MINNESOTA FIRM FILES CONSTITUTIONAL CHALLENGE TO
NEW BANKRUPTCY LAW
The law firm Milavetz, Gallop & Milavetz P.A. is challenging the constitutionality of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) for allegedly violating the First and Fifth Amendment rights of attorneys and consumers. The declaratory judgment petition challenges BAPCPA’s ability to limit attorneys’ advice to clients and would stop classifying attorneys as “debt relief agencies.” The complaint alleges that the vagueness and overbreadth of the new law creates a chilling effect on the public’s right to receive information and advice from attorneys and limits the freedom of expression of attorneys, among other grounds, according to the firm. Read the complaint, filed Nov. 14.
PENSION AGENCY REPORTS $22.8 BILLION SHORTFALL
The federal agency that insures the private pensions of 44 million workers said today that its deficit was $22.8 billion in 2005, as big airlines in bankruptcy dumped their pension liabilities, the Associated Press reported. The Pension Benefit Guaranty Corp. (PBGC) disclosed in its annual financial report that as of Sept. 30, it had $56.5 billion in assets to cover $79.2 billion in pension liabilities.
The PBGC's $22.8 billion deficit for fiscal 2005 takes into account both the pension liabilities that the agency has assumed and those it expects to take over in the future. It is slightly narrowed from the $23.3 billion shortfall it reported a year ago, which was a record. If such events as corporate bankruptcies that occurred after the end of the fiscal year on Sept. 30 had been counted, the 2005 deficit would have been $25.7 billion, the agency said.
Read the full story.
LAWYERS SEEK NEW STRATEGIES FOR “SEA CHANGE” IN
Life may never be the same for lawyers who litigate silica and asbestos cases. With the passing of the World War II shipyard generation, who made up the bulk of past asbestos cases, as well as more than 80 asbestos defendants in bankruptcy or out of business, plaintiffs are digging deeper to find new defendants in specialized industries responsible for different kinds of asbestos illness, the National Law Journal reported Friday.
Defendants are looking at new ways to take on asbestos plaintiffs one by one in court. They are spurred by a judge presiding over federal multidistrict litigation in Texas, who said in a recent ruling that mass diagnoses of potential silica plaintiffs "were driven by neither health nor justice: They were manufactured for money."
Read the full story.
FORBES COMMENTARY: FIVE REASONS GM WON'T DECLARE BANKRUPTCY
General Motors (GM) recently said that it would have to restate its 2001 earnings by as much as $400 million, spurring fresh downgrades and prompting some analysts to raise the prob ability that the automaker will declare bankruptcy, a Forbes.com commentary said yesterday. The talk about a GM bankruptcy makes for market attention, but lacks real substance. Here are a few of the reasons this is so.
Reason No. 1: You have to be eligible to declare bankruptcy; you can’t just decide it would be strategically beneficial to do so. General Motors, with $19 billion in cash and a book value of $40 billion, hardly meets that test now or for a number of years.
Reason No. 2: GM doesn’t need a bankruptcy threat to win concessions from its unions. It has Delphi to do that. When the Delphi bankruptcy is concluded, the unions will know what they can expect to win from GM if they force it to use the bankruptcy route. Chances are, they will settle for something close to the Delphi concessions, because they have even more to lose with GM.
Reason No. 3: GM as a business is a very valuable franchise. Before it goes into bankruptcy, it would likely reach a merger agreement with a foreign car manufacturer, much as Chrysler did seven years ago when it “merged” with Daimler to form DaimlerChrysler .
Reason No. 4: Unlike the airlines, GM and its unions have the power to fix the problems. There are a variety of ways this can be done short of bankruptcy. The main battle may well be within the United Auto Workers, pitting young workers against those who are either retired or about to retire.
Reason No. 5: A bankruptcy filing would be most devastating to GM shareholders. It is the duty of the board of directors and management to do everything to prevent that from happening. While this principle seems to have been ignored in several recent bankruptcies, it seems less likely to happen here. Besides, we have Kirk Kerkorian watching to make sure this doesn’t happen. I’d be more worried if he had bought GM debt instead of stock.
PAYDAY LENDERS PUT MANY UTAH BORROWERS IN A VICIOUS CYCLE
Credit counselors, church groups and bankruptcy lawyers say that increasing numbers of Utahns are mired in a payday loan system they say is designed to trap and financially drain the desperate or unsophisticated, the Deseret Morning News reported Sunday. But lenders, regulators and some lawmakers say that it provides needed emergency help to those without credit.
Few states among 39 that explicitly allow such loans have laws that are friendlier to the payday loan industry than Utah. It is one of the 10 that have no cap on interest rates or fees. It is among two with no legal maximum amounts for such loans. Utah also has a 12 week period to "roll over" loans with continuing high interest—one of the longest time allowances of any state. Most states ban rollovers.
Amid such friendly laws, Utah has seen meteoric growth of payday lenders; the state has 381 payday loan stores or licensed online lenders. Utah is also at or near the top in the rank of households per bankruptcy filing, at more than twice the national average bankruptcy rate.
Read the full story.
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, dischargeability/discharge, the automatic stay, commonly asked questions and much more. Softbound, 170 pages.
Member: $9 Non-member: $16
Order your copy today!
ABI COMMITTEE PRESENTATIONS AT WINTER
Alert:The Hyatt Grand Champions Resort and Spa and the Renaissance Esmeralda Resort and Spa are sold out. ABI has contracted overflow accommodations at the nearby Miramonte Resort and Spa (Phone: (760) 341-2200/Toll Free: (800) 237-2926). Get your registration in TODAY!
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, including:
The Business Reorganization and Investment Banking Committees will present a joint program, “Unique Issues in Gaming, Hospitality and Entertainment Venue Reorganization Cases.” The panel will focus on the unique problems that arise in casino, hotel, theme park and related companies' chapter 11 cases, and will discuss how to address special problems, such as first-day orders, dealing with regulators, use of cash collateral, sales of assets, and plan content and confirmation. Panelists will suggest practical solutions to the problems presented, and will draw lessons from these cases applicable to other businesses and industry groups.
The Consumer Bankruptcy and Ethics Committees will present a joint program, "My Practice Will Go On… Or Will It?—Ethical and Other Challenges for Consumer Bankruptcy Case Practice under BAPCPA." This timely program will address the ethical issues that arise in consumer bankruptcy cases and the new challenges posed by BAPCPA. The panel, which will include debtor and creditor counsel, as well as a representative of the Office of the U.S. Trustee, will discuss practices of counsel, new approaches to old issues, and questions raised by the new consumer provisions.
ABI’S SECOND CARIBBEAN INSOLVENCY SYMPOSIUM COMING IN FEBRUARY
Join ABI in Miami for the Second Caribbean Insolvency Symposium, February 9-10, 2006, at the Eden Roc Resort & Spa in Miami.
This year’s program brings together top international speakers to discuss the issues of the moment in international insolvency and restructuring. The Eden Roc Resort & Spa, right in the heart of Miami Beach, provides a memorable venue for the conference.
The program of 7.25 CLE credit hours features a faculty of outstanding scholars, judges and practitioners from across the United States, the Caribbean and South America. Timely topics include:
- CAFTA and New Chapter 15: Forum-shopping in the Caribbean
- Introduction to the New Bankruptcy and Restructuring Law in Brazil
- Small Business and Individual Chapter 11 under BAPCPA
- Tough Ethical Dilemmas after BAPCPA
- Dealing with Disasters: The New Bankruptcy Law after a Natural Disaster
- Views from the Bench
Be among the first to register
for this important program in a tropical location.
2005-06 ABI MEMBERSHIP DIRECTORY PRINT EDITION AVAILABLE FOR PURCHASE
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. An online version of the Directory is available at the ABI World Web site (www.abiworld.org), which is continually updated. All members received a complimentary CD-ROM version of the Directory with their November ABI Journal.
The $55 cost of the printed version includes shipping and handling. Visit the ABI bookstore to order.
NEW CRACKING THE CODE ARTICLE
"First and Sixth Circuits Recognize 'Bad Faith' Exception to Debtors' Right to Convert from Chapter 7 to Chapter 13" by Mark P. Williams (Norman, Wood, Kendrick & Turner; Birmingham, Ala.)
In In re Marrama, _ F.3d , 2005 WL 2840634 (1st Cir. Oct. 31, 2005), and In re Copper, F.3d _, 2005 WL 2648960 (6th Cir. Oct. 18, 2005), the First and Sixth Circuit Courts of Appeals, respectively, ruled that a debtor’s right to convert a case from chapter 7 to chapter 13 pursuant to 11 U.S.C. §706 where the case had not been previously converted is not absolute, but is subject to an exception for motions filed in bad faith.
Read the article here.
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