News
New California Law
A 10/10/19 article in Credit & Collection e-newsletter reports: A new California law signed by Gov. Gavin Newsom prohibits collection agencies from wiping out bank accounts to pay medical debts. “People who are living paycheck to paycheck need the protection that this bill will provide to give them more financial security,” said Sen. Bob Wieckowski, who authored the legislation. “We do not want people living on the streets because debt collectors, who don’t have the greatest track record for accuracy, claim someone owes an old debt.” Mr. Wieckowski says the legislation doesn’t erase debt, but “gives people the ability to…
California Legislature Declares That Mortgage Debt Is Regulated Under State’s Debt Collection Law
For many years it was unclear whether mortgage debt was covered under the California Rosenthal Fair Debt Collection Practices Act (the “Rosenthal Act”), which is California’s corollary to the federal Fair Debt Collection Practices Act (“FDCPA”). That issue was resolved on October 7, 2019, when California Governor Gavin Newsom signed into law legislation that expressly includes “mortgage debt” within the Rosenthal Act’s definition of “consumer credit.” Senate Bill 187 (“SB 187”), which is effective January 1, 2020, amends the Rosenthal Act to expressly apply to debt collection activities involving residential mortgage loans. SB 187 also amends the Rosenthal Act so…
2 Bankruptcy Court Opinions are opposite to each other, on Bankruptcy Court Allowing a Late Claim if the Creditor Was Not Listed and did not find out there was a bankruptcy until after the deadline for filing proofs of claim had passed
Bankruptcy Judge Elizabeth Brown of Denver differs with Bankruptcy Judge Michelle Harner of Baltimore on the interpretation of Bankruptcy Rule 3002(c)(6), about whether a Bankruptcy Court can allow a Proof of Claim filed AFTER the deadline (“bar date”) for filing Proofs of Claim has passed, in a bankruptcy case, if the creditor filing the Proof of Claim, after the deadline (“bar date”) did not receive notice of the existence of the bankruptcy case, and did not find out there was a bankruptcy case, until after the deadline (“bar date”) for filing a Proof of Claim had passed. Yesterday we reported…
Big Electric Company Chapter 11 Bankruptcy
Big Electric Company Chapter 11 bankruptcy case in the news: In the Pacific Gas & Electric Co. (“PG&E”) Chapter 11 bankruptcy, the Bankruptcy Court recently ended the “exclusivity period”, in which only debtor PG&E could file a proposed Chapter 11 plan of reorganization. Now the noteholders and wildfire victims have filed a joint alternative proposed Chapter 11 plan, which will compete for confirmation, with PG&E’s proposed Chapter 11 plan. The proposed Chapter 11 plan filed by the noteholders and wild fire victims, would, if confirmed (means approved) by the Bankruptcy Court, give the noteholders control of the company and would…
US Consumer Debt Surges To Record Highs
America has a shocking new “savings and loan” crisis. Consumer debt is surging to record highs, fueled by rising mortgage debt, student loans and a binge on credit card use. And more Americans are flat-out broke, with no emergency savings. “Consumer debt is an ongoing personal financial crisis for many Americans,” said John Madison, CPA and personal financial counselor at Dayspring Financial Ministry. “The ease of obtaining ever-increasing levels of available credit traps many consumers into the illusion that they can buy whatever they want — regardless of their ability to repay the debt they take on.” Despite borrowing beyond…
Bankruptcy Amendments
Three narrow in scope bankruptcy amendments have been passed by both the US House of Representatives, and the US Senate, and are awaiting President Trump signing these 3 amendments into law. Bankruptcy press reports that President Trump is expected to sign these 3 bills into law, as the 3 bills had little to no opposition, in Congress: H.R. 2938: Excludes VA and Department of Defense disability payments from the monthly income calculation used for bankruptcy means testing. H.R. 2336: “H.R. 2336, the “Family Farmer Relief Act of 2019,” would increase the current debt limit used to determine whether a family…
Seventh Circuit Solidifies a Circuit Split on the Automatic Stay
Disagreeing with the Tenth and D.C. Circuits and siding with four other circuits, the Seventh Circuit rules that passively holding estate property violates the automatic stay. Solidifying a split of circuits, the Seventh Circuit ruled that the City of Chicago must comply with the automatic stay by returning impounded cars immediately after being notified of a chapter 13 filing. The decision lays the foundation for the Supreme Court to grant certiorari and decide whether violation of the automatic stay requires an affirmative action or whether inaction amounts to control over estate property and thus violates the stay. The Second, Seventh,…
Risky Borrowing Is Making a Comeback, but Banks Are on the Sidelines, Reports American Bankruptcy Institute 6/13/19 E-Newsletter
A decade after reckless home lending nearly destroyed the financial system, the business of making risky loans is back, the New York Times reported on Tuesday. This time, the money is bypassing the traditional, and heavily regulated, banking system and flowing through a growing network of businesses that have stepped in to provide loans to parts of the economy that banks abandoned after 2008. With almost $15 trillion in assets, the shadow-banking sector in the U.S. is roughly the same size as the entire banking system of Britain, the world’s fifth-largest economy. In certain areas — including mortgages, auto lending…
Commentary: Legislation Aims to Tackle the Student Loan Crisis in Bankruptcy Court
The American Bankruptcy Institute e-newsletter of 5/16/19 reports that Legislation introduced last week, in the US Congress, seeks to allow student loans to be discharged in bankruptcy without the difficulty of proving the “undue hardship” standard, according to a Washington Post commentary. The legislation has drawn bipartisan support with two Republican co-sponsors in the House, including Rep. John Katko (R-N.Y.), who introduced a similar bill in the last session of Congress. It would, as sponsor House Judiciary Chair Jerrold Nadler (D-N.Y.) put it in a statement, “ensure student loan debt is treated like almost every other form of consumer debt.”…
American Bankruptcy Institute e-newsletter of 5/9/19 reports RISK from over-leveraged debt, from over-borrowing by corporations
For fund managers, it’s easy to be picky when money is tight, but not so simple when they’re rolling in cash, according to a Bloomberg commentary on Tuesday. Leveraged-loan investors are suddenly willing to push back on the pervasive weakening of covenants, the safeguards in offering documents that are meant to protect creditors. In January, Moody’s Investors Service determined that covenant quality in leveraged loans was the worst on record in the third quarter of 2018. It hasn’t gotten much better since. On Monday, the Federal Reserve echoed that sentiment, further amplifying its warnings about risky corporate debt in a…