News
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…
Soaring Bankruptcies in the Farm Belt Force Banks to Boost Defenses
Banks that serve U.S. farmers are increasingly restructuring existing loans and boosting the collateral needed for new ones as the numbers of late and missed payments have risen, Bloomberg News reported. While regional banks are healthy, they’re clearly boosting their defenses against the risks they face. In March, a report by First Midwest Bank in Chicago showed past-due agricultural loans up 287 percent in 2018 over the previous year. Meanwhile, cases handled by the Iowa Mediation Service involving farmers unable to make payments rose 20 percent. While regional banks are healthy, they’re clearly boosting their defenses against the risks they…
Credit and Collection E-newsletter of 4/29/19 Reports
Red flags are flying in the credit-card industry after a key gauge of bad debt jumped to the highest level in almost seven years. The charge-off rate—the percentage of loans companies have decided they’ll never collect—rose to 3.82 percent in the first three months of 2019, the highest since the second quarter of 2012, according to data compiled by Bloomberg Intelligence. And loans 30 days past due, a harbinger of future write-offs, increased at all seven of the largest U.S. card issuers. At Discover Financial Services, which reported results on Thursday, the charge-off rate increased to 3.5 percent from 3.23…
American Bankruptcy Institute reports that Malls are Under Pressure as More Stores Close
Strong retail numbers last year from department stores Macy’s Inc. and Nordstrom Inc. raised hopes that the beleaguered mall industry would finally rebound. But recent developments this year are pointing to more trouble ahead, the Wall Street Journal reported. A number of struggling retailers are closing stores and being more selective about where to open ones, dimming prospects for many mall owners and investors. U.S. retailers have already closed 5,994 stores so far this year, compared with 5,864 closures for all of last year, according to Coresight Research. The net store closings, or the number of closings minus openings this…
Bankrupt Student Loan Borrowers Could Finally Get a Break
American Bankruptcy Institute 4/15/19 e-newsletter reports that it is possible that Bankrupt Student Loan Borrowers Could Finally Get a Break, if congress were to accept the recommendations of the recent Commission on Consumer Bankruptcy report, and make amendments to the Bankruptcy Code, to make it easier to seek to discharge student loan debt in bankruptcy. Getting out from under crushing student loan debt might become a little easier if new proposed changes in bankruptcy rules take hold, MarketWatch.com reported. The proposed changes are part of a wide-ranging report by prominent members of the bankruptcy community, including former judges, academics and…
Sens. Grassley and Klobuchar Introduce Bipartisan Legislation to Help Family Farms Reorganize
U.S. Senators Chuck Grassley (R-Iowa), Amy Klobuchar (D-Minn.) and Tina Smith (D-Minn.) reintroduced bipartisan legislation to help family farms reorganize after falling on hard times, according to a press release from Sen. Smith’s office. The legislation is also cosponsored by Senators Ron Johnson (R-Wis.), Patrick Leahy (D-Vt.), Thom Tillis (R-N.C.), Doug Jones (D-Ala.) and Joni Ernst (R-Iowa). As bankruptcy rates among American farmers near record highs, the Family Farmer Relief Act of 2019 would raise the chapter 12 operating debt cap to $10 million, allowing more family farmers to seek relief under the program. Several years of low commodity prices,…