GM Bankruptcy

Bankruptcy is not a process that should be feared by the American people – or by General Motors.  Sometimes it acts as a grim reaper.  Sometimes it has the power of the Phoenix allowing failed businesses to rise from their ashes.  But always it is the great equalizer which is precisely what Congress intended.

So why are GM and the country so afraid?  The answer appears to be very straight forward – loss of the company and the attendant jobs.  That’s arguably never a good thing.

Consequently, in our bailout driven economy, there is much talk of the Treasury, a/k/a Santa Claus, waiting on the scenes for yet another golden delivery.  The great Greek playwrights had a most descriptive word for this process – deus-ex-machina, which means “chariot from the heavens”.

• read the full post from Charles Moster of MosteryWynne: “GM Bankruptcy - To Fear or Not to Fear“

Bankruptcy and Bailouts

As a bankruptcy attorney and former lawyer for the Feds, I feel compelled to point out the drawbacks of the current bailout to GM and other entities which might seek Chapter 11 protection.  The bankruptcy laws afford no special protection to taxpayers in a bailout situation.  As such, the massive outlay advanced by the American people may never get fully repaid in a Chapter 11 proceeding which is highly problematic.

The purpose of Chapter 11 is to allow the honest debtor to reorganize its debts and thus restructure obligations to creditors.   The process necessarily involves the reduction of creditor claims so that available assets can be more equitably distributed.  In most contexts that makes perfect sense.

However, the Bankruptcy Code recognizes special protection for discrete groups like the American taxpayer when a situation so warrants.

• read the full post from Charles Moster of Moster & Wynne:  “Bankruptcy & Bailouts - Need for Reform“

New study reports 62 percent of bankruptcies due to medical bills

A study released by the American Journal of Medicine has produced some interesting results concerning the relationship of bankruptcies to medical bills in the United States:

“Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills. Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance. Using identical definitions in 2001 and 2007, the share of bankruptcies attributable to medical problems rose by 49.6%. In logistic regression analysis controlling for demographic factors, the odds that a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001.”

New Bankruptcy Law Constitutionality Questioned

The new bankruptcy act that went into place in 2005, The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, or BAPCPA, is being questioned by several lawyers across the nation. Attorneys have filed several lawsuits against the code and a few are pending currently before the Supreme Court.

At the heart of the matter is the amendments that affect attorneys most and forces them to be declared as a ‘debt relief agency’ and restrict their advice to clients.

From the Memphis Daily News:

Memphis attorney Ben Sissman, a private practitioner at The Law Offices of Ben Sissman, said the biggest issue attorneys have with the changes in the code is “it (means) the individual (filing for bankruptcy) has to pay more to get the same relief.”

BAPCPA discourages debtors from filing a Chapter 7 bankruptcy, under which most debts are forgiven, in favor of Chapter 13. A Chapter 13 bankruptcy means the monies owed are forgiven after the debtor has repaid some portion of their debts.

Prior to BAPCPA, a debtor with any income could file for Chapter 7 bankruptcy, but the new law places more stringent limits. The formula for determining whether a debtor is eligible for Chapter 7 now takes the debtor’s income and compares it to the median income of the debtor’s state of residence. If the debtor’s income is higher than the state’s median, the debtor is subject to a “means test” to determine if they qualify for a Chapter 7.

Attorneys argue this amendment falls under the category of “presumption of abuse.”

Also, bankruptcy lawyers are now termed “debt relief agencies.” Many people think of DRAs as places that advertise they can significantly reduce a person’s debt without having to file bankruptcy.

Placing bankruptcy attorneys in the same category as DRAs has angered many lawyers, including Sissman.

“It is designed to make people think there’s something sleazy about you,” Sissman said. “It’s designed to be offensive. No lawyer wants to stand out there and say, ‘Hi, I’m a lawyer, but I’m also a debt relief agent.’ It doesn’t accomplish anything other than to make lawyers look bad.”

Read the full story here: Local Lawyers speak out against Bankruptcy Act’s limits

Senate Reviews Bill to Protect Consumers from Creditors

pushing legislation that would block creditors charging high interest rates on credit cards from collecting from consumers in bankruptcy proceedings. The proposal would change bankruptcy laws to dissolve claims for repayment of debt carrying interest

As bankruptcy filings mount, attention turns again to reform

Cash-strapped families are seeking bankruptcy protection at nearly the same rate and in the same manner as they did before the much-debated 2005 bankruptcy law reform, a trend critics say proves the reform was a

U.S. bill offers bankruptcy relief from card lenders

Tuesday by a U.S. senator who has introduced legislation prohibiting lenders from making claims on consumers in bankruptcy if interest rates are excessive. Senator Sheldon Whitehouse, a Rhode Island Democrat, told a hearing on credit card practices that

Dems seek bankruptcy changes on credit card debt

pushing legislation that would block creditors charging high interest rates on credit cards from collecting from consumers in bankruptcy proceedings. The proposal would change bankruptcy laws to dissolve claims for repayment of debt carrying interest

Donlin Recano Retained to Provide Bankruptcy Services to Everything but Water LLC

Donlin, Recano and Company, Inc., the bankruptcy management consultancy, announced today the company will provide claims, noticing and balloting services in the bankruptcy case of Everything But Water LLC, the Florida-based retailer of upscale swimwear

Consumer bankruptcies jump in January

filed by businesses, 9.9 per cent fewer than a year ago. The Office of the Superintendent of Bankruptcy reports that Canadians filed a total of 125,087 bankruptcies in the 12-month period ending in January, 14.5 per cent ? or 109,239 ? more than in

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