American Bankruptcy Institute Update

October 27, 2005

In This Issue

Highlights

Legislation Update

New Bankruptcy Judgeship Act Moves through House Judiciary Committee

House Judiciary Committee Chairman Jim Sensenbrenner (R-Wis.) introduced legislation on Oct. 20 to provide authority for the President to appoint additional circuit and district court judges, and to increase the number of authorized bankruptcy judgeships. The bill, the Federal Judgeship and Administrative Efficiency Act of 2005, was ordered reported from the Committee today. The bill would increase the number of authorized bankruptcy judgeships by creating 24 new permanent or temporary bankruptcy judgeships.

The bill provides that new bankruptcy judgeships would be established as follows:

(1) 1 additional bankruptcy judgeship for the eastern and western districts of Arkansas.
(2) 1 additional bankruptcy judgeship for the eastern district of California.
(3) 2 additional bankruptcy judgeships for the middle district of Florida.
(4) 2 additional bankruptcy judgeships for the northern district of Georgia.
(5) 1 additional bankruptcy judgeship for the southern district of Georgia.
(6) 1 additional bankruptcy judgeship for the eastern district of Kentucky.
(7) 1 additional bankruptcy judgeship for the district of Maryland.
(8) 3 additional bankruptcy judgeships for the eastern district of Michigan.
(9) 1 additional bankruptcy judgeship for the southern district of New York.
(10) 1 additional bankruptcy judgeship for the western district of Pennsylvania.
(11) 1 additional bankruptcy judgeship for the western district of Tennessee.
(12) 1 additional bankruptcy judgeship for the eastern district of Texas, and
(13) 1 additional bankruptcy judgeship for the district of Utah.

Temporary judgeships are provided in the northern and middle districts of Florida, and in Indiana, Mississippi, Nevada, North Carolina and Ohio.

The bill would be effective upon enactment. Read the full text of the bill.

House Panel Approves PBGC Pension Premium Increase

Increased pension premiums were one of several budget-cutting proposals approved by House committees yesterday as the House FY06 budget reconciliation package began to take shape, CongressDaily reported. The House Education and the Workforce Committee approved a boost in pension premiums that employers pay to the Pension Benefit Guaranty Corp. (PBGC) from $19 to $30 per employee annually. That is a key element of the committee's plan to reduce mandatory spending on programs under its purview by $18.1 billion over the next five years.

Education and the Workforce Chairman Sen. John Boehner (R-Ohio) noted that those premiums have not been raised since 1991. The measure would also permit the PBGC to hike premiums by as much as 20 percent annually. The agency must get congressional approval to raise premiums, and lawmakers would have the opportunity to reject the increase on a straight up-or-down vote each year.    

The Senate Health, Education, Labor and Pensions Committee's plan would raise the premium to $46.75 per employee, but the Senate version does not include the option to raise premiums in the future by up to 20 percent a year. The House bill also creates a $1,250 per participant premium for companies that have declared bankruptcy and ended their pension policies. The premiums would be paid for the three years following a company's emergence from bankruptcy.

BANKRUPTCY FILERS MAY SUFFER DOUBLE WHAMMY IN LAW CHANGE

Consumer credit counselors are ramping up to handle an influx of calls from what could be hundreds of additional clients — debtors required by a new federal bankruptcy law to go through a 90-minute debt counseling session before they can file for personal bankruptcy, the Tennessean reported yesterday.

Tennessee bankruptcy lawyer Steven Lefkovitz said that he sat in while several clients went through counseling sessions over the phone last week, and they were handled inconsistently. "One was on the phone for 30 minutes and when she said, 'I don't have a job,' they said: 'Well, there's nothing we can do for you.' Another was in my office on the phone for two hours working on financial models with a counselor."

Some consumer advocates say that the counseling rule amounts to a meaningless bureaucratic hoop that will slow legitimate bankruptcy cases; others worry that unscrupulous counseling services could give debtors bad advice or steer them into ineffective debt-management plans to reap additional fees. Read the full story.

ANALYSIS - AIRLINE BANKRUPTCIES SEEN HELPING, BUT NOT SAVING, MIDWEST

It's a long-shot, but nothing else Midwest Air Group Inc. has done recently has helped it to become profitable. The Milwaukee-based airline, known for its roomy leather seats and baked-onboard chocolate chip cookies, has been losing money since 2001, despite cost-cutting efforts and a Saver Service begun two years ago that lowered fares and put in a new row of seats on some flights. Now, the beleaguered carrier is hoping to benefit from the bankruptcy of Minneapolis-based Northwest Airlines Corp. and its pullback from Midwest's main hub in Milwaukee.

"Any time a competitor pulls out of a market, it helps the people that remain there," Midwest CEO Tim Hoeksema told the Associated Press in an interview. Northwest announced on Oct. 3 that it will discontinue 14 daily departures from Milwaukee's General Mitchell International Airport at the end of the month, reducing its seat capacity out of the airport by 11 percent. Midwest, which carries about half of the passengers out of the airport, expects to pick up a large percentage of the demand. Read the full analysis.

COMMENTARY/ANALYSIS - FROM HARDBALL TO SOFTBALL IN MOTOWN

For those who came of age in Detroit, the new twist in the long-running game show starring General Motors and the United Auto Workers is simply stunning. It used to be called “Family Feud.” Now, it's “Let's Make a Deal.” The change was inspired, in no small part, by the Delphi horror show. Any GM UAW worker or retiree who can count can see that accepting what amounts to about a 20 percent cut in medical benefits beats risking what's likely to happen to the guys at the Delphi plant across the street.

Two key numbers help explain why the UAW is being nice: $2,950 and $1,330. The first is the monthly pension of a UAW worker retiring this year at age 50 after 30 years with GM. The second is what a worker would get if GM failed and the federal pension-insurance agency had to step in. In addition, health care cuts in a GM bankruptcy would be far more severe than what's being discussed now. This scary prospect led to last week's GM-UAW agreement to cut $3 billion from GM's annual health care expenses.

But when you crunch the numbers, you see that the cuts aren't really that big a deal to GM. Of the $3 billion in annual health care savings, only $1 billion is in cash. The other $2 billion is an accounting entry, but not real money. These cuts and other initiatives will buy time for GM, but they won't solve its fundamental problem: getting U.S. consumers to buy GM vehicles for more than they cost to make. That depends partly on cost cuts, of course -- but also on GM being able to step up its car-making game. Read the entire commentary.

HOT OFF THE PRESSES: THE CONSUMER BANKRUPTCY MANUAL (SECOND EDITION)

Written by ABI Consumer Bankruptcy Committee Co-chair Thomas Yerbich, the Consumer Bankruptcy Manual (Second Edition) provides both new and experienced practitioners with the fundamentals of consumer bankruptcy proceedings under chapter 7 or 13 of the Code. The second edition covers changes made by the new law. Topics covered include how the two statutory schemes work, their differences, the duties of the debtor in the bankruptcy process, the rights and procedures applicable to creditors, discharge ability/discharge, the automatic stay, commonly asked questions and much more. Softbound, 170 pages.

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ABI COMMITTEE PRESENTATIONS AT WINTER LEADERSHIP CONFERENCE

The 17th Annual Winter Leadership Conference, December 1–3, 2005 , in beautiful Indian Wells, California, at the Hyatt Grand Champions Resort & Spa will feature presentations and sessions from ABI’s committees.

The Legislation Committee program will consider the early implementation issues surrounding BAPCPA’s effective date, including the rules process, U.S. Trustee practices and court procedures.

BAPCPA makes important changes to the law of preferences reclamation and other issues. An open forum moderated by the Uniform Commercial Code Committee will discuss observations, problems and other issues concerning the new law.

Watch this space for other ABI Committee presentation descriptions in upcoming ABI Update editions.

Register here!

REGISTER NOW FOR ROCKY MOUNTAIN BANKRUPTCY CONFERENCE AND SAVE!

Please join us for the Eleventh Annual Rocky Mountain Bankruptcy Conference, to be held January 26–28 in beautiful downtown Denver, Colorado.

The educational program will provide attendees with an interactive learning experience led by a faculty of highly regarded bankruptcy judges and experienced practitioners. The roundtable format emphasizes discussion of relevant insolvency issues among the faculty and the participants.

This conference is an educational opportunity not to be missed! Up to 12 hours of CLE credit, including three hours of ethics, can be earned.

Register today!

2005-06 ABI MEMBERSHIP DIRECTORY PRINT EDITION AVAILABLE FOR SALE

The print edition of the 2005-06 ABI Annual Membership Directory is now available. This 21st edition lists more than 11,000 insolvency professionals, more than ever before, and is a symbol of ABI’s sustained membership growth. The Directory is one of the many benefits of ABI membership and is available exclusively to members. An online version of the Directory is available at the ABI World Web site (www.abiworld.org), which is continually updated. All members will receive a complimentary CD-ROM version of the Directory with their November ABI Journal.

The expanded print edition enables you to capitalize on the depth and diversity of our membership. In addition to indexing each member by geographic area, ABI committee, profession and practice area, there are references to firm size and certification to assist you in identifying colleagues for referrals. Included is a “Multiple Members by Firm” section, which permits you to easily locate all members from a particular law, accounting or turnaround firm. Members are also listed under other locations where they have offices, thus enhancing your ability to easily find bankruptcy professionals nationwide. Also included are e-mail addresses and firm Web site listings. The Endowment section includes guidelines for consideration of Endowment Fund grant proposals. The $55 cost of the printed version includes shipping and handling. Visit the ABI bookstore to order.

NEW FAQ ON “DO YOU KNOW THE ABI WORLD WEB SITE?”

Do You Know?ABI's official Web site, ABIWorld.org, provides thousands of bankruptcy-related documents and numerous other services for ABI members. The tutorials for negotiating ABIWorld now include an FAQ section, which will help you to focus your search for information on the site. Check it out today!

Latest Job Postings at ABI Career Center

Check out the ABI Career Center. The Center is a one-stop site for job seekers and employers in the insolvency community. Career Center resources are available free to both employers and job seekers. New positions are featured daily. The latest listings include: