The Bankruptcy Law Firm, Prof. Corp.
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.”…
Benjamin v. U.S. (In re Benjamin), ___F.3d___ (5th Cir. May 10, 2019), case18-20185
This case is described as being part of a growing split among federal Circuit Courts, on whether bankruptcy courts have jurisdicition to hear disputes over social security disputes, and over Medicare disputes: American Bankruptcy Institute [5/14/19 e-newsletter] reports that, in In re Benjamin, the Fifth Circuit Court of Appeals rejects the ‘recodification canon’ to divest bankruptcy courts of jurisdiction over Social Security suits. Deepening an existing split of circuits, the Fifth Circuit held that the recodification canon does not divest the bankruptcy court of subject matter jurisdiction to hear Social Security claims. In the May 10 opinion by Circuit Judge…
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…
Wells Fargo Bank NA v. Weidenbenner (In re Weidenbenner), ___BR___ (Bankruptcy Court S.D.N.Y. April 25, 2019) case number 15-244 Freezing a Chapter 7 Debtor’s Bank Account Doesn’t Violate the Automatic Stay
SDNY opinion seems to mean that a bank may freeze a debtor’s entire bank account at filing, without violating the automatic stay. Persuaded by a Ninth Circuit opinion, a district judge in New York held that a bank does not violate the automatic stay by imposing a temporary freeze on the account of an individual who files a chapter 7 petition. The bank had an internal policy of allowing chapter 7 debtors to continue drawing funds from their accounts if the accounts held an aggregate of less than $5,000 on the date of filing. On the other hand, the bank…
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,…
Jung v. Internal Revenue Serv. (In re Jung) (Bankr. W.D. Wis., 2019)
Jung v. Internal Revenue Serv. (In re Jung) (Bankr. W.D. Wis., 2019) holds Bankruptcy court has jurisdiction to adjudicate both dischargeability as well as liability of prepetition taxes owed to IRS: After filing chapter 7 the debtors filed an adversary action in bankruptcy court requesting a ruling of discharge for income taxes and penalties. “The IRS moved to dismiss this adversary on the ground of lack of subject-matter jurisdiction under Federal Rules of Civil Procedure 12(b)(1) and 12(h)(3). The IRS asserts the adversary should be dismissed because the decision will not affect creditors given that the case is a no…