At 8, Insolvency Reform Act Falls Short Of Goals

Detroit bankruptcy could change municipal market, Chicago Fed says

Jeffrey Morris, a former University of Dayton law professor and a partner with the law firm of Porter Wright Morris & Arthur in Dayton, said the reforms were partly intended to decrease bankruptcy filings and as predicted, filings have dropped. In 2004, the year before the reforms were enacted, annual business and consumer filings totaled nearly 1.6 million. Other than 2005, when there was a rush to beat the Oct. 17 deadline, filings have not topped that 2004 figure and in 2012 totaled 1.2 million cases. The Bankruptcy Abuse Prevention and Consumer Protection Act took effect on Oct. 17, 2005. Eight years must pass before bankruptcy can be filed again.
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But how the bankruptcy court rules on the treatment of different debt classes could profoundly alter market perceptions of their risk, particularly for issuers with mushrooming pension obligations like Detroit's, two of the bank's economists wrote in a monthly research note, the "Chicago Fed Letter." A key issue in the city's pending Chapter 9 bankruptcy is whether Detroit's state-appointed emergency manager, Kevyn Orr, may treat certain general obligation bonds as unsecured debt on a par with its pension obligations, and repay them at just pennies on the dollar. General obligation, or GO, bonds have long been viewed as the muni market's gold standard, and none of the handful of municipal bankruptcies since 1970 has resulted in a writedown of GO debt. Since 2003, GO bonds accounted for nearly 60 percent of new debt deals in the $3.7 trillion muni bond market, where cities, states, hospitals, school districts and others raise cash for capital projects and other needs. Orr's proposed cuts to retirement benefits, which are being challenged in the bankruptcy case by labor unions, retirees and pension funds, conflict with strong protections in the Michigan Constitution against impairing those benefits. The judge in the Detroit case has not yet determined if Detroit is eligible to formally enter bankruptcy protection, as hearings in that phase begin later this month. A successful challenge by unions and retirees, on the basis of the U.S. Constitution's Tenth Amendment regarding states' rights, could impact the pricing of bonds issued by cities with large unfunded pension liabilities, according to the Fed report. "If the court agrees with pension creditors that state protections hold supreme, this could change market expectations with respect to the relative standing of municipal debt issued by cities located in states with such protections," the Fed report said, pointing to Chicago, Los Angeles, and New York City. Overall, large U.S.
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Bankruptcy Judge Sends a Message to Bank of America

But theyre in the minority, he said. Most distressed consumers hoping for a loan modification are at the banks mercy. The consent decree advertised as the answer to industry practices that wrongly forced people out of their homes lacks an enforcement mechanism, Mr. Cox said. In the case of the discharged debt collection, the Ramoses had to not only hire a lawyer but also had to reopen their bankruptcy case. Last week, Bank of America agreed to stop the calls and letters except for informational notices that inform the Ramoses of what they have to do to hold onto their home. Chapter 7 bankruptcy absolved them of the obligation to pay the debt but preserved the banks lien on their property. This is a national problem. Its happening all over the place, said New York attorney Michael Schwartz, who represented the Ramoses.
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Solus Rides a Boom in Bankruptcy Claims

Anthony was acquitted in 2011 of murdering her daughter. Kronk found Caylees remains in woods near Anthonys home. He says he was defamed when Anthonys defense team made false statements, including that Kronk killed Caylee and that he moved the remains. Anthonys bankruptcy attorneys dismissed the claims as false. Over the years, many persons have pursued actions in which they sought to profit, one way or another, from Ms. Anthonys ordeal, her attorney, David Schrader, wrote in the motion. All of the claimants have been rebuffed and turned away empty-handed, though most of them enjoyed their fifteen minutes of fame while their claims were pending, which was the real objective. Anthony is scheduled to be deposed next week as part of Gonzalezs claim, although that could be delayed if her attorneys ask a judge to stop the proceeding. Schrader didnt return an email and phone call seeking comment on whether he would file a request to stop the deposition. Copyright 2013 The Associated Press.
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Casey Anthony asks judge to dismiss Gonzalez, Kronk claims in her bankruptcy case

If I were in a position where I needed to file for bankruptcy, would you think I was a bad person? Congress enacted Federal Bankruptcy laws some time ago to give honest individuals a fresh start and the hope of a sound financial future. Bankruptcy is not a uniform eraser for irresponsible spending or a free pass. Bankruptcy proceedings are supervised by the Federal Government, and each plan or filing is unique to the individual's financial situation. That being said, the stigma associated with filing bankruptcy frequently deters people and businesses truly in need of relief. This crushing debt can erode ongoing businesses, relationships and your health.
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BANKRUPTCY myths and facts

JPMorgans Fight with Lehman, MF Global Gets Nasty February 13, 2012 Earlier this year Solus Alternative Asset Management in New York reported to clients that it had raised $1.1 billion for its two funds that invest in late-stage bankruptcy claims, including those against Lehman Brothers, the estate of Bernard Madoff, MF Global and Hostess subsidiary Interstate Bakeries Corp. With those two funds now fully deployed, Solus plans to complete its capital closing in October or November, according to people familiar with the firm. The Solus Recovery Fund III and the Solus Recovery Strategies Fund will also invest in late-stage bankruptcy litigation-related claims. Christopher Pucillo, president, CIO and founder of the $3.3 billion alternative-asset firm, declined to comment, but sources say Solus expects to have capital commitments of more than $200 million for the new funds. The Solus Recovery Strategies Fund seeks to offer investors more liquidity than the firms existing funds, with a two-year lockup period rather than its usual three years.
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