American Bankruptcy Institute Update

November 8, 2005

In This Issue

Highlights

Supreme Court Grants Cert. in Bankruptcy Case

The U.S. Supreme Court yesterday granted cert. in Howard Delivery Service Inc., et. al. v. Zurich American Insurance Co. (05-128). The question presented is: In a bankruptcy case, is an unsecured claim for unpaid premiums owing for a debtor’s statutory workers’ compensation liability insurance policy entitled to priority under §507(a)(4) of the Bankruptcy Code as a “contribution to an employee benefit plan arising from services rendered,” as held by the Fourth and Ninth Circuits, or is such a claim not entitled to §507(a)(4) priority, as held by the Sixth, Eighth and Tenth Circuits? The decision below can be found at 403 F.3d 228 (4th Cir. 2005)

PENSION REFORM

It's a Slow Road to Pension Reform

Only one-quarter of American workers receive a traditional defined-benefit pension when they retire, the Christian Science Monitor reported yesterday. That proportion is likely to shrink drastically in the next decade. Many corporations have decided that paying for that type of pension, with a monthly payment for the lifetime of a retiree, is too costly. In effect, the pension system in the United States is falling into a crisis. Yet it could well be years before the issue is fully tackled by Washington.

The problem has been noticed. Last month, Time magazine's top story was headlined, "The Broken Promise." It pointed out that more companies are walking away from the bargained-for promise to provide their workers with retirement benefits. Day after day, the news includes stories about various corporations shedding or limiting pension and health benefits for their current or retired workers. The workers covered by traditional plans (currently 34 million) is steadily dwindling.

Will more Americans be left destitute in their retirement years? Will more have to work into their 70s to maintain a decent living standard? Read the full article.

SURVEY: BANKS HAVEN'T CHANGED STANDARDS

Most U.S. banks haven't altered lending standards for home equity lines of credit even after authorities raised concerns about whether lenders were adequately weighing risks, says a Federal Reserve survey released yesterday, the Associated Press reported. Banking regulators in May worried that lenders had eased their standards for granting home equity lines of credit to consumers in a way that increased the risk of problem loans.

The Fed survey of 57 U.S. banks found that "most domestic institutions indicated that they had not changed their lending standards or terms on home equity lines of credit" in response to regulators' concerns about these lines of credit.

Only a few banks reported having tightened their credit standards for home equity lines of credit; only five said they are charging more for these credit lines. Many banks said that the new bankruptcy law had no effect on their loan policies for businesses and individuals. Meanwhile, the survey said that demand for home mortgages has weakened over the past three months. Economists believe that the hot housing market will cool a bit as mortgage rates climb. Read the full story.

REFCO ACCOUNTS DECLINED FOLLOWING BENNETT DISCLOSURE, BANKRUPTCY

Refco Inc., the No. 4 U.S. futures broker at the end of September, lost about half the value of its U.S. customer accounts before it filed for bankruptcy protection three weeks later, Bloomberg reported today. Refco had $6.5 billion in customer accounts at its U.S. futures units as of Sept. 30, according to data posted on the Commodity Futures Trading Commission Web site yesterday. Customer accounts at the company's global futures units, including the United States, tumbled to $3.4 billion as of Oct. 24, the most recent date for which data is available.

The customer accounts are the primary assets that New York-based Refco plans to auction tomorrow based on confidential bids submitted last week. The company's disclosure that Refco CEO Phillip Bennett's hid $430 million in debt prompted a customer exodus from Refco's regulated businesses, including the futures unit.

The reduced customer accounts may “have a direct effect on depressing the price” at the auction, said Lynn LoPucki, a bankruptcy professor at UCLA law school. “The disclosures and the bankruptcy happened very suddenly, and there is no reason to believe we are at the bottom of things.” Read the full analysis.

ABI CO-SPONSORS IWIRC HOLIDAY GALA

The International Women’s Insolvency and Restructuring Confederation (IWIRC) New York Network has extended a special invitation to all current ABI members to attend its Into the Past Holiday Gala, Thursday, Nov. 10, 2005, 6:00 p.m. – 9:00 p.m. at the historic Campbell Apartment at 15 Vanderbilt Avenue, Balcony Level, atop New York City’s Grand Central Station.

ABI is again delighted to be a Gold Sponsor for this popular and well-attended networking event. You need not be a member of IWIRC to attend, and both women and men are encouraged to take part!

ABI members who respond to this announcement will enjoy a discounted admission to the event. The price is $125 for IWIRC members and $150 for non-IWIRC members, and may be paid at the door. Reservations and business attire are encouraged.

IWIRC New York Network Committee members include: Co-chair—Sandra A. Riemer, Phillips Nizer LLP; Co-chair—Elizabeth Ellison, Donlin, Recano & Company Inc.; Treasurer—Andrea S. Walsh, Capstone Advisory Group LLC; and Events Director—Lydia Heilmann, FTI Consulting Inc.

To make a reservation, please contact Dawn K. Arnold at darnold@rattetlaw.com. For more information on IWIRC go to http://www.iwirc.com/

IN TIME FOR THE NEW LAW: THE CONSUMER BANKRUPTCY MANUAL (SECOND EDITION)

Written by ABI Consumer Bankruptcy Committee Co-chair Thomas Yerbich, the Consumer Bankruptcy: Fundamentals of Chapter 7 and Chapter 13 of the U.S. Bankruptcy Code (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.

Product #05-020
Member: $9 Non-member: $16
Order your copy today!

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 Finance and Banking Committee

The panel will discuss the recent explosion of second-lien lending and the growth of the bankruptcy provisions contained in the inter-creditor agreements that accompany most second-lien loan transactions. What happens when these provisions are tested in a bankruptcy case? The panel will discuss whether the business reality of these provisions, negotiated between first- and second-lien lenders, lines up with the practical realities of whether the commonly negotiated for provisions are even enforceable in a bankruptcy.

The presenters are: Jo Ann Brighton, Kennedy Covington Lobdell & Hickman LLP, Charlotte, N.C.; Honorable Judith Fitzgerald, U.S. Bankruptcy Court for the Western District of Pennsylvania, Pittsburgh; and Mark N. Berman, Nixon Peabody LLP, Boston.

The Unsecured Trade Creditor Committee

The committee will present a panel program, “The Intersection of UCC Article 2A and the Bankruptcy Code.”  The panel will discuss aspects of Article 2A that commonly arise in bankruptcy proceedings, including true vs. financing lease issues, the ability to assert defenses against finance lessors, and the protection and recovery of leased property in bankruptcy cases.

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 1,000-page edition lists more than 11,000 insolvency professionals, and is a reflection 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 this week.

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!

GET INVOLVED!

Get Involved From publishing opportunities to committee involvement, ABI offers many options for members to raise their professional profiles.
Visit today for more opportunities.

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: