Finance and Banking

Mortgage

Report: Many Major U.S. Cities Still Not Recovered from Crisis

ABI Bankruptcy Brief | December 12, 2013

December 17, 2013

NEWS AND ANALYSIS

ANALYSIS: VOLCKER RULE SHOWS ITS WIDE REACH

Financial institutions and investors are scrambling to line up a new way to finance municipal-bond investments, with the week-old Volcker Rule set to curtail banks' dealings in tender-option bonds --a $75 billion niche of the market for debt issued by cities, states and local governments, the Wall Street Journal reported today. Meanwhile, more than a dozen small and midsize banks will likely need to sell collateralized debt obligations under a Volcker Rule provision limiting certain risky bank investments, according to analysts. Zions Bancorp of Salt Lake City said yesterday that it would have to sell some CDOs and that it would take a $387 million charge to write down the value of the securities. The Volcker Rule, part of the 2010 Dodd-Frank financial regulatory overhaul, will force giant banks to rethink virtually every aspect of their trading activities. Many banks have already sold, wound down or spun off such restricted activities as proprietary-trading desks that make wagers with the bank's own money. In a tender-option bond transaction, banks, hedge funds and others use short-term borrowings to fund the purchase of long-term muni bonds. The hope is that they will profit from the difference in the interest they pay lenders -- often money-market funds -- and what they earn on the muni bonds. The market is a fraction of the $3.7 trillion municipal-debt universe, but the debt has been popular with large investment firms such as OppenheimerFunds, Nuveen Asset Management and Eaton Vance, which often use the debt in leveraged strategies that aim to boost returns using borrowed money. Read more. (Subscription required.)

While the Volcker Rule was intended to prevent banks from "engaging as principal for the trading account of the banking entity in any purchase or sale of one or more financial instruments," it contains only a minimal enforcement mechanism, according to a commentary in yesterday's New York Times DealBook blog. The rule contains a list of exemptions, including trades made for liquidity purposes and market-making activity for customers. Even a hedging transaction is still permitted, as long as it is "designed to reduce or otherwise significantly mitigate and demonstrably reduce or otherwise significantly mitigate specific, identifiable risks." From an enforcement perspective, the heart of the Volcker Rule is the requirement that banks put in place extensive procedures to comply with the prohibition on proprietary trading. This will impose significant costs on banks that engage in the types of transactions that could run afoul of the Volcker Rule. If a bank engages in prohibited proprietary trading, it can be required to divest itself of the investment and be restricted from future trading of that type. But there is no separate punishment incorporated into the rule for violations, despite suggestions that the rule include its own schedule of civil penalties. Read more.

COMMENTARY: THE HIDDEN DANGER IN PUBLIC PENSION FUNDS

The threat that public-employee pensions pose to state and local government finances is well known, but less known is that pensions are larger and their investments riskier than at any point since public employees began unionizing in earnest nearly half a century ago, according to a commentary in yesterday's Wall Street Journal. Public pensions have long been advertised as offering generous, guaranteed benefits for public employees while collecting low and stable contributions from taxpayers. But with Detroit's bankruptcy filing citing $3.5 billion in unfunded pension liabilities, and with four of the five largest municipal bankruptcies in U.S. history occurring over the past two years, reality tells us otherwise. According to the commentary, public pensions pose roughly 10 times more risk to taxpayers and government budgets than they did in 1975. In that year, state and local pension assets were equal to 49 percent of annual government expenditures, according to the commentary. Pension assets have nearly tripled to 143 percent of government outlays today. That's not because plans are better funded -- today's plans are no better funded than in 1980 -- but mostly because pension plans have grown as public workforces have aged. The ratio of active public employees to retirees has fallen drastically, according to the State Budget Crisis Task Force. Today it is 1.75 to 1; in 1950, it was 7 to 1. This means that a loss in pension investments has three times the impact on state and local budgets than it would have had 40 years ago. Read more. (Subscription required.)

ANALYSIS: INSIDERS OFFER VIEW OF HOW BOFA STYMIED NEEDY HOMEOWNERS

Bank of America, led by Chief Executive Officer Brian T. Moynihan, faced more than 15,000 complaints in 2010 from its role in the government's Home Affordable Modification Program (HAMP), Bloomberg News reported yesterday. Urban Lending, one of the vendors brought in to handle grievances from lawmakers and regulators on behalf of borrowers, also operated a mail-processing center for HAMP documents. Instead of helping homeowners as promised under agreements with the U.S. Treasury Department, Bank of America stalled them with repeated requests for paperwork and incorrect income calculations, according to nine former Urban Lending employees. Some borrowers were sent into foreclosure or pricier loan modifications padded with fees resulting from the delays, all but two of whom asked to remain anonymous because they signed confidentiality agreements. HAMP was the centerpiece of President Barack Obama's attempt to prevent foreclosures by lowering distressed borrowers' mortgage payments. Under the program, homeowners are given trial modifications to prove they can make reduced payments before the changes become permanent. Relying on the same industry that sold shoddy mortgages during the housing bubble and improperly sped foreclosures afterward, HAMP resulted in still-active modifications for 905,663 homeowners as of the end of August, or 13 percent of the 6.9 million people who applied. Bank of America stands out in a program that lawmakers and former Federal Deposit Insurance Corp. Chairman Sheila Bair have called a failure, leaving many homeowners worse off. The second-largest U.S. lender canceled more trial modifications than any mortgage firm and sent the highest percentage of rejected customers into foreclosure, Treasury data show. Read more.

WORKPLACE LOANS GAIN IN POPULARITY

Since 2010, at least half a dozen nonbank lenders have started marketing loans to companies and payroll vendors, the Wall Street Journal reported today. Employer-based loan programs are now available to more than 100,000 workers, according to estimates drawn from several lenders. That number could expand to more than 10 million workers in the next few years based on projections provided by company executives. The firms are part of a broader push by shadow lenders to take a growing share of the traditional banking business. Banks have toughened their lending standards since the financial crisis, leaving small companies and individual borrowers with battered or insufficient credit histories to search elsewhere for loans. Pitched as the financial equivalent of a health-wellness program, employer-loan programs often include online tools aimed at improving borrowers' budgeting abilities. Employers typically offer the loans without collecting a fee for themselves. They say that their goal is to help their employees lead more stable financial lives, alleviating the workplace disruptions that financial stress can cause for workers. While borrowers have various options to pay back their loans, the most common method is through automatic payments from an employee's paycheck. Some consumer advocates, however, say that could make it harder for borrowers to pay other bills if they run into financial difficulties. Read more. (Subscription required.)

SEC ORDERS $3.4 BILLION IN PENALTIES IN FISCAL 2013

The Securities and Exchange Commission said that its enforcement division opened 13 percent more investigations in the latest fiscal year and ordered violators of SEC rules to pay a total of $3.4 billion, the Wall Street Journal reported today. The SEC said these monetary sanctions were 10 percent higher than the prior year's penalties and 22 percent more than in 2011, when the SEC filed the most actions in its history. For the year ended in September, the agency filed 686 enforcement actions and opened 908 investigations. Read more. (Subscription required.)

LATEST ABI PODCAST TAKES A CLOSER LOOK AT HOW UNSECURED CREDITOR RECOVERIES DECREASED POST-BAPCPA

The latest ABI Podcast features ABI Resident Scholar Kara Bruce speaking with Prof. Lois Lupica of the University of Maine School of Law, who was the reporter and principal investigator for "The Consumer Bankruptcy Creditor Distribution Study" funded by the ABI Endowment. Lupica, who also authored the ABI Endowment-funded Consumer Bankruptcy Fee Study in 2011, talks about the results of the new study, which found that creditor returns in consumer bankruptcy proceedings have been less effective since the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Click here to listen to the podcast.

To access a copy of "The Consumer Bankruptcy Creditor Distribution Study," please click here.

NOW AVAILABLE FOR PRE-ORDER: BEST OF ABI 2013: THE YEAR IN CONSUMER BANKRUPTCY

Now available for pre-order in the ABI Bookstore is Best of ABI 2013: The Year in Consumer Bankruptcy. This must-have reference contains the best ABI Journal articles and papers from ABI's top-rated educational seminars selected by ABI Board Member Alane Becket of Becket & Lee LLP (Malvern, Pa.) to cover the most important developments in consumer bankruptcy for 2013. The book delves into such timely topics as the foreclosure crisis, tax issues, the latest on chapter 13, student loans and much more, and it also features relevant case summaries drawn from ABI's Volo site (volo.abi.org). Make sure to log into www.abi.org to get your discounted ABI member pricing. The book will ship in late December. Click here to order.

RENEW YOUR ABI MEMBERSHIP BY DEC. 31 AND SAVE!

ABI LAUNCHES SIXTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS

ABI IN-DEPTH

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

Summarized by Samuel Schwartz of The Schwartz Law Firm Inc.

The Ninth Circuit Bankruptcy Appellate Panel affirmed the holding of the U.S. District Court for the Central District of California, finding that the lower court did not abuse its discretion when it: a) awarded the debtor $300 for actual damages, $3,000 in attorneys' fees and $390 in costs; and b) found that although the debtor's real estate agent was a petition preparer, the real estate agent's broker was not, and thus, was not a proper defendant.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: HOUSE-PASSED INNOVATION ACT WOULD MAKE MAJOR CHANGES TO §365(n)'S IP LICENSEE PROTECTIONS

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. The U.S. House of Representatives on Dec. 5 passed a significant patent reform bill known as the "Innovation Act." Although the focus of the legislation is on patent infringement litigation and other patent law revisions, the Innovation Act, H.R. 3309, would also make major changes to §365(n) of the Bankruptcy Code. It would also address the interplay between §365(n) and chapter 15 cross-border bankruptcy cases.

ABI Quick Poll

Electricity qualifies as a "good" entitled to administrative expense status under § 503(b)(9).

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NEXT EVENT:

COMING UP

CALENDAR OF EVENTS

2014

January

- Western Consumer Bankruptcy Conference

Jan. 20, 2014 | Las Vegas, Nev.

- Rocky Mountain Bankruptcy Conference

Jan. 23-24, 2014 | Denver, Colo.

February

- Caribbean Insolvency Symposium

Feb. 6-8, 2014 | San Juan, P.R.

- VALCON14

Feb. 26-28, 2014 | Las Vegas, Nev.

March

- Bankruptcy Battleground West

March 11, 2014 | Los Angeles, Calif.

- Alexander L. Paskay Memorial

Bankruptcy Seminar

March 13-15, 2014 | Tampa, Fla.

Thursday, August 21, 2025

ABI Tags

Court Administration

Analysis: Volcker Rule Shows Its Wide Reach

Labor/Employment

ABI Bankruptcy Brief | March 19 2013

March 19, 2013

NEWS AND ANALYSIS

ANALYSIS: MORE HOMEOWNERS EMERGE FROM "UNDERWATER" STATUS

Rising home values have lifted more borrowers out of the hole of owing more than their properties are worth, an encouraging sign for an economy still closely tied to the health of the housing market, the Wall Street Journal reported today. The number of "underwater" homeowners in the fourth quarter of 2012 declined by 1.7 million from a year earlier, meaning 1.7 million U.S. households have regained home equity, according to data released Tuesday by CoreLogic, a research company. Overall, the company said 21.5 percent of households with a mortgage were underwater at the end of 2012, down from 25.2 percent at the end of 2011. While the trends are encouraging, some newly above-water households are just barely at breakeven and therefore are a long way off from being able to change their finances in any significant way. And the overall ranks of those underwater remain large, at about 10.4 million, down from 12.1 million at the end of 2011, according to CoreLogic. Read more. (Subscription required.)

To see a state-by-state analysis of CoreLogic's 4Q 2012 data, be sure to check out ABI's Chart of the Day site.

FANNIE MAE SEES WAY TO REPAY BILLIONS TO U.S. TREASURY

The rebounding housing market has helped return Fannie Mae to profitability and now might allow the government-controlled mortgage-finance company to repay as much as $61.5 billion in rescue funds to the U.S. Treasury, the Wall Street Journal reported. The potential payment would be the upshot of an accounting move whereby the company would reclaim certain tax benefits that were written down shortly after the company was placed under federal control in 2008. The potential move was disclosed last week in a regulatory filing in which the company said that it would delay the release of its annual report, due yesterday, as it tries to reach a resolution with its accountants and regulator over the timing of the accounting move. The debate about when Fannie should be allowed to reclaim the deferred-tax assets comes as Fannie and its smaller sibling, Freddie Mac, are likely to show large profits in the coming quarters as the housing market gradually recovers from its prolonged bust. The potential payment also has political implications as lawmakers and regulators wrangle over the fate of the firms, which were placed into a federal conservatorship amid soaring losses. The Obama administration has publicly said that the two companies eventually would be wound down and has blocked them from retaining profits, but has done little to de-emphasize their role in the mortgage market. Read more. (Subscription required.)

CFPB ISSUES PROPOSAL TO SUPERVISE STUDENT LOAN SERVICERS

The Consumer Financial Protection Bureau on Friday issued a proposal to supervise nonbank servicers of private and federal student loans that qualify as "larger participants" in the student loan servicing market, according to an analysis yesterday by Ballard Spahr LLP. The proposal represents an attempt by the CFPB to significantly expand its supervisory authority over student loan servicers. Because it already has supervisory authority over larger banks and nonbank private student lenders, the CFPB believes it should oversee student loan servicing by those entities. The CFPB's current authority to supervise nonbank private student lenders, however, does not allow it to supervise the nonbank student loan servicers that do not offer or provide private student loans. The proposal would allow the CFPB to supervise servicing of private and federal student loans by such nonbank servicers. Comments on the proposal will be due 60 days after its publication in the Federal Register. Click here to read the proposal.

OBAMA CUTS STUDENT-DEBT COLLECTOR COMMISSIONS TO AID BORROWERS

President Barack Obama's administration slashed the commissions paid to private collection companies that chase overdue student loans, reducing an incentive to squeeze borrowers, Bloomberg News reported today. Previously, the U.S. Education Department paid a commission as high as 16 percent of the entire loan amount only if collectors convinced defaulted borrowers to make stiff monthly payments. Starting this month, the fee dropped to as low as 11 percent, regardless of payment size. With $77.4 billion worth of student loans in default, the federal government turns to an army of private collectors to pursue borrowers. These companies, which receive about $1 billion annually in commissions, have sparked growing complaints that they insist on high payments, even when borrowers qualify for leniency. Under the new schedule, collectors will no longer have an incentive to avoid offering affordable payments tied to borrowers' incomes. Read more.

PLASTIC-SHY YOUNG IN U.S. SPUR MOVE TO USE NEW CREDIT DATA

Thirty-nine percent of undergraduate students between the ages of 18 and 24 owned a credit card in 2012, down from 49 percent in 2010, a Sallie Mae and Ipsos Public Affairs survey found, Bloomberg News reported today. And young adults who do have credit cards are carrying smaller balances: A median of $1,600 in 2010 compared with $2,500 in 2001 for under-35 households, according to Federal Reserve data. The trend, rooted in stricter lending rules and weaker job outlooks for young Americans since the 2008-09 recession, has implications for the strength of the economy. Fewer are building the traditional credit histories that would help them obtain financing for the purchases of homes and cars, which is critical to economic growth. Credit bureaus and the lending industry are stepping up their search for new ways to bolster credit files, and young people who do not pay credit card bills often do pay mobile phone bills. As reporting agencies gather data from telephone, rent and other payments, some scoring models incorporate this information to help assess candidates' creditworthiness. Read more.

ANALYSIS: WORKERS SAVING TOO LITTLE TO RETIRE

Workers and employers in the U.S. are bracing for a retirement crisis, even as the stock market sits near highs and the economy shows signs of improvement, the Wall Street Journal reported today. New data show that powerful financial and demographic forces are combining to squeeze individuals and companies that are trying to save for the future and make their money last. Fifty-seven percent of U.S. workers surveyed reported less than $25,000 in total household savings and investments excluding their homes, according to a report to be released Tuesday by the Employee Benefit Research Institute. Only 49 percent reported having so little money saved in 2008. The survey also found that 28 percent of Americans have no confidence they will have enough money to retire comfortably—the highest level in the study's 23-year history. Read more. (Subscription required.)

NUMBER OF CASES FILED BY SEC SLOWS

The Securities and Exchange Commission is filing significantly fewer civil fraud cases this year as its efforts to punish misconduct related to the financial crisis start to ebb, the Wall Street Journal reported yesterday. The agency is likely to fall short this fiscal year of its record-breaking number of enforcement actions in the previous two years. The expected drop in the numbers could be a headache for Mary Jo White, the former prosecutor nominated by President Barack Obama to be SEC chairman. A Senate panel is set to approve White's appointment today, the last step before the full Senate votes on it. White last week told a Senate hearing that she would strengthen the SEC's enforcement function to ensure that "all wrongdoers … will be aggressively and successfully called to account." The slowdown in enforcement actions reflects changes in the economic cycle, according to SEC officials. "We're at a point of inflection in our enforcement program," George Canellos, acting SEC enforcement head, said last month. Market meltdowns on the scale of the 2008 crisis, when companies implode and trillions of dollars are wiped off asset values, tend to expose major frauds and produce big cases, Canellos said. "We're now in a different era," he added. Read more. (Subscription required.)

NEW ABI BOOK EXPLORES THE DEPTHS OF DEEPENING INSOLVNECY

Any company executive juggling the competing demands of the troubled firm and its obligations to investors, as well as litigators practicing on either side of the insolvency aisle, will be interested in ABI’s latest publication, The Depths of Deepening Insolvency: Damage Exposure for Officers, Directors and Others. Authors Kathy Bazoian Phelps (Diamond McCarthy LLP) and Prof. Jack F. Williams (Mesirow Financial) wrote the book from both the plaintiffs' and defendants' perspectives to offer a deep analysis of the legal principle known as "deepening insolvency." The book also provides potential defenses that may be asserted to deepening insolvency allegations, as well as a state-by-state list of significant case law on this issue. To find out more about the book or to pre-order your copy, please click here. (Make sure to log in using your ABI member credentials to obtain the ABI member discount.)

DON'T MISS ACB'S FREE EVENT, "THE AUTO BANKRUPTCIES: CHECKING THE REARVIEW MIRROR," ON MARCH 22!

ABI members are encouraged to register for the American College of Bankruptcy's "The Auto Bankruptcies: Checking the Rearview Mirror" on March 22 at Boston College Law School in Newton, Mass. The afternoon event will feature key players looking back at the events that led to GM and Chrysler being placed into bankruptcy and the lessons that have been learned from the cases. Panelists include:

• Corinne Ball of Jones Day (New York), who served as lead bankruptcy counsel to Chrysler.

• Matthew A. Feldman of Willkie Farr and Gallagher LLP (New York), who served as chief legal advisor to the Obama administration's Task Force on the Auto Industry.

• Hon. Arthur J. Gonzalez, a Senior Fellow at New York University School of Law and formerly the Chief Bankruptcy Judge for the U.S. Bankruptcy Court for the Southern District of New York, who presided over the Chrysler chapter 11 proceedings.

• Harvey R. Miller of Weil, Gotshal & Manges LLP (New York), who served as lead bankruptcy counsel to GM.

The moderator will be Mark N. Berman of Nixon Peabody LLP (New York).

Registration for the afternoon event is free, so be sure to sign up today before it reaches capacity!

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

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 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 in the regular ABI 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 randomly be 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, and 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.

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: GORDON V. PAPPALARDO (IN RE GORDON; 1ST CIR.)

Summarized by Jennifer L. Saffer of J.L. Saffer, P.C.

In this appeal by a debtor in her chapter 13 case, the Bankruptcy Appellate Panel (BAP) for the First Circuit affirmed, after de novo review, the bankruptcy court’s order sustaining the chapter 13 trustee’s objection to the debtor's claimed exemption in a scheduled remainder interest in real estate. Affirming the decision of the bankruptcy court, the BAP determined that the property claimed as exempt was not "owned" by the debtor as required by and within the meaning of Mass. Gen. Laws ch. 188, § 3(a); the debtor had elected Massachusetts exemption rules rather than the federal, as was her option under 11 U.S.C. § 522(b).

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: CONGRESS, NOT FHFA, SHOULD BE REFORMING THE GSEs

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post found that while there is an emerging bipartisan consensus on the way forward for the secondary mortgage market, Congress has punted on what should be done with Fannie Mae and Freddie Mac, and the (Federal Housing Finance Agency) FHFA is taking significant steps without hearings or public discussion.

ABI Quick Poll

Who will win the NCAA basketball tournament?

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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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FRIDAY:

March 22, 2013

Register Today!

COMING UP

April 5, 2013

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April 10, 2013

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April 18, 2013

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April 18-21, 2013

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May 15, 2013

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May 16, 2013

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May 21-24, 2013

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June 7, 2013

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June 13-16, 2013

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July 11-14, 2013

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July 18-21, 2013

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CALENDAR OF EVENTS

2013

March

- Bankruptcy Battleground West

March 22, 2013 | Los Angeles, Calif.

- ACB's Free Event, "The Auto Bankruptcies: Checking the Rearview Mirror" Program

March 22, 2013 | Newton, Mass.

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.

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.

Thursday, August 21, 2025

ABI Tags

Consumer Bankruptcy

Asset Sales

More Homeowners Emerge from "Underwater" Status

Practice and Procedure

Municipal Bankruptcy

Turnaround Issues

ABI Bankruptcy Brief | April 02 2013

April 2, 2013

NEWS AND ANALYSIS

REPORT: CREDIT CARD DELINQUENCIES REACH 18-YEAR LOW

The American Bankers Association reported today that delinquencies on bank-issued credit cards sank to 2.47 percent in the fourth quarter of 2012 – the lowest level since 1994, CNNMoney.com reported today. The percentage of credit card accounts that were 30 days or more overdue during the quarter was roughly half the record high of 5.01 percent set in 2009 and well below the 15-year average of 3.87 percent. It was also down significantly from the previous quarter when 2.75 percent of credit card customers were delinquent on payments. Delinquencies in all three home-related categories – home equity loans, home equity lines of credit and property improvement loans – also fell during the fourth quarter. Read more.

COMMENTARY: PENSIONS NEED TO SHARE FINANCIAL PAIN WHEN CITIES GO BROKE

Stockton, Calif., wants bondholders to pay for its financial woes while leaving retirement benefits intact, but that approach undermines the law's power to rein in runaway pension costs, according to a Reuters commentary on Friday. The housing boom filled Stockton's coffers with tax revenue that officials squandered through poor management, pay raises and downtown renovations, according to the commentary. With the economic bust came $90 million in cuts over three years and, last summer, its chapter 9 filing. Bankruptcy Judge Christopher Klein yesterday approved Stockton's chapter 9 filing petition to move forward. The city's plan to right itself includes a bond-principal haircut that could be the first for a major municipality since the 1930s, according to the commentary. Some bonds could be cut as much as 83 percent, but officials would continue to pay out about $30 million a year to the California Public Employees' Retirement System (CalPERS), which manages the city's pensions. Wells Fargo and other bondholders owed more than $300 million have understandably cried foul. Legally, the securities they own merit the same treatment in bankruptcy as payments to CalPERS, according to the commentary. Central Falls, R.I., which exited bankruptcy last September, showed that a municipality can slash retirement benefits without a political or legal firestorm. Read more.

FORECLOSURE INVENTORY BALLOONED IN FIRST QUARTER OF 2013

RealtyTrac reported yesterday that nearly 1.5 million U.S. properties were actively in the foreclosure process or bank-owned in the first quarter of 2013, up 9 percent from the first quarter of 2012, but still down 32 percent from the peak of 2.2 million in December 2010, UPI.com reported yesterday. Though overall inventories are up, completed foreclosure inventories are still declining. CoreLogic reported yesterday that there were 54,000 completed foreclosures in the U.S. in February 2013, down from 67,000 in February 2012, a year-over-year decrease of 19 percent. On a month-over-month basis, completed foreclosures fell from 58,000 in January 2013 to the February level of 54,000, a decrease of 7 percent. Read more.

COMMENTARIES SHARE CONCERN OF RISK-TAKING BY BIG BANKS

Financial firms can borrow money more cheaply and with less market scrutiny when they have access to government guarantees of deposit insurance, loans from the Federal Reserve and, ultimately, taxpayer support such as what was seen with the Troubled Assets Relief Program in 2008, according to a commentary by Thomas M. Hoenig, the vice chairman of the Federal Deposit Insurance Corp., in Friday's Washington Post. Hoenig said that this safety net was intended to stabilize the financial system by protecting the payments system that transfers money around the country and the world, as well as the essential lending that commercial banks provide. But these protections also assure those who lend to banks that they will be repaid regardless of the condition of the bank. Under such circumstances, creditors give the firms a discount on the cost of the funds they borrow. Things are made more difficult, according to Hoenig, by the fact that the largest financial companies now combine traditional commercial banking with higher-risk activities such as trading so that both their banking and betting activities get access to these government protections and the multibillion-dollar subsidy that comes with them. Using subsidized money to finance the conglomerates’ bets encourages ever-higher levels of debt, risk and interconnectedness not attainable or sustainable in a truly free market, according to Hoenig. Click here to read the full commentary.

A related commentary in today's Wall Street Journal written by former FDIC chair Sheila Bair found that while bank use of risk models is common and not illegal, their use in bolstering a bank's capital ratios can give the public a false sense of security about the stability of the nation's largest financial institutions. Capital ratios (also called capital adequacy ratios) reflect the percentage of a bank's assets that are funded with equity and are a key barometer of the institution's financial strength: They measure the bank's ability to absorb losses and still remain solvent, according to Bair. While this should be a simple measure, it is not, according to Bair, because regulators allow banks to use a process called "risk weighting," which allows them to raise their capital ratios by characterizing the assets they hold as "low risk." For instance, as part of the Federal Reserve's recent stress test, the Bank of America reported to the Federal Reserve that its capital ratio is 11.4 percent. But that was a measure of the bank's common equity as a percentage of the assets it holds as weighted by their risk—which is much less than the value of these assets according to accounting rules. Take out the risk-weighting adjustment, and its capital ratio falls to 7.8 percent. On average, the three big universal banking companies (JPMorgan Chase, Bank of America and Citigroup) risk-weigh their assets at only 55 percent of their total assets. For every trillion dollars in accounting assets, these megabanks calculate their capital ratios as if the assets represented only $550 billion of risk. Read more. (Subscription required.)

ANALYSIS: PACE OF MERGERS SLOWED IN THE FIRST QUARTER 2013 TO THE FEWEST SINCE 2003

Only 8,115 merger deals were announced worldwide in the first quarter of this year, the lowest number since 2003, according to data from Thomson Reuters, the New York Times DealBook blog reported today. While the combined value of $542.8 billion outpaced last year's first quarter by about 10 percent, it is still 26 percent below the level for the period in 2011. Bankers and lawyers have been publicly boasting about a nascent revival in mergers. In March, 97 percent of deal makers surveyed by the Brunswick Group public relations firm said that they expected more deals to be announced in North America this year than in the last year. Many advisers caution against judging 2013 by one quarter; some deals that would otherwise have been announced in the first quarter were moved to fourth quarter 2012 to avoid incurring potentially higher taxes, they said. Read more.

FRIDAY! DON’T MISS THE ABI LIVE WEBINAR – "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.

Make sure to register today!

ABI IN-DEPTH

LATEST CASE SUMMARY ON VOLO: SCHOPPE V. COMMISSIONER OF INTERNAL REVENUE (10TH CIR.)

Summarized by Eric Madden of Diamond McCarthy LLP

The Tenth Circuit ruled that the automatic stay under 11 U.S.C. § 362(a)(1) does not apply to a proceeding commenced by the debtor taxpayer's petition filed in tax court, including any appeal from rulings in the underlying proceeding. Adopting the reasoning of the First, Third, Fifth and Eleventh Circuits and rejecting the reasoning of the Ninth Circuit, the Tenth Circuit concluded that a petition filed in tax court is an independent judicial proceeding initiated by the debtor, not the continuation of an administrative proceeding against the debtor.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: I'M A CREDITOR OF DETROIT...NOW WHAT? (PART 2)

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. Previously examining some of the overarching issues that can make a chapter 9 restructuring more challenging for creditors than a chapter 11, a recent blog post takes a closer look at the financial challenges of Detroit.

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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FRIDAY:

April 5, 2013

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COMING UP

April 10, 2013

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April 18, 2013

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April 18-21, 2013

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May 15, 2013

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May 16, 2013

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May 21-24, 2013

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June 7, 2013

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June 13-16, 2013

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July 11-14, 2013

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July 18-21, 2013

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CALENDAR OF EVENTS

2013

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.

Thursday, August 21, 2025

ABI Tags

Credit Card Delinquencies Reach 18-Year Low

ABI Bankruptcy Brief | January 17 2013

January 17, 2013

NEWS AND ANALYSIS

ABI'S CHAPTER 11 COMMISSION EYES UPDATES TO BANKRUPTCY CODE

With the Bankruptcy Code now 35 years old, 2013 looks to be a key year in developing a replacement as ABI's Chapter 11 Commission continues its study of chapter 11 with a "top to bottom look" at the Code, The Deal reported yesterday. No specific changes have been recommended to date, and the Commission will not be close to specifics until it gets reports from all 13 of its advisory committees, according to Commission Co-Chair Al Togut of Togut, Segal & Segal LLP (New York). The commission, which is just looking at corporate chapter 11 and the parts of the code that affect business bankruptcies, expects to complete its report in the spring of 2014, said fellow Co-Chair Bob Keach of Bernstein Shur (Portland, Maine), adding that by the end of 2013 the commission should have a good idea of what the report will look like. The report will have two components: ideas for change where there is a consensus and proposals that lack a consensus. Since the ABI does not lobby Congress for legislation, an organization or a combination of organizations will likely work to convert the report into legislation, said Keach. "The idea is to develop a statute for the next 40 years that will get us through as well as this one did," Keach says. Read more.

PENSION FUNDING GAP WIDENS FOR BIG CITIES

A study released on Tuesday by the the Pew Center on the States found that major U.S. cities emerged from the financial crisis with increasingly underfunded pension and retiree health care plans, the Wall Street Journal reported today. Cities employing nearly half of U.S. municipal workers saw their pension and retiree health care funding levels fall from 79 percent in fiscal year 2007 to 74 percent in fiscal year 2009, according to the latest available data, the Pew report stated. The growing funding gulf, which the study estimated at more than $217 billion for the 61 cities in the study, raises worries about local finances at a time when states are also struggling to recover from the recession. More than half, or some $118 billion, of the projected pension shortfall stems from unfunded retiree health care costs, according to the Pew report. Read more. (Subscription required.)

ABI will be holding a media teleconference on Tuesday, Jan. 22, at 11 a.m. ET with experts examining municipal distress in 2013. There are limited spots available to ABI members that would like to join the call next week. Contact John Hartgen, ABI's Public Affairs Manager, at jhartgen@abiworld.org if you would like to participate in the teleconference.

CFPB'S NEW MORTGAGE RULES AID HOMEOWNERS

U.S. banks will have to do more to help struggling mortgage borrowers keep their homes under final rules released today by the Consumer Financial Protection Bureau (CFPB), the Wall Street Journal reported today. Mortgage-loan servicers, which collect borrowers' loan payments, will have to evaluate troubled borrowers for all loan-assistance options permitted by mortgage investors such as Fannie Mae and Freddie Mac, as well as private investors, according to the CFPB rules that will take effect in a year. Currently, no national standard exists for how mortgage servicers must treat defaulting borrowers. The lending industry "must consider all options available from the mortgage owners or investors to help the borrower retain the home," said CFPB director Richard Cordray. The industry "can no longer steer borrowers to those options that are most financially favorable for the servicer." The agency's move follows numerous federal and state efforts to regulate the industry, which came under fire after reports in 2010 found that banks were foreclosing on borrowers without properly reviewing documents and other paperwork, a practice dubbed "robo-signing." In 2011, regulators found abuses of foreclosure processes at 14 lenders. Ten of those lenders agreed to an $8.5 billion settlement of regulators' allegations. Read more. (Subscription required.)

ANALYSIS: "ODD COUPLE" IN U.S. HOUSE TO TACKLE MORTGAGE FINANCE

The will of the new Congress to begin rebuilding the U.S. mortgage finance system rests largely in the hands of Reps. Jeb Hensarling (R-Texas) and Maxine Waters (D-Calif.), known to be partisan fighters from opposite ends of the ideological spectrum, Bloomberg News reported yesterday. Hensarling is the new chairman of the House Financial Services Committee, while Waters is the highest-ranking Democrat. "While we clearly have profound philosophical differences – some might call us Capitol Hill’s newest odd couple – we are exploring areas of common concern where we hopefully can work together," Hensarling said. In addition to grappling with proposals to tweak and amend the Dodd-Frank regulatory law, they will be seeking common ground on what may be the panel's biggest issue this year: The future of Fannie Mae and Freddie Mac. For Hensarling, the solution is to abolish the government-owned mortgage companies and completely privatize the mortgage market. Waters argues that some government involvement is needed to preserve the 30-year fixed home loan. It is likely that the two lawmakers eventually will support a plan that would shrink the role of Fannie Mae and Freddie Mac without threatening to choke off the flow of money into home loans. Read more.

FLORIDA DEFIES HOUSING REBOUND AS FORECLOSURES SOAR

More than six years after subprime lending and overbuilding led to the recent U.S. real estate slump, RealtyTrac Inc. reported that Florida had the biggest increase in home seizures last year, and the highest foreclosure rate, Bloomberg News reported today. One in every 32 Florida households received a notice of default, auction or repossession in 2012, more than double the average U.S. rate of one in every 72, according to RealtyTrac Inc.'s report. Home repossessions increased by 16,276 during the year to 84,456, the biggest gain nationwide. Adding to the state’s woes is a backlog of foreclosures caused by a required court review of each case. Judicial supervision of repossessions is slowing Florida’s rebound, in contrast to California and Arizona, so-called nonjudicial states, where lenders send notices to delinquent borrowers and record defaults at the county level without court intervention, said Lawrence Yun, chief economist of the National Association of Realtors. It took 853 days on average in Florida to complete a foreclosure in the fourth quarter, the third-longest behind New York and New Jersey, RealtyTrac said in today’s report. The U.S. average rose to 414 days from 348 days a year earlier, the most since the data firm began tracking the metric in 2007. Texas had the shortest period at 113 days. Almost 20 percent of outstanding Florida loans were more than 30 days delinquent or in foreclosure in November, the largest share of non-current mortgages in the nation, according to data provider Lender Processing Services. Read more.

ANALYSIS: REWRITING U.S. TAX LAW HAS CONSENSUS WHILE FIX PROVES ELUSIVE

Maintaining a bipartisan consensus in Congress to rewrite the U.S. tax code will be difficult as there is little agreement on what a tax overhaul means and what it is supposed to achieve, according to a Bloomberg News analysis yesterday. Republicans, who control the U.S. House, want lower tax rates and fewer breaks in a simpler system that raises no additional revenue. The Obama administration and many Democrats endorse some of those goals – particularly corporate rate reduction – while viewing a tax rewrite as a way to guarantee more revenue from top earners. That split will challenge lawmakers as they decide whether to rewrite the code as part of budget talks or work on a major tax bill without a fiscal agreement. Compromise remains elusive, though the code is more convoluted -- and therefore, ripe for change -- following passage of a law Jan. 1 that raised marginal rates and reinstated limits on personal exemptions and deductions. Read more.

BLOOMBERG'S LATEST "BILL ON BANKRUPTCY" VIDEO: MF GLOBAL CREDITORS UNDETERRED BY LOW VALUE

The low valuation creditors of MF Global Holding Ltd. put on their liquidating chapter 11 plan is not deterring the bond market where debt is being sold for roughly twice the predicted recovery for unsecured creditors of the liquidating commodity broker's holding company. Bloomberg Law's Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle explore this and other current cases in their latest video. Click here to view.

TAKE AN IN-DEPTH LOOK AT CREDITORS' COMMITTEES AND THE ROLE OF THE INDENTURE TRUSTEES 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

• 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

• 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!

ABI IN-DEPTH

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 the 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!

LATEST CASE SUMMARY ON VOLO: TIMCO LLC V. T AND M SALES AGENCY INC. (IN RE TIMCO LLC; 6TH CIR.)

Summarized by James E. Bailey III of Butler Snow O'Mara Stevens & Cannada PLLC

The Sixth Circuit ruled that the appeal of the bankruptcy court's decision to remand a case removed by state court action to confirm an arbitration award that was affirmed by a district court was not reviewable by the court of appeals under 28 U.S.C. § 1334(d). The appeal of the order granting relief from the automatic stay to allow the state court action to proceed was moot where the debtor failed to obtain stay pending appeal and the state court had entered a valid order confirming an arbitration award.

There are more than 700 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: HIGH-INCOME EARNERS NOT BARRED FROM PASSING BANKRUPTCY'S MEANS TEST

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A new post discusses the misconception that bankruptcy's means test bars high-income earners from qualifying for chapter 7 relief.

ABI'S INDUBITABLE EQUIVALENTS: TELL US A TUNE AND WE'LL SING YOU THAT SONG!

ABI's Indubitable Equivalents need your help: Tell us your favorite Rock and Roll tune - that elusive classic that takes you back, makes your feet tap, your head bang, and your horns come out! If we pick your song, you get widespread promotion by the band and you'll receive a free CD of IE’s greatest hits!

To enter, log onto www.abiband.com or “like” the Band’s Facebook page.

The fine print: No purchase necessary. You can enter as many times as you want. Multiple winners will be selected. Winners will be announced on the IE website and on Facebook. Entry deadline: January 31.

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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MONDAY:

Jan. 21, 2013

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NEXT THURSDAY:

Jan. 24-25, 2013

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COMING UP:

Feb. 7-9, 2013

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

Feb. 19, 2013

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Feb. 20-22, 2013

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March 7-9, 2013

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March 22, 2013

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April 18-21, 2013

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CALENDAR OF EVENTS

2013

January

- Western Consumer Bankruptcy Conference

January 21, 2013 | Las Vegas, Nev.

- Rocky Mountain Bankruptcy Conference

January 24-25, 2013 | Denver, Colo.

February

- Caribbean Insolvency Symposium

February 7-9, 2013 | Miami, Fla.

- 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.

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

- Annual Spring Meeting

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

Thursday, August 21, 2025

ABI Tags

Claims

Mortgage

Bankruptcy Litigation

Unsecured Trade Creditors

Creditors' Committee

Practice and Procedure

ABI's Chapter 11 Commission Eyes Updates to Bankruptcy Code

ABI Bankruptcy Brief | June 25 2013

June 25, 2013

NEWS AND ANALYSIS

SUPREME COURT GRANTS CERT IN NINTH CIRCUIT CASE ON JURISDICTION BY CONSENT

The Supreme Court yesterday granted certiorari in Executive Benefits Ins. Agency v. Arkison (In re Bellingham Insurance Agency) about the scope of the bankruptcy court's powers in the wake of the Court's ruling in Stern v. Marshall. In a Ninth Circuit case that drew attention after Stern was decided, a fraudulent transfer defendant argued the bankruptcy court lacked jurisdiction to enter judgment against it. The Ninth Circuit agreed that the bankruptcy court could not enter a final judgment in a fraudulent transfer action but held that the defendant had consented to the bankruptcy court's jurisdiction through its litigation conduct. The Supreme Court will decide whether parties can consent to bankruptcy court jurisdiction. They will also have to rule on a statutory issue about a gap Stern created in the jurisdictional framework. A potential outcome is that bankruptcy courts will lose the power to hear any fraudulent transfer actions. To read the petition for a writ of certiorari, please click here.

LATE AUTO LOAN PAYMENTS EDGED HIGHER IN 1Q 2013

Banks are increasingly extending auto loan financing to borrowers with less-than-sterling credit, a trend that's contributing to a higher rate of missed loan payments, the Associated Press reported today. The rate of U.S. auto-loan payments late by 60 days or more rose to 0.88 percent in the first three months of the year, credit reporting agency TransUnion said today. That's up from 0.82 percent in the first quarter last year, but down from 1 percent in the last three months of 2012, the firm said. Among subprime borrowers, or those whom lenders deem to be higher credit risks because of their track record of managing debt, the delinquency rate jumped to 5.5 percent in the first quarter from 5.09 percent a year earlier. Read more.

ANALYSIS: HIGH-END HOME LOANS STAGE A COMEBACK

Despite a recent sharp rise in mortgage rates, "jumbo" loans are becoming easier to get, according to a Wall Street Journal analysis on Saturday. Lenders originated $54 billion in such mortgages in the first quarter of 2013, according to Inside Mortgage Finance, an industry newsletter, up from $47 billion during the same period a year earlier. Higher loan volume isn't the only sign of a turnaround. The difference in the rate for a government-backed "conforming" mortgage and a jumbo loan is the narrowest it has been since 2007. Many jumbo lenders also have increased the amount of a home's value they will finance, and some are becoming more flexible in evaluating borrowers with strong credit. Read more. (Subscription required.)

COMMENTARY: HOW SAM ZELL IS SINKING TRIBUNE A SECOND TIME AROUND

Sam Zell is gone from the Tribune Co., but his toxic financial legacy lives on, according to a commentary in Friday's Washington Post. Not only did his debt-fueled purchase of one of the nation’s biggest media companies help precipitate its bankruptcy, costing creditors billions of dollars and wiping out thousands of jobs, but he also left a nasty tax mess behind for Tribune, which exited chapter 11 proceedings on Dec. 31. The Internal Revenue Service has challenged the tax-avoiding way that Zell had Tribune unload Newsday, a Long Island, N.Y., newspaper, and it seems almost certain to challenge the way that Tribune unloaded the Chicago Cubs. By the time the final papers are shuffled, the IRS and local tax authorities will likely seek considerably more than half a billion dollars in taxes, penalties and interest from Tribune from the sales of the Cubs and Newsday. Read more.

LATEST ABI PODCAST EXAMINES SUPREME COURT'S DECISION ON THE MEANING OF “DEFALCATION”

ABI's latest podcast features ABI Resident Scholar Scott Pryor speaking with Prof. Keith Sharfman of St. John's University School of Law and attorney Tom Byrne of Sutherland Asbill & Brennan LLP (Atlanta) on the issues surrounding the Supreme Court's unanimous decision in Bullock v. BankChampaign, N.A. In its decision on May 13, the Court held that a defalcation by a trustee requires a finding of gross negligence or some knowledge that what he or she is doing is improper. Byrne was the counsel of record for Randy Bullock, and Scharfman joined fellow professors on an amici curiae brief in support of BankChampaign. Click here to listen to the podcast.

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 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 on July 15 from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.

ABI GOLF TOUR UNDERWAY; NEXT STOP IS THE NORTHEAST BANKRUPTCY CONFERENCE ON JULY 12

The next stop for the ABI Golf Tour is the famed Newport National course in Newport, R.I., in conjunction with the Northeast Bankruptcy Conference on July 12. Final scoring to win the Great American Cupsponsored by Great American Groupis 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.

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: SUAREZ V. BARRET (IN RE SUAREZ; 9TH CIR.)

Summarized by James Portman Webster of the James Portman Webster Law Office PLC

The Ninth Circuit affirmed the Bankruptcy Appellate Panel and bankruptcy court's ruling that a state court contempt ruling can be used as evidence that a debt results from a willful and malicious injury and is, therefore, nondischargeable under 11 U.S.C. § 523(a)(6).

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 ANALYSIS OF IN RE BELLINGHAM INSURANCE AGENCY

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post takes a closer look at the questions raised by the Supreme Court yesterday when it granted certiorari in Executive Benefits Insurance Agency v. Arkison (In re Bellingham Insurance Agency).

ABI Quick Poll

Law firms should provide support for law student-staffed bankruptcy clinics for consumer debtors.

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.

NEXT EVENT:

July 11-14, 2013

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COMING UP

July 15, 2013

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July 18-21, 2013

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Aug. 8-10, 2013

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Aug. 22-24, 2013

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Sept. 10, 2013

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Sept. 12, 2013

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Sept. 18-19, 2013

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Sept. 27, 2013

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Oct. 4, 2013

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Oct. 6, 2013

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Oct. 14, 2013

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Nov. 10-12, 2013

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Nov. 11, 2013

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Dec. 8-12, 2013

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CALENDAR OF EVENTS

2013

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.

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

    Sept. 18-19, 2013 | New York

- 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

- Austin Advanced Consumer Bankruptcy Practice Institute

Nov. 10-12, 2013 | Austin, Texas

- Detroit Consumer Bankruptcy Conference

Nov. 11, 2013 | Detroit, Mich.

December

- ABI/St. John’s Bankruptcy Mediation Training

Dec. 8-12, 2013 | New York

Thursday, August 21, 2025

ABI Tags

Supreme Court Grants Cert in Ninth Circuit Case on Jurisdiction by Consent

ABI Bankruptcy Brief | October 17, 2013

October 22, 2013

NEWS AND ANALYSIS

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!

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

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

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

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.

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.

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.

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FRIDAY:

COMING UP

CALENDAR OF EVENTS

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.

Thursday, August 21, 2025

ABI Tags

Preliminary Hearing on Detroit's Chapter 9 Eligibility Concludes with Discussio…

ABI Bankruptcy Brief | February 5 2013

February 12, 2013

NEWS AND ANALYSIS

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!

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.

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.

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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NEXT EVENT:

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

Feb. 19, 2013

Register Today!

COMING UP:

Feb. 20-22, 2013

Register Today!

9th Annual Wharton Restructuring and Distressed Investing Conference

Feb. 22, 2013

Register Today!

March 7-9, 2013

Register Today!

March 22, 2013

Register Today!

"Nuts and Bolts" Program at ASM- A Must for Junior Professionals or Those New to Bankruptcy Practice

April 18, 2013

Register Today!

April 18-21, 2013

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

Register Today!

May 16, 2013

Register Today!

May 21-24, 2013

Register Today!

June 7, 2013

Register Today!

CALENDAR OF EVENTS

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.

Thursday, August 21, 2025

ABI Tags

Asset Sales

Bankruptcy Litigation

Predatory Lending

Corporate Governance

Restructuring Experts: Recession Did Not Improve Corporate Governance

ABI Bankruptcy Brief | July 9, 2013

July 9, 2013

NEWS AND ANALYSIS

PENSION PROPOSAL AIMS TO EASE FUTURE BURDEN ON STATES AND CITIES

Sen. Orrin Hatch (R-Utah), the senior Republican on the Senate Finance Committee, is set to introduce legislation that would allow states and cities to exit the pension business while still giving public workers the type of benefits they want, the New York Times DealBook blog reported today. It involves a tax-law change that would enable governments to turn their pension plans over to life insurers. Big players like MetLife and Prudential, to cite just two, might thus step into shoes now occupied by the likes of CalPERS, California’s giant state pension system. Any such change would be voluntary, said Hatch, who along with Senate Finance Committee Chairman Max Baucus (D-Mont.) is committed to working on a tax overhaul package this year, and the public-pension change could be one part of that. Working with insurers would not suddenly make trillions of dollars appear, but Hatch said that it would make costs more predictable and protect both retirees and taxpayers. The proposal “does not include an explicit or implicit government guarantee,” he said. Read more.

ANALYSIS: FINANCIAL CRISIS JUST A SYMPTOM OF DETROIT'S WOES

As officials in Detroit negotiate urgently with creditors and unions in a last-ditch effort to spare Detroit from plunging into the largest municipal bankruptcy in the nation’s history, residents say that the city has worse problems than its estimated $18 billion debt, the New York Times reported today. The Detroit police’s average response time to calls for the highest-priority crimes this year was 58 minutes, officials now overseeing the city say. The department’s recent rate of solving cases was 8.7 percent, far lower, the officials acknowledge, than rates in cities like Pittsburgh, Milwaukee and St. Louis. Kevyn D. Orr, the state-appointed emergency financial manager for Detroit, has said that the chances of filing for bankruptcy, a possibility that could be decided as early as this month, stand at 50-50. The prospect of a bankruptcy filing — a move that is extremely rare for cities and one that has never happened to an American city as populous as Detroit, with about 700,000 people — worries some residents. They say they fear that bankruptcy would add more stigma to a city that has contracted alarmingly in the decades since it was the nation’s fourth largest, starting in the 1920s, and that it might worsen already bare-bones services. Read more.

CFTC WEIGHS DELAY OF SWAPS RULES

Commodity Futures Trading Commission Chair Gary Gensler is proposing to partially delay controversial cross-border derivatives rules slated to go into effect Friday, the Wall Street Journal reported today. The move is an about-face for Gensler, who previously refused to delay a requirement that U.S. banks operating abroad comply with U.S. swaps rules, despite mounting pleas from fellow commissioners, lawmakers and overseas policy makers. Gensler now is floating a compromise that would implement some provisions almost immediately and delay others until the end of the year. The agency may vote as soon as Friday on the rules, which require that firms trading derivatives hold more capital and post collateral to a clearinghouse that secures the deal. Gensler's proposal comes after a tense meeting last week with Treasury Secretary Jacob Lew and Securities and Exchange Commission Chairman Mary Jo White. Lew pressed Gensler and White to better coordinate adoption and implementation of U.S. swaps rules. Lew has received complaints from policy makers and others about a lack of coordination between U.S. and foreign governments. Read more. (Subscription required.)

DODD-FRANK EXECUTIVE PAY RULE STILL IN LIMBO AMID PUSHBACK FROM CORPORATE AMERICA

Soon after Congress in 2010 approved the largest overhaul of financial regulation in generations, the Securities and Exchange Commission moved to enforce a provision requiring companies to disclose how much more their chief executives made than other employees, the Washington Post reported on Sunday. The agency just had to write a rule telling firms how to comply, but nearly three years later, the rule remains unfinished, with no sign of when it will be done. Within six months of the law’s passage in 2010, SEC staffers had circulated an early blueprint for the pay rule. They set a deadline for completing it by the end of 2011. The public was outraged over runaway executive compensation, and the pay disclosure seemed relatively straightforward, at least compared with many of the law’s other requirements. What the agency did not count on was the resistance mounted by big business. A lobbying campaign waged by business executives and the nation’s most prominent corporate associations undercut the momentum and effectively brought the agency’s work on the rule to a standstill. The efforts of business groups to influence the SEC’s work was especially effective because of their success in pressing a court challenge to another part of the financial overhaul legislation — in essence, an extension of their lobbying efforts. The threat of additional lawsuits has hung over the discussion between lobbyists and agency officials about the pay rule, and some opponents have warned that the agency could be sued again if it enforces it. Read more.

DELAWARE-ONLY BYLAWS ON SHAREHOLDER SUITS TO CHANGE LEGAL LANDSCAPE

A recent ruling in Delaware is poised to change the landscape in big-ticket corporate litigation—to the delight of many companies and the likely chagrin of some shareholders, the Wall Street Journal reported yesterday. Chancellor Leo Strine of the Delaware Court of Chancery late last month ruled that corporate boards may adopt bylaws requiring that most shareholder lawsuits against the companies be filed in Delaware. The ruling effectively gives the thousands of businesses incorporated in Delaware home-field advantage in shareholder suits. The Delaware Chancery Court, one of the country's most influential business courts, doesn't use juries and is regarded as relatively business friendly compared with other courts. Forcing shareholders to sue in Delaware—and only Delaware—is a way to forestall a wave of lawsuits getting filed in several courts every time a merger or other major corporate action is announced. Roughly 300 corporations have adopted Delaware-only provisions in recent years to stem a rising tide of multicourt shareholder litigation. Mergers and acquisitions, in particular, have provided fodder for suits outside of Delaware, with shareholder plaintiffs demanding jury trials in a variety of states to challenge deals. Read more. (Subscription required.)

MAKE SURE TO PRE-ORDER ABI'S NEWEST PUBLICATION UNDERSTANDING ORDINARY: A PRIMER ON FINANCIAL AND ECONOMIC CONSIDERATIONS FOR ORDINARY COURSE DEFENSES TO PREFERENCE ACTIONS

Understanding Ordinary: A Primer on Financial and Economic Considerations for the Ordinary Course Defenses to Bankruptcy Preference Actions provides practitioners and others exposed to bankruptcy preference matters with an overview of bankruptcy preference basics, as well as a detailed discussion of the ordinary course of business defense – both between parties and within industries. Nearly every chapter includes a legal note written by an expert in the field, and the book is replete with charts that help illustrate many of the book's concepts. The 168-page softbound publication will ship in late July. To pre-order, please click here (be sure to log-in to receive ABI member pricing).

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

Utilizing a case study, ABI's panel of experts 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 on July 15 from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.

ABI GOLF TOUR UNDERWAY; NEXT STOP IS THE NORTHEAST BANKRUPTCY CONFERENCE ON FRIDAY

The next stop for the ABI Golf Tour is the famed Newport National course in Newport, R.I., in conjunction with the Northeast Bankruptcy Conference on July 12. Final scoring to win the Great American Cupsponsored by Great American Groupis 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.

ABI IN-DEPTH

NORTON JUDICIAL EXCELLENCE AWARD NOMINATIONS OPEN

Nominations are now open for the 8th Annual Judge William L. Norton Judicial Excellence Award, to be presented during the ABI luncheon at the annual meeting of the National Conference of Bankruptcy Judges on Nov. 1, 2013. The award is presented by ABI and Thomson Reuters each year to the current or retired bankruptcy judge whose career embodies the same continued dedication and outstanding contributions to the insolvency community as the award’s namesake, Judge Norton. Nominations are considered by a committee made up of representatives from the Norton treatise and past ABI presidents. Nomination forms are available from Clay Mattson at Thomson Reuters (clay.mattson@thomsonreuters.com).

NEW CASE SUMMARY ON VOLO: RYAN V. U.S. (IN RE RYAN; 7TH CIR.)

Summarized by Penelope Bach of Sulaiman Law Group

The Seventh Circuit Court of Appeals affirmed the decision of the the bankruptcy court holding that the bankruptcy court's interpretation of § 506(d) as stated in Dewsnup v. Timm (502 U.S. 410 (1992)) applies in chapter 13 cases as well as chapter 7 cases.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: SUPREME COURT TO CONSIDER WHETHER STERN ALLOWS WAIVER OR CONSENT

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post takes a closer look in at Executive Benefits Insurance Agency v. Arkison, No. 12-1200, which was granted certiorari on June 24. The post said that the Supreme Court has set the stage to flesh out the practical impact of Stern v. Marshall because it squarely raises the issue of whether a party can waive its right to insist on a trial before an Article III tribunal and the related question of whether consent is permissible.

ABI Quick Poll

When will the dowward trend of consumer bankruptcy filings turn around?

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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THURSDAY:

July 11-14, 2013

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COMING UP

July 15, 2013

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Nov. 11, 2013

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Dec. 8-12, 2013

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CALENDAR OF EVENTS

2013

August

- Mid-Atlantic Bankruptcy Workshop

August 8-10, 2013 | Hershey, Pa.

- Southwest Bankruptcy Conference

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

October

- Midwestern Bankruptcy Institute Program and Midwestern Consumer Forum

    Oct. 4, 2013 | Kansas City, Mo.

- ABI Endowment Football Game

    Oct. 6, 2013 | Miami, Fla.

- Professional Development Program

    Oct. 11, 2013 | New York, N.Y.

- Chicago Consumer Bankruptcy Conference

    Oct. 14, 2013 | Chicago, Ill.

November

- Austin Advanced Consumer Bankruptcy Practice Institute

Nov. 10-12, 2013 | Austin, Texas

- Detroit Consumer Bankruptcy Conference

Nov. 11, 2013 | Detroit, Mich.

December

- ABI/St. John’s Bankruptcy Mediation Training

Dec. 8-12, 2013 | New York

Thursday, August 21, 2025

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