All items from Credit Slips

Holy BibleI wonder how many Bankruptcy professors have posed a hypothetical about the exemption of a rare Bible worth lots of money? Well, a federal District Court in Illinois had to answer the question for real.
The Illinois person property exemption statute includes the debtor's Bible. A debtor in Southern Illinois asserted this exemption in a rare, first-edition Mormon Bible that she had acquired (for free) from her local library. Apparently, the library director had not been paying attention, as the 1830 Bible was appraised at at least $10,000.



Posted 3 days 23 hours ago

Following up on my prior post, the New York Court of Appeals has ruled that a rent stabilized appartment is a public benefit, rather than an asset.



Posted 4 days 19 hours ago

Readers who have not otherwise received notice in the twittersphere may be interested in this commentary at The Conversation.



Posted 5 days 3 hours ago

Last week, Adam pointed us to a NYT's story on "zombie debt" after bankruptcy. I did a bit more research into the story because I had a hard time understanding the problem from the article.
There are a few lawsuits that have been filed about this (I found ones against GE Capital/Synchrony, Bank of America/FIA Card Svcs, Citigroup, and Chase). The GE complaint alleges that the banks have a systematic practice of "selling and attempting to collect discharged debts and ... failing to update and correct credit information to credit reporting agencies to show that such debts are no longer due and owing because they have been discharged in bankruptcy." You can download the complaint in the GE case here.
More specifically, the allegations are that after a discharge, some creditors do not update their tradelines to a status of "in bankruptcy" and instead leave them as "charged-off." The credit report of a person in this situation would then say they have filed bankruptcy and obtained a discharge but you could not tell whether any individual debt has been discharged in that bankruptcy. The (non-binding) credit bureau reporting guidelines (METRO 2) specify that creditors should report accounts as "included in bankruptcy" once they receive a notice of discharge.



Posted 1 week 47 min ago

Mexico's public offering with New York-style ICMA CACs is a huge deal. But it turns out that Vietnam's exempt offering on November 6, also under New York law, was there first. Since it is not a public offering, the disclosure document is not public, and the one press article describing it is behind a paywall. Here are a few bits that struck me as interesting about the three adoptions so far.
The Clause Formerly Known as Pari Passu:
Like Kazakhstan and Mexico, Vietnam fixes the pari passu clause to exclude the ratable payment interpretation. Funnily enough, the three seem to do it in slightly different ways:
Kazakhstan:



Posted 1 week 2 hours ago

The headline for this post will be mysterious and perhaps slightly salacious in a general newsfeed, but bankruptcy experts will know it means the time is nigh in the 11th Circuit for lien strip-offs. The Supreme Court agreed to hear Bank of America v. Caulkett and Bank of America v. Toledo-Cardona, where the 11th Circuit allowed lien strip-offs of wholly underwater junior  mortgages in a chapter 7. The Supreme Court case of Dewsnup v. Timm would seem to hold otherwise, but the 11th Circuit ruled Dewsnup applied only to partially underwater mortgages. Hence, the 11th Circuit believe it was bound by its own pre-Dewsnup precedent allowing strip-offs for wholly underwater junior mortgages.
I like the 11th Circuit rule as a matter of policy, but I have to believe that as a matter of precedent, the Supreme Court is almost certain to reverse. I have to get back to work on some other things, but perhaps other Credit Slips bloggers might have more to say. Until then, SCOTUSBlog also has a summary.



Posted 1 week 1 day ago

The NYT has a piece about credit reporting of so-called "zombie debt"--debt that has been discharged in bankruptcy.  Apparently the US Trustee Program is investigating various creditors in connection with this debt.
The reporting obscured a bit of very subtle bankruptcy metaphysics. The discharge of debt in bankruptcy does not void the debt. The debt is still owing. But it cannot be collected except if the debtor volunteers to repay it. The discharge is an injunction against the enforcement of the debt against the debtor as a personal liability. The discharge voids judgments on the debt, but not the debt (and it does not prevent the enforcement of liens).  In other words, the debt still exists post-discharge.  It just isn't enforceable.
That means that there is nothing per se inaccurate about the debt being reported to a credit reporting agency as owing, provided that the debt is also reported as discharged in bankruptcy. (Different story altogether under Fair Credit Reporting Act and Fair Debt Collection Practices Act if the discharge is not reported.)   



Posted 1 week 4 days ago

EuroMortgageLoanTwo stories in today's world news caught my attention because they were both related to rising consumer debt and tightening mortgage rules. 



Posted 1 week 6 days ago

Mexican-flag-300x225Mexico has just filed a registration statement with the SEC for New York-law bonds with a version of ICMA collective action clauses (CACs), cheered here just a few months ago, among other refinements. This is a big deal for three reasons: Mexico, New York, and the clauses. Bottom line -- a classy, confident move.



Posted 2 weeks 15 hours ago

TobecontinuedOn Friday November 7, 2014, Judge Rhodes confirmed the City of Detroit's plan of adjustment. As previously noted, this judicial act permits the release of debt and clears the way for the City to forge ahead, but the future of Detroit is in the hands of many others. Although a fuller written decision is expected, the court's oral ruling already hints strongly at new bankruptcy doctrine. Two examples: unfair discrimination and professional fees.



Posted 2 weeks 1 day ago