American Bankruptcy Institute Update

December 15, 2005

In This Issue

Highlights

Legislation

House Debates Pension “Termination Tax” Today

The House of Representatives today had under consideration its version of pension reform (H.R. 2830) including a provision that requires sponsors of plans that are terminated by the PBGC as distress terminations to pay a premium of $1,250 per participant for each of the three years following emergence from bankruptcy. The exit premium has been criticized by several unions, such as the AFL-CIO and UAW, as one that will result in the liquidation of the company and the loss of more jobs. Bankruptcy professionals in chapter 11 have also criticized the proposal. Government estimates put the expected revenue at $1 billion over five years, making the provision a popular budget reconciliation item. However, the expected revenue gains could be illusory. The operative language is found in Title IV of the bill (Improvements in PBGC Guarantee Provisions). The new rule would apply to cases filed after Oct. 26, 2005. Read the excerpts from the bill here.

BANKRUPTCY TRUSTEE PROHIBITED FROM SEEKING LLC FUNDS

A bankruptcy trustee is powerless to go after money allegedly stolen from a limited liability corporation in which a debtor was a member, a Northern District of New York bankruptcy judge has ruled, the New York Law Journal reported yesterday. Chief Bankruptcy Judge Stephen D. Gerling suggested that property of an LLC does not become property of a bankruptcy estate when one partner allegedly steals assets. In re Ferraro, 00-63241, turned on whether a chapter 7 trustee could seize for creditors money allegedly stolen from the limited liability corporation by the debtor's partner. Click here for the full story (login required).

CREDIT-DERIVATIVES DEADLINE LOOMS

Credit-derivatives dealers are scrambling to meet a self-imposed Jan. 31 deadline to settle a backlog of trades, Dow Jones Newswires reported Tuesday. Concerned about possible disruptions in this booming market, the New York Federal Reserve in late September convened a meeting with 14 leading dealers, with the aim of getting the industry's backlog of trade confirmations under control. Traders then committed to clear by the end of January at least 30 percent of trade confirmations that were outstanding for more than 30 days.

But when auto-parts supplier Delphi Corp. filed for bankruptcy protection four days later, it upset the timetable. Though Delphi defaulted on bonds valued at $2 billion, the total volume of credit-derivatives contracts that in the event of bankruptcy had to be settled using those bonds reached $28 billion. The settlement of Delphi-related derivatives has slowed dealers' efforts to deal with the backlog of confirmations, said Andy Brindle, a senior adviser at MarketAxess Holdings Inc., an electronic bond-and-derivatives trading platform and a former co-head of global structured credit at J.P. Morgan Chase & Co. "There are a handful of people who won't make the Jan. 31 target," said the global head of credit derivatives at an investment bank in New York. Click here for the full story.

NEW CHAPTER 12 RULES FRIENDLIER TO FARMERS

Prior to new federal bankruptcy guidelines going into effect on Oct. 17, there was much speculation that Congress, to the detriment of debtors, had handed the legislative reins over to creditor lobbyists. Now, a month later, that hasn’t turned out to be the case – at least not for the farming community and chapter 12, the Delta Farm Press reported Tuesday.

“Chapter 12 is actually much friendlier for farming debtors as a result of the new bill,” said Susan Schneider, associate law professor at the University of Arkansas. Schneider, who serves as the director of the university’s graduate program in agricultural law, says the new and expanded chapter 12 was no accident. “It definitely was meant to be. There were a number of farmer advocates in the Senate wanting to improve chapter 12 for farmers. They weren’t necessarily the same ones wanting the overall bankruptcy reform bill. Those wanting the bill to pass basically let the farmer advocates get what they wanted in order to secure the farm-state votes. It was a trade-off.” Click here for the full story.

CAR TITLE LOAN COMPANY ENDORSED BY AL SHARPTON UNDER ATTACK BY CONSUMER GROUPS

Former Democratic Presidential candidate Al Sharpton is reconsidering his role as a TV pitchman for a car title outfit called LoanMax, a Georgia-based company with offices in 20 states. Interest rates for these loans can approach 30 percent APR. The loans are under attack by consumer groups, state attorneys general and state legislatures. Borrowers can lose their car, frequently their only asset, by missing as few as one payment. LoanMax isn't saying what they paid Rev. Al for the spots, which recently aired in Virginia and were covered in the Washington Post. Sharpton says he sees nothing predatory in the loans, though some in the minority community are critical. In fact, according to yesterday’s Dallas Examiner, Sharpton says he has now placed his plans for more ads on hold until he can obtain more financial data from the firm. Click here for the full story.

ANALYSIS ON CONSUMER PROVISIONS OF BAPCPA

ABI Member Michael Barnett (Michael Barnett, PA; Tampa, Fla.) has prepared an analysis of the consumer provisions of BAPCPA, updating it with case law as becomes available. Click here to view the analysis.

REGISTER NOW FOR ABI’S 14th ANNUAL BANKRUPTCY BATTLEGROUND WEST

For the past 13 years, ABI has presented its Bankruptcy Battleground West program to the Los Angeles area insolvency community. The 14th annual program, to be held March 10, 2006, at The Century Plaza in Los Angeles, is titled “Everything Old is New Again: New Rules, New Players and New Strategies for Chapter 11 Practice.” The program will also include a luncheon presentation by bankruptcy attorney Patrick Shea, the former mayoral candidate for San Diego who advocated a chapter 9 filing to help solve the city’s financial problems. This year’s program promises to be exciting and informative. Don’t miss out!

Timely topics include:

  • Vanishing Pensions and Shrinking Retirement Benefits: Does Chapter 11 Allow a Company to Take Away with One Hand What It Gave with the Other?
  • Code Blues–New Issues for Health Care and Hospitals: An Analysis, Discussion and Debate of Issues Involving Health Care, Hospitals Under the Amended Bankruptcy Code.
  • Luncheon Presentation: Should San Diego File Chapter 9 to Restructure Its Debts?
  • The New Face of American Reorganization and Restructuring
  • The Business Bankruptcy Law 6 Months Later: Has Anything Really Changed?

Register today and earn 6.25 hours of CLE credit!

BLOG ON BAPCPA

ABI World is now home to a blog on the latest case law interpreting the bankruptcy amendments. Created by David L. Rosendorf, ABI member and a shareholder at Miami’s Kozyak Tropin & Throckmorton, P.A., the ABI BAPCPA Blog provides regular commentary, analysis and an opportunity for you to post comments. Today’s edition, covers a new Florida homestead opinion and two rulings from a Pennsylvania court on credit counseling. Check out the blog here, and feel free to weigh in.

UPDATED FOR THE NEW LAW: WHEN WORLDS COLLIDE: BANKRUPTCY AND ITS IMPACT ON DOMESTIC RELATIONS AND FAMILY LAW, THIRD EDITION

Divorce and bankruptcy are alike in that each attempts to provide a "fresh start," but the laws are often in conflict. This resource, now updated to include BAPCPA changes, was developed for an ABI educational program to help family court judges better identify and deal with bankruptcy issues, such as the impact of the automatic stay, the power of the courts to enjoin state courts, property of the bankruptcy estate, the impact of the bankruptcy discharge on alimony, child support, maintenance and property settlements, post-petition divorce actions and exempt property. Appendices feature relevant sections of the Bankruptcy Code, a list of cases and articles on the topic, and a directory of bankruptcy judges and bankruptcy court clerks. Softbound, 120 pages. Order today!

Product #05-029

Member: $22  Non-member: $27

NEW ON-DEMAND CLE: BEST OF MID-ATLANTIC WORKSHOP 2005

“Anything but Bankruptcy: ABCs, Receiverships & Other Alternatives” will be held live on Jan. 18, 2006, at 2 p.m. EDT. This “Best of ABI” program covers winning strategies involving state and federal receiverships, assignments for the benefit of creditors, out-of-court workouts and more. 90 minutes, $95. Click here for more information.

GET INVOLVED!

Do You Know?From publishing opportunities to committee involvement, ABI offers many options for members to raise their professional profiles. Click here 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: