All items from Total Bankruptcy

The U.S. Supreme Court will decide whether homeowners can terminate “underwater” second mortgages during bankruptcy.
On Monday, the country’s top court agreed to review two appeals from Bank of America against bankrupt homeowners who are attempting to eliminate bank liens on their properties.
Two Florida homeowners are arguing that filing for Chapter 7 bankruptcy protection with a first mortgage valuing more than their property’s worth permits them to remove the lien from the second mortgage.
The homeowners’ lawyers argue that when both mortgage loans are underwater, the second lien is effectively valueless.
Financial lenders are fighting to keep the second mortgage lien, contending the debt could one day be fully paid—especially as property values increase.
“There is no such thing as a ‘truly valueless’ lien on property capable of appreciating,” as stated in court papers filed by Bank of America lawyers.
The 11th U.S. Circuit Court of Appeals ruled that homeowners currently in Chapter 7 bankruptcy can annul a second mortgage when the owed debt is greater than the value of the first mortgage.
Bank of America appealed the decision, stating their plea “may be the single most important unresolved issue in consumer bankruptcy.”

Posted 3 days 1 hour ago

Dendreon Corp, the maker of the world’s first cancer vaccine, filed for bankruptcy protection this Monday.
The Chapter 11 bankruptcy has been filed as Dendreon faces an outstanding $620 million in convertible debt that is due in 2016. The Seattle-based company listed over $664 million in total debts and $364.6 million in assets.
The arrangement requires a recapitalization of Dendreon, or a sale of the company and all its assets, according to a statement released today. The company also indicated it had agreed on financial restructuring terms with several bond holders.
Provenge was approved in 2010 as the first immunotherapy and was intended to treat patients with advanced-stage prostate cancer. Drug sales never met its expectations as Provenge is difficult to administer and cost $93,000.
The treatment requires a patient’s extraction of white blood cells to be mixed with vaccine components. The combination is then provided as an infusion.
The high cost of manufacturing Provenge specifically hurt Dendreon and allowed several competitors to surpass the company.
Dendreon reported only $283.7 million in revenue in 2013, significantly smaller than 2012’s $325.3 million.
"The business is fundamentally unprofitable so, without a change to efficiencies in the manufacturing process, it's really difficult to see them coming back as a standalone company," according to Wedbush Securities analyst David Nierengarten.

Posted 1 week 3 days ago

A federal judge ruled in favor of the Detroit bankruptcy plan, finalizing a 16 month process in which the city petitioned to file a Chapter 9 bankruptcy.
U.S. Bankruptcy Judge Steven Rhodes ruled that the Motor City’s complete restructuring plan is rational and achievable. Detroit now has legal authority to cut more than $7 billion in unsecured liabilities and put back $1.4 billion into public services over the next 10 years.
The decision allows Detroit to trim roughly 74 percent of its unsecured debt. Additionally, the plan expects probable cost savings via more effective government operations that might increase the city’s reinvestment plan to $1.7 billion.
Rhodes said that Detroit’s settlement with pensioners was a “miraculous” conclusion; he also overruled every objection to the city’s plan.
"This city is insolvent and desperately needs to fix its future," Rhodes said.
Rhodes also stated that Detroit made the correct decision to preserve the Detroit Institute of Arts instead of attempting to sell artwork to settle debts.
Today’s ruling ends the largest municipal bankruptcy in U.S. history; the city of Detroit is expected to officially emerge from bankruptcy within the next few weeks.
Detroit emergency manager Kevyn Orr made a statement regarding Rhodes’ decision:

Posted 2 weeks 1 hour ago

The historic Detroit bankruptcy trial came to a close on Monday when city attorneys gave closing arguments as to why U.S. Bankruptcy Judge Steven Rhodes should approve the city’s bankruptcy plan.
Judge Rhodes is expected to announce his ruling on November 7.
Closing arguments highlighted the necessity to pass the debt-cutting plan, which would free Detroit from $7 billion in debt and open up money to improve city services.
The City of Detroit filed for bankruptcy in June 2003, claiming to owe over $18 billion in debt. The bankruptcy plan was revealed earlier this year: it aims to restructure and settle debts through several different severe measures, including reducing city employee pensions.
Funding of roughly $200 million will come from Michigan taxpayers and due to an agreement to not sell off art pieces from the Detroit Institute of Arts, the city will received nearly $500 million from private and corporate donors.
City lawyer Bruce Bennett identified the greatest risks that would stop Detroit from executing the debt-cutting strategy. He stated the plan could collapse if city leaders strayed from the plan to invest $1.7 billion.
"The worst thing that could happen is if the $1.7 billion is misused or perceived to be misused," Bennett said. "Either would be an enormous problem."

Posted 3 weeks 3 days ago

Texas entrepreneur Samuel Wyly has filed for bankruptcy on Sunday, stating he does not own the assets to pay roughly $400 million in penalties for an overseas fraud scheme.
According to the Chapter 11 petition, Wyly stated he had assets and debt between $100 million and $500 million. He attributed his debt to the “massive costs of investigations and then litigation” by the Securities and Exchange Commission.
“While the debtor has substantial assets, he does not have the ability to pay the full amount of all asserted claims at the present time,” according to the filing.
A New York judge ruled last month that Wyly, 80, and the estate of his late brother, Charles, must forfeit up $187.7 million plus interest. In May, a civil jury found they were involved in a 13-year fraud scheme in which they used offshore trusts and subsidiaries to conceal stock sales.
It is believed the Wylys accrued upwards of $550 million in untaxed earnings through their system, which lasted over a decade.
The SEC is listed as Wyly’s second greatest creditor, with a claim of $198.1 million, according to court documents. Wyly listed the Internal Revenue Service as his biggest creditor, with disputed debts “unknown.”
Depending on how interest is calculated, the total payment owed by Wyly and his late brother’s estate will fall between $300 million and $400 million.

Posted 4 weeks 3 days ago

A U.S. bankruptcy judge has dismissed the case of a Colorado marijuana business owner, stating that while he is in compliance with state law, he is breeching the federal Controlled Substances Act.
Frank Arenas, wholesale distributor and producer of marijuana, was seeking Chapter 7 bankruptcy protection. According to his petition, he owes $556,000 to unsecured creditors.
He testified he owns roughly 25 marijuana plants, each valued at $250, which Arenas would have liquidated into payments in his Chapter 7 case. However, the trustee could not take control of the plants without breaking federal law.
Additionally, Arenas’ case could not be converted to a Chapter 13, which would permit him to pay off his debts gradually, because, as Judge Howard Tallman writes, the agreement would be financed “from profits of an ongoing criminal activity under federal law.”
"Violations of federal law create significant impediments to the debtors' ability to seek relief from their debts under federal bankruptcy laws in a federal bankruptcy court," Judge Tallman added.
Arenas’ case the second marijuana business bankruptcy dismissed in Colorado including a marijuana business; a least two other cases have been discharged in California.

Posted 8 weeks 3 hours ago

Detroit has reached a final settlement with its greatest opponent, bond insurer Syncora Guarantee Inc., this Monday, according to a lawyer for the city.
Under the deal, Syncora will recover roughly 14 percent of money owed, which they've long claimed totals more than $333 million. Syncora will receive two sets of notes from Detroit, a lease to control a tunnel to Canada, land near the tunnel, and the possibility of leasing and controlling a parking structure.
With this settlement, Syncora is fully exiting the Chapter 9 bankruptcy case , including any future appeals.
David Heiman of Jones Day, a lawyer for Detroit, said to U.S. Bankruptcy Judge Steven Rhodes in Monday’s hearing that both parties have “laid down their swords.”
While the agreement with Syncora is an important cleared hurdle for Detroit’s bankruptcy emergence, the city still faces creditor Financial Guaranty Insurance Co., who is seeking roughly $1.1 billion from the pension debt it insured.
On Monday, FGIC asked Judge Rhodes to suspend the trial until September 22 so the company can modify its approach in the wake of Syncora’s settlement. The trial is currently on hold since last week so Detroit and Syncora could finalize their deal.
Detroit’s Grand Bargain is centered around an estimated $816 in pension debt. FGIC may be held responsible for payment if investors end up taking losses.

Posted 9 weeks 4 days ago

Five of Atlantic City’s 12 casinos could close this year, following Trump Entertainment Resorts’ bankruptcy filing this past Tuesday.
The company owns Trump Plaza, a casino slated to close next week. Trump’s Taj Mahal could follow suit in November if the company cannot receive concessions from union workers.
According to paperwork filed with the U.S. Bankruptcy Court, Trump Entertainment estimates its liabilities range between $100 million and $500 million and assets no greater than $50,000. The company missed last quarter’s tax payment and currently does not have enough revenue to pay lenders this month, as reported by the Washington Post.
In a statement to the New York Times, Fitch Ratings analyst Alex Bumazhny indicates the Taj Mahal closure comes as a surprise: “The property is almost breaking even and will benefit from the closure of Trump Plaza.”
Three casinos have closed since January in lieu of increased competition from neighboring states. On CNBC’s “Closing Bell,” financial researcher Frank Fatini claims new casinos in Pennsylvania and New York state have “taken away…the convenience gambler, the ‘daytripper’”from Atlantic City.
Bloomberg states that higher labor costs and real estate taxes have also hurt Atlantic City’s profits.
The closing of the Taj Mahal could leave 2,800 workers unemployed, raising the year’s total loss in Atlantic City casino jobs to above 8,000.

Posted 10 weeks 2 days ago

Testimony in the historic Detroit bankruptcy trial began this morning with the city’s chief financial officer stating fiscal controls were “very, very poor” when he began last year.
John Hill Jr. was the first witness called on September 4. According to Hill, Detroit was unable to fully determine revenue flow for a myriad of reasons, but partly due to a failure to implement a “financial commuter system,” as said by ABC News.
Lawyers for the United Auto Workers, Wayne County and the American Federation of State, County and Municipal Employees are also slated to present their arguments on Thursday.
On Wednesday, lawyers argued against Detroit’s current debt modification plan, claiming it to be “illegal, unfair and dead on arrival,” according to an article in the Detroit Free Press.
Judge Steven Rhodes compelled a lawyer for Syncora Guarantee, arguably the city’s strongest critic and creditor, to state what he felt is an appropriate amount for the city to repay. Attorney Kieselstein said Syncora wants 75 cents on the dollar.
Detroit’s Grand Bargain is the foundation of the bankruptcy plan. The bargain would allow the city to accept roughly $816 million over the next 20 years from the state of Michigan, non-profit foundation and the Detroit Institute of Arts donors. The money would be used to fund city retiree pensions.

Posted 11 weeks 1 day ago

Crumbs Bake Shop was granted permission to sell itself to Lemonis-Fischer Enterprises in a New Jersey bankruptcy court on Tuesday, August 26th.
Judge Michael Kaplan approved the sale of the famed cupcake chain to Marcus Lemonis, star of CNBC’s “The Profit,” and Fischer Enterprises, which is best known as the owner of frozen treat Dippin’ Dots. The purchase will successfully conclude Crumbs’ Chapter 11 bankruptcy case, annulling $6.5 million in debt, according to the Wall Street Journal.
Crumbs closed all 49 of its locations nationwide in July. About half of those locations will remain closed, but new ownership intends to reopen stores in cities such as New York, Chicago, Washington D.C., Boston and Los Angeles.
Scott Fischer, chief operating officer of Fischer Enterprises, states the stores will still focus on Crumbs’ famed cupcakes, but there are plans to integrate other food brands owned by the Oklahoma based investment company, such as ice cream and popcorn.
Crumbs began searching for a buyer in late 2013, but a $5 million investment from Fischer Enterprises in January 2014 temporarily halted the search. Filings show the company resumed hunting in May after an “out of court restructuring failed to take hold,” as stated by The Wall Street Journal.

Posted 12 weeks 1 day ago