’S LIVE WEBINAR "STUDENT LOANS: BANKRUPTCY MAY NOT HAVE THE ANSWERS – BUT DOES CONGRESS?"



Do not miss the "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?" webinar presented by ABI's Consumer Bankruptcy Committee on April 10 from noon-1:15 ET. ABI's panel of experts will provide an overview of the student loan industry, examine the numbers behind and causes of student loan debt, and discuss federal loan programs as well as federal consolidation and forgiveness programs. Faculty on the webinar includes:

• Prof. Daniel A. Austin of Northeastern University School of Law (Boston)
  
  
  
• Edward "Ted" M. King of Frost Brown Todd LLC (Louisville, Ky.)
  
  
  
• Craig Zimmerman of the Law Offices of Craig Zimmerman (Santa Ana, Calif.)

CLE credit will be available for the webinar. This webinar is sure to sell out; register now for the special ABI member rate of $75!

NEW BANKRUPTCY PROFESSIONALS: DON'T MISS THE NUTS AND BOLTS PROGRAM AT ABI'S ANNUAL SPRING MEETING! SPECIAL PRICING IF YOU ARE AN ASM REGISTRANT!



An outstanding faculty of judges and practitioners explains the fundamentals of bankruptcy in a one-day Nuts and Bolts program on April 18 being held in conjunction with ABI's Annual Spring Meeting. Ideal training for junior professionals or those new to this practice area!

The morning session covers concepts all bankruptcy practitioners need to know, and the afternoon session splits into concurrent tracks, focusing on consumer and business issues. The session will include written materials, practice tip sessions with bankruptcy judges, continental breakfast and a reception after the program. Click here to register!

LATEST CASE SUMMARY ON VOLO: IN RE ALABAMA AIRCRAFT INDUSTRIES INC. (3D CIR.)



Summarized by John Eggum of Foran Glennon Palandech Ponzi & Rudloff

A transfer of a cause of action to a litigation trust, in accordance with the terms of an asset purchase agreement, can be insulated from attack on appeal pursuant to § 363(m). In this case, the Third Circuit found that invalidating the transfer of the cause of action would invalidate the related sale, since the value of the assets sold would be altered if the cause of action was not transferred in accordance with the terms of the applicable asset purchase agreement. Accordingly, the Third Circuit dismissed the appeal as moot.

There are more than 750 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: WHEN CAN AUTOMATIC STAY BE EXTENDED TO NONDEBTOR THIRD PARTY?

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post discusses whether the automatic stay can be extended to protect nondebtor third parties by examining the case of In re Brier Creek Corp. Center Assocs. LP (Bankr. E.D.N.C.).

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

As a result of the RadLAX decision, the right to credit-bid will likely chill bidding at auctions, as potential purchasers may be dissuaded from participating in the bidding process.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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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2013

March

- Bankruptcy Battleground West

     March 22, 2013 | Los Angeles, Calif.

April

- ABI Live Webinar: "Legacy Liabilities : Dealing with Environmental, Pension, Union and Similar Types of Claims"

     April 5, 2013

- ABI Live Webinar: "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?"

     April 10, 2013

- "Nuts and Bolts" Program at ASM

     April 18, 2013 | National Harbor, Md.

- Annual Spring Meeting

     April 18-21, 2013 | National Harbor, Md.

May

- "Nuts and Bolts" Program at NYCBC

     May 15, 2013 | New York, N.Y.

- ABI Endowment Cocktail Reception

     May 15, 2013 | New York, N.Y.

- New York City Bankruptcy Conference

     May 16, 2013 | New York, N.Y.

- Litigation Skills Symposium

     May 21-24, 2013 | Dallas, Texas

June

- Memphis Consumer Bankruptcy Conference

     June 7, 2013 | Memphis, Tenn.

- Central States Bankruptcy Workshop

     June 13-16, 2013 | Grand Traverse, Mich.

PRELIMINARY HEARING ON DETROIT'S CHAPTER 9 ELIGIBILITY MOVES CASE TO CRITICAL PHASE

In an exchange with an attorney representing Detroit's two pension funds, Bankruptcy Judge Steven Rhodes discussed whether protections for the city's pension funds could violate federal bankruptcy law. The exchange occurred during the closing session yesterday of a three-day preliminary hearing on Detroit's chapter 9 eligibility. Robert Gordon, the pension funds' attorney, argued that the city should not be eligible for bankruptcy protection because Michigan's constitution protects pensions from impairment, and because the retiree unions believe that the city will pursue pension cuts. While a Reuters story yesterday suggested that a decision was made on the pension issue, Judge Rhodes did not issue an opinion on the matter during the exchange, but he did pose tough questions to attorneys representing Detroit's unions, retirees and pension funds as they disputed the legal arguments the city's attorneys made last week. Even if Judge Rhodes believes that the Constitution prevents impairment, that is not an issue to be decided during the eligibility trial. The trial on Detroit's chapter 9 eligibility is scheduled to begin tomorrow. Read more.

CORDRAY DOESN'T EXPECT WAVE OF LITIGATION OVER CFPB'S QM RULE

U.S. Consumer Financial Protection Bureau Director Richard Cordray said that he doesn't anticipate an outburst of litigation after his agency's qualified mortgage rule takes effect next year, Bloomberg News reported yesterday. Regulators understand that banks will need time for implementation of the rule, which will require that lenders take certain steps to confirm a borrower's ability to repay, Cordray said yesterday. "Let me also assure you that our oversight of the new mortgage rules in the early months will be sensitive to the progress made by institutions that have been squarely focused on making good-faith efforts to come into substantial compliance on time -- a point that we have also been discussing with our fellow regulators," he said. The consumer bureau will have no data initially and will need to wait a few months after the rule takes effect in January to judge its impact, Cordray said. Read more.

For more on the CFPB's new mortgage servicing rules, be sure to attend the inaugural abiWorkshop program, "Risky Times for Secured Lenders and Servicers," on Nov. 6. One of the program sessions is devoted to the CFPB's new mortgage servicing rules scheduled to take effect next year. To register to attend in person or via live webstream, please click here.

DOJ SEES $13 BILLION JPMORGAN DEAL AS A TEMPLATE FOR FUTURE BANK SETTLEMENTS

The Justice Department plans to use its tentative $13 billion settlement with JPMorgan Chase as a blueprint for reaching similar deals with other banks in probes related to bad mortgages and the 2008 financial crisis, the Washington Post reported today. Justice Department officials plan to expand the use of a 1980s law that carries a relatively low burden of proof and gives prosecutors 10 years to pursue such cases, twice as long as under standard securities law. Under this model, the department would also require that some of the settlement money be directed to consumers; in JPMorgan's case, $4 billion would be set aside for struggling homeowners. The department would also refuse to allow banks to avoid criminal prosecution by paying higher civil penalties. The strategy will give the Justice Department several more years to extract multibillion-dollar fines from banks eager to rid themselves of crushing legal burdens. The strategy also includes requiring that any future deals include help for homeowners devastated by the housing market's collapse. Justice Department officials want JPMorgan to agree to aggressive forms of mortgage relief, including lowering the balances of borrowers who owe significantly more than their homes are worth. The agency wants that help directed to the areas most affected by the troubled housing market, including Detroit. Read more.

BIG U.S. BANKS SAY PROPOSAL TO LIMIT LEVERAGE ARBITRARY, HARMFUL

Some of the largest U.S. banks said a proposed rule to increase the capital they hold against potential losses is arbitrary and would put them at a disadvantage against non-U.S. banks facing easier requirements, Bloomberg News reported yesterday. The so-called leverage ratio -- proposed by banking regulators at 5 percent for holding companies and 6 percent for their banking units -- targeted banks with the most assets. In comment letters yesterday, New York-based Citigroup Inc., the third-biggest U.S. bank, said the idea could worsen an uneven global playing field for U.S. banks, and State Street Corp. said that the regulators showed "no evidence" they based the numbers on an impact study. The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. proposed a tougher limit on U.S. firms than those agreed to in Basel III international accords. The leverage cap -- also affecting JPMorgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley, Bank of America Corp., Wells Fargo & Co. and Bank of New York Mellon Corp. -- is meant to limit vulnerabilities in the financial system that were seen in the lead-up to the 2008 credit crisis. Read more.

ANALYSIS: PRIVATE-EQUITY FIRMS TARGETING RENTAL MARKET IN HOUSING'S HARDEST-HIT AREAS

Private-equity firms and hedge funds have bought as many as 200,000 homes across the U.S., typically in areas hardest hit by the housing crash, to profit from soaring demand for rentals, Bloomberg News reported yesterday. Demand for rental accommodations in the U.S. has grown as almost 8 million homes have been repossessed through foreclosure or sold for a loss since 2007, according to RealtyTrac. The homeownership rate dropped to 65 percent in the first half of this year, its lowest level since 1998, Census data show, and may keep falling as more owners lose their homes and slow income growth and tight credit limit people's ability to buy. Last year, U.S. home prices dropped to a low of 35 percent below their 2006 peak, triggering a wave of acquisitions from investors trying to turn a business that's been dominated by mom and pop landlords into an institutional asset class resembling the apartment industry. Blackstone Group LP has led the stampede, spending more than $7.5 billion on almost 40,000 properties, followed by American Homes 4 Rent with more than 20,000. Investors have largely targeted Phoenix, Atlanta, Dallas, Charlotte, N.C. and Tampa, Fla., where growth in jobs and population is expected to drive up rents and home values. Read more.

RENEW YOUR ABI MEMBERSHIP BY DEC. 31 AND SAVE!

Beginning in January 2014, ABI will institute its first dues increase to the regular dues rate in six years. The $20 increase will ensure that ABI can continue to provide you with the latest and most effective tools available in insolvency information and education. You can lock in 2013 rates, and additional discounts, for up to three years by using a multi-year renewal option (save $75!). You can also save 10 percent on future dues by opting into the automated dues program. To renew your membership and save, please go to renew.abi.org.

NEW "BANKRUPTCY IN DEPTH" VIDEO PREVIEWS UPCOMING SUPREME COURT BANKRUPTCY CASES

ABI's next "Bankruptcy In Depth" video features ABI Resident Scholar Kara Bruce talking with Eric Brunstad of Dechert LLP (Hartford, Conn.) to preview the bankruptcy cases that the Supreme Court will consider during its 2013 term. Brunstad, who has argued many cases before the Court and is an expert in bankruptcy appellate practice, discusses in depth Law v. Siegel, which questions whether the court may use its general equitable authority under §105 of the Bankruptcy Code to surcharge a debtor's exempt assets, and Executive Benefits Insurance Agency v. Arkison (In re Bellingham), which will address the bankruptcy court's authority to adjudicate Article III matters. He also provides a candid view of what it is like to argue a case before the Court and an in-depth analysis of the issues involved with the upcoming cases. Click here to watch a preview of the forthcoming ABI "Bankruptcy In Depth" video.

ABI LAUNCHES SIXTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS

Law school students are invited to submit a paper between now and March 4, 2014 for ABI's Sixth Annual Bankruptcy Law Student Writing Competition. ABI will extend a complimentary one-year membership to all students who participate in this year's competition. Eligible submissions should focus on current issues regarding bankruptcy jurisdiction, bankruptcy litigation, or evidence issues in bankruptcy cases or proceedings. The first-place winner, sponsored by Invotex Group, Inc., will receive a cash prize of $2,000 and publication of his or her paper in the ABI Journal. The second-place winner, sponsored by Jenner & Block LLP, will receive a cash prize of $1,250 and publication of his or her paper in an ABI committee newsletter. The third-place winner, sponsored by Thompson & Knight LLP, will receive a cash prize of $750 plus publication of his or her paper in an ABI committee newsletter. For competition participation and submission guidelines, please visit http://papers.abi.org.

RISKY TIMES FOR SECURED LENDERS AND SERVICERS TO BE FOCUS OF FIRST ABI WORKSHOP PROGRAM- ATTEND IN PERSON OR VIA LIVE WEBSTREAM!

You will not want to miss the abiWorkshops series' inaugural program, "Risky Times for Secured Lenders and Servicers." The program is cosponsored by TMA (Chesapeake), IWIRC (D.C./Greater Maryland) and RMA (Potomac), and will be held on Nov. 6 from 9 a.m. to 3 p.m. ET in the ABI Headquarters Conference Center in Alexandria, Va. The abiWorkshops series provides attendees two great ways of participating: You can register to attend in person at the ABI Conference Center, or you can participate via a live webstream! Topics that will be covered on the Nov. 6 program include:



- Living with the New CFPB Mortgage Servicing Rules

-
Business Lending: Navigating What Lies Ahead

- Business Lending: Recent Legal Developments



For more information or to register for the "Risky Times for Secured Lenders and Servicers" abiWorkshop on Nov. 6, please click here.

EXPERTS TO EXAMINE STUDENT LENDING AND BANKRUPTCY AT ABI WORKSHOP PROGRAM ON NOV. 15

Experts will tackle the hot topic of student lending issues in bankruptcy on the abiWorkshops series' new program, "You Can't Discharge Student Loans in Bankruptcy - Or Can You?" The program will be held on Nov. 15 from 9 a.m. to 3 p.m. ET in the ABI Headquarters Conference Center in Alexandria, Va. The abiWorkshops series provides attendees two great ways of participating: You can register to attend in person at the ABI Conference Center, or you can participate via a live webstream! Topics that will be covered on the Nov. 15 program include:

- Student Lending Today: Who Borrows, How Much, Delinquency & Default Trends

- Repayment Options: Income Based Repayment and New Lender/Servicer Programs

- Litigation under Sect. 523(a)(8): What Proofs Are Needed? Evidence Demonstration

For more information or to register for the "You Can't Discharge Student Loans in Bankruptcy - Or Can You?" abiWorkshop on Nov. 15, please click here.

ABI GOLF TOUR UNDERWAY; LAST STOP FOR 2013 IS WINTER LEADERSHIP CONFERENCE IN DECEMBER

The 7th and final stop for the 2013 ABI Golf Tour is on Dec. 5 at the Trump National Golf Club, held in conjunction with ABI’s Winter Leadership Conference. Final scoring to win the Great American Cup — sponsored by Great American Group — is based on your top three scores from the seven ABI events. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! A 22-handicapper won the tour event at July’s Southeast Bankruptcy Workshop. There's no charge to register or participate in the Tour.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: PENNINGTON-THURMAN V. BANK OF AMERICA N.A. (IN RE PENNINGTON-THURMAN; 8TH CIR.)

Summarized by Michael Tamburini of the Commercial Law Group P.A.

The BAP affirmed the bankruptcy court's conclusion that the debtor's allegations against her mortgage lender were without merit and, therefore, it did not abuse its discretion in denying the debtor's motion to reopen her case to bring an adversary proceeding.

There are more than 1,000 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 MORTGAGE MARKETS CAN PRICE RISK EFFICIENTLY

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent blog post suggested that higher capital requirements for federal mortgage lenders, more stringent qualified mortgage and qualified residential mortgage requirements for borrowers and a heightened reliance on private markets will help keep taxpayers from paying for future bailouts.

The abiWorkshops series' inaugural program, "Risky Times for Secured Lenders and Servicers," on Nov. 6 will cover potential legal issues associated with the CFPB's new qualified mortgage lending rules set to take effect in 2014. Attend in person or via live webstream.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

Does the bankruptcy court's Section 105 power enable it to surcharge the debtor's exempt property?

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

2013

October

- International Insolvency & Restructuring Symposium

    Oct. 25, 2013 | Berlin, Germany

November

- abiWorkshop: "Risky Times for Secured Lenders and Servicers"

   Nov. 6, 2013 | Alexandria, Va.

- Complex Financial Restructuring Program

   Nov. 7, 2013 | Philadelphia, Pa.

- Corporate Restructuring Competition

   Nov. 7-8, 2013 | Philadelphia, Pa.

- Detroit Consumer Bankruptcy Conference

   Nov. 11, 2013 | Detroit, Mich.

-abiWorkshop: "You Can't Discharge Student Loans in Bankruptcy - Or Can You?"

   Nov. 15, 2013 | Alexandria, Va.

- Delaware Views from the Bench

   Nov. 25, 2013 | Wilmington, Del.

December

- Winter Leadership Conference

    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.

January

- Western Consumer Bankruptcy Conference

    Jan. 20, 2014 | Las Vegas, Nev.

- Rocky Mountain Bankruptcy Conference

    Jan. 23-24, 2014 | Denver, Colo.

COMMENTARY: A VISION FOR REFORMING STUDENT LOANS

With outstanding student debt topping one trillion dollars and the default rate on federal loans approaching 15 percent, many borrowers are finding themselves in a spiral of debt and financial ruin, according to a CNBC.com commentary by Sen. Marco Rubio (R-Fla.) and Rep. Tom Petri (R-Wis.). This week, the Federal Reserve announced that American consumer debt is higher than it's ever been, with student loans leading this surge. It's important to note that a significant number of borrowers default on small debt levels, according to the commentary. In fact, the average amount of a defaulted federal loan is roughly $14,000. Many of these defaults occur because our system focuses the burden of repayment on a borrower's initial years out of school when he or she is least equipped to bear it. As a result, temporary struggles to find a job right out of college or low initial earnings turn into needless defaults. And while other options exist, the system's bewildering complexity prevents many students from taking advantage of them. Far better would be to have each borrower's payments set automatically as an affordable percentage of income, according to Rubio and Petri. For most, this would mean paying less early in their careers and more as their income grows over time. Additionally, borrowers would be protected from income shocks such as unemployment, something many recent graduates have struggled with during the economic downturn. Read the full commentary.

For further discussion of the student loan debt crisis, be sure to attend ABI's Student Loan Debt Symposium, which will feature Rep. Petri, sponsor of a new graduated loan repayment bill, as the keynote speaker. Click here for more information or to register.

GM OFFICIALS TO FACE QUESTIONING IN CRIMINAL PROBE

Government investigators are about to start calling in General Motors Co. officials for questioning as they intensify a criminal probe into the auto maker's mishandling of faulty ignition switches that are linked to 13 deaths, the Wall Street Journal reported today. As the criminal probe moves forward, GM Chief Executive Mary Barra is sticking with her plan to delay answering key questions about the ignition-switch recall until the company's internal investigation of the matter wraps up. Barra is under growing pressure from regulators, lawmakers and accident victims and their families to deliver more quickly on her promises of transparency. Barra has refused to give Congress and federal vehicle-safety regulators the names of those inside GM who made the decisions that delayed the compay's recall, saying that those responses must wait until Chicago attorney Anton Valukas, who is spearheading the company's probe, completes his findings. GM hired Valukas last month. Last week, Barra told lawmakers she expected him to complete his investigation in 45 to 60 days. Barra's strategy is costing GM $7,000 a day in fines, which the National Highway Traffic Safety Administration began to levy after GM missed an April 3 deadline to answer 107 questions about the recall. Read more. (Subscription required.)

New GM shielded itself from liability for crashes that happened before its 2009 bankruptcy. Victims are left to sue a shell company that has few assets. Congressional pressure is building for GM to establish a victim compensation fund notwithstanding the limit on liability. For further analysis, make sure to attend the "Large Complex Trusts: A General Motors Case Study" panel at ABI's Annual Spring Meeting. This panel will discuss the General Motors bankruptcy case with an in-depth discussion about the issuance of public units in a major bankruptcy. The session will also include the challenges addressed by the trust such as liability claims. For more information or to register, please click here.

REALTYTRAC: U.S. FORECLOSURES FALL TO LOWEST QUARTERLY LEVEL SINCE MID-2007

RealtyTrac reported that the number of U.S. home foreclosure filings slid 23 percent in March from a year ago, helping bring first-quarter foreclosure activity to its lowest level since the second quarter of 2007, Reuters reported today. However, there were 117,485 U.S. properties with default notices, scheduled auctions and bank repossessions in March, according to RealtyTrac, which lifted overall foreclosure activity by 4 percent last month from February, when it posted a more than seven-year low. The monthly increase was driven by a 7 percent rise in foreclosure starts. Overall, though, more U.S. homeowners are keeping up with their mortgage payments. March was the 42nd straight month where U.S. foreclosure activity dropped from year-ago levels. A total of 28,840 U.S. properties were repossessed by lenders in March, down 5 percent from February, and a 34 percent drop from the same month a year ago to the lowest level since July 2007. Read more.

FANNIE MAE, FREDDIE MAC SHAREHOLDERS RAIL AGAINST MEASURE TO DISMANTLE TWO FIRMS

Dozens of Fannie Mae and Freddie Mac shareholders flocked to Capitol Hill yesterday to protest a Senate proposal that they say would trample on the rights of the mortgage giants' investors, the Washington Post reported today. Over the past two weeks, three groups have weighed in forcefully on the Senate legislation, which seeks to dismantle D.C.-based Fannie and McLean-based Freddie, replace them with a new entity and shift more of the risks of mortgage lending to the private sector. These groups are demanding a stop to what they view as the government's rip-off of Fannie and Freddie investors. In August 2012, about four years after the government took control of the two mortgage firms, federal officials directed the companies to turn over nearly all profits to the U.S. Treasury. Several investor groups have sued to challenge the arrangement. The Senate legislation, introduced by Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho), does not address how to deal with the shareholders. Some key lawmakers, including Crapo, have said that they are looking to the courts for answers. But as a Senate panel prepares to vote on the Johnson-Crapo measure possibly later this month, the newly formed groups are making it known that they want Congress to deal with the issue. Read more.

CARE FOUNDER JUDGE JOHN C. NINFO AWARDED WITH 2014 EXCELLENCE IN FINANCIAL LITERACY EDUCATION LEGACY AWARD

Credit Abuse Resistance Education (CARE) Founder Hon. John C. Ninfo II received the 2014 Excellence In Financial Literacy Education (EIFLE) Award by the Institute for Financial Literacy for his distinguished accomplishments in developing, implementing and promoting successful financial literacy education worldwide. Now in its eighth year, the EIFLE Awards were created to acknowledge innovation, dedication and the commitment of individuals and organizations that support financial literacy education worldwide. For more information on CARE and how you can help, please click here.

EXPLORE CHALLENGES THAT LIE AHEAD FOR UNITS AND TRUSTS ESTABLISHED FROM GM'S BANKRUPTCY AT SPECIAL PRESENTATION AT ABI'S ANNUAL SPRING MEETING

Watch below to find out more about what is on tap for ABI's 32nd Annual Spring Meeting at the JW Marriott in downtown Washington, D.C. The conference, taking place April 24-27, 2014, features a roster of the best national speakers, while the depth and scope of topics offer something for everyone.

REGISTER TODAY!

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: COLLINS V. EBERT, ET AL. (IN RE MARANATHA CONSTRUCTION CO.; 5TH CIR.)

Summarized by Doug Stewart of Stewart Robbins & Brown LLC

The Fifth Circuit affirmed the district court's decision finding veil-piercing claims to be property of the estate under 11 U.S.C. § 541(a)(1) and properly pursued by the bankruptcy trustee where the appellant creditors alleged only the same general harm suffered by all other creditors and failed to allege any harm personal only to them.

There are nearly 1,300 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:  COLLINS V. EBERT, ET AL (IN RE MARANATHA CONSTRUCTION CO.; 5TH CIR.)

A recent post on the ABI Blog Exchange looks at a few items consumers should know about tax liens after bankruptcy. Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

Detroit should not be allowed to slash pensions in its bankruptcy case.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

2014

April
- Annual Spring Meeting
    April 24-27, 2014 | Washington, D.C.

May
- Credit & Bankruptcy Symposium
    May 1-2, 2014 | Uncasville, Conn.

- New York City Bankruptcy Conference
    May 15, 2014 | New York, N.Y.

- Litigation Skills Symposium
    May 20-23, 2014 | Dallas, Texas

- abiLIVE Webinar
    May 28, 2014 |

- Student Debt Crisis Symposium
    May 30, 2014 | Washington, D.C.

June
- Memphis Consumer Bankruptcy Conference
    June 6, 2014 | Memphis, Tenn.

- Central States Bankruptcy Workshop
    June 12-15, 2014 | Lake Geneva, Wis.

- abiWorkshop: Chief Bankruptcy Judges Roundtable
    June 16, 2014 | Alexandria, Va.

- Cross-Border Insolvency Program
    June 20, 2014 | New York, N.Y.

July
- Northeast Bankruptcy Conference
    July 17-20, 2014 | Stowe, Vt.

- Southeast Bankruptcy Conference
    July 24-27, 2014 | Amelia Island, Fla.

August
- ABI Endowment Baseball Event
    Aug. 13, 2014 | Baltimore, Md.

- Fourth Hawai'i Bankruptcy Workshop
    Aug. 13-16, 2014 | Maui, Hawai'i