All items from Credit Slips

A quick note on a couple of events today that might be of interest to Slips readers:
First, I'm participating in an ABI webinar about "chapter 14" and related topics.
Second, I'll be testifying in front of the House Judiciary Committee on proposed legislation to add a subchapter V to chapter 11, for financial institutions.
Otherwise, resume your summer and I'll bother you no more.



Posted 1 week 6 days ago

Chapter 13 trustees handle millions of dollars in plan payments every year. At some point in likely a sizable portion of cases, the trustee accumulates these payments instead of distributing the funds to creditors. What happens if a debtor's case is converted while the trustee has this accumulated money in its account? In 2012, the 3rd Circuit, in a majority opinion, held that the trustee must return the funds to the debtor (see decision here). Yesterday the 5th Circuit held that the trustee must distribute the funds to creditors (see decision here), thus creating a split on an issue that, as the Fifth Circuit stated, "has divided courts for thirty years," though only had previously produced one appellate court decision squarely on point.
With only one-third of Chapter 13 cases making it to discharge, the issue potentially affects a good number of debtors and involves a significant amount of money in total. Each individual debtor may (or may not) be entitled to a large sum of money in his or her estimation. In the 3rd Circuit case, the Chapter 13 trustee had accumulated over $9,000 in undistributed payments. In the 5th Circuit case, the trustee was holding about $5,500 in undistributed payments. And to the extent there isn't at least a local rule to rely on, Chapter 13 trustee probably would like clearer guidance on the issue.  



Posted 2 weeks 2 days ago

FolderRowTo what extent does secured credit law protect creditors from the consequences of mistaken actions made on their behalf? I wrote about this issue in March 2013. As discussed in that post, the bankruptcy court issued both a decision on the merits and a certification for a direct appeal to the U.S. Court of Appeals for the 2nd Circuit.
The 2nd Circuit has now certified the following question to the Delaware Supreme Court: 



Posted 2 weeks 3 days ago

GazellesUntil a few days ago, it looked like Detroit's chapter 9 plan confirmation would come and go untouched by appellate process. In February 2014, the U.S. Court of Appeals for the Sixth Circuit granted seven petitions for direct appeal of the bankruptcy court's eligibility decision, which included the finding that pension claims could be impaired in bankruptcy. But the Sixth Circuit did not act on the request for expedited consideration. Somewhat remarkably, it agreed to do what the bankruptcy court had requested in its certification memo: consult with the bankruptcy court's lead mediator to consider the impact of the appeal's timing on negotiations.



Posted 3 weeks 21 hours ago

I thought I'd write a quick follow-up to Anna's thorough post about the latest in the Argentine bond saga. A lot happened at Friday's hearing, which was convened after NML requested that the judge hold Argentina in contempt for transferring funds to Bank of New York Mellon and others. The transcript reveals an exasperated judge without a great deal of interest in parsing the separate parties and interests at stake. The result was one clear loser (holders of English-law bonds denominated in euros) and one clear winner (holders of Argentina's local-law bonds).



Posted 3 weeks 6 days ago

Extra! Extra!  Today is just another day in Argentina's bond saga. It may well come and go with no payments either to the NML plaintiffs or to the restructured bondholders. However, a Sunday filing by Argentina's Euro-denominated exchange bond holders might lead to substantive developments eclipsing the purely symbolic significance of a missed payment date and the start of a 30-day contractual grace period.  The Euro bond holders' move is a good place to start thinking about the next steps and beyond.



Posted 3 weeks 6 days ago

PRflag The fast-moving legislation's title does not include the word bankruptcy. Materials distributed by the Puerto Rico government explain, though, that the bill is meant to provide chapter 9-like relief to Puerto Rico public corporations through one of two paths - one more prepack-like than the other. Calling the effort "dazzling," Cate Long notes, "[s]eldom have financial markets seen such an elegantly choreographed approach to haircutting sovereign debt."



Posted 4 weeks 1 day ago

Ordered not to carry out its planned swap into local-law (and local payment) bonds, Argentina has now deposited funds for the June 30 payment with Bank of New York Mellon, trustee under the exchange bonds. Via Joseph Cotterill at FT Alphaville, here is NML's response, which asks Judge Griesa to schedule contempt hearings. (Technically, to order Argentina to show cause why it should not be held in contempt.) The plot thickens.



Posted 4 weeks 3 days ago

As expected, Judge Griesa has reportedly denied Argentina's request for a stay. At his recent news conference, Economy Minister Axel Kicillof did not quite suggest that the government would negotiate only if the stay was granted - instead, he implied that Argentine officials couldn't weigh options without knowing how much time they had. Well, now they know.



Posted 4 weeks 3 days ago

AbstractSenator Harkin's discussion draft of the Higher Education Affordability Act (described here) is expected to include a provision restoring bankruptcy relief from private for-profit student loans. A few years ago, I offered justifications for that move here. Prof. Scott Pryor agrees.



Posted 4 weeks 3 days ago