« June 12, 2011 - June 18, 2011 | Main | June 26, 2011 - July 2, 2011 »

June 24, 2011

Top 5 Bankruptcy Articles of the Past Month

Top 5 most-downloaded bankruptcy-related articles of the past month on SSRN.

1) Directors’ Fiduciary Duties in the Zone of Insolvency and Actual Insolvency: To Whom, What, and When?, Michael R. Patrone.  Analyzes the extent of corporate directors' fiduciary duty to creditors, and the incentive structures created by the various possible frameworks for fiduciary duty to creditors.

2) Are Credit Default Swaps Associated with Higher Corporate Defaults?, Stavros Peristiani & Vanessa Savino.  Found a statistically significant link between trading in credit default swaps (CDS) and corporate default frequency in the years leading up to 2008.

3) Macroeconomic Effects of Bankruptcy & Foreclosure Policies, Kurt Mitman.  Created nationwide models of household debt loads to measure the effects of varying homestead exemption rules and mortgage procedure policies to measure the macroeconomic effects of the policies, and suggested optimal policies to balance increased household welfare while minimizing the cost of mortgages and unsecured debt.

4) Recovery and Returns of Distressed Bonds in Bankruptcy, Wei Wang.  Analyzes the rate of return on distressed bonds in Chapter 11 reorganizations, and offers explanations for the generally strong returns on senior bonds and negative returns for junior bonds.

5) Game Theoretic Analysis of Negotiations under Bankruptcy, Amira Annabi, Michele Breton & Pascal Francois.  Applied a model of negotiations in court-supervised bankruptcy reorganizations as a non-cooperative game comprised of creditors, shareholders, and a trustee, and found that the length and success of the negotiations, the level of protection for creditors, and the success or failure of the firm, are affected by which of these players is given "first mover advantage" - who files the original plan of reorganization.

-CHH

June 24, 2011 in Article Reviews | Permalink | Comments (0) | TrackBack

June 23, 2011

Update from the State Bar Business Law Section's INSOLVENCY LAW COMMITTEE

June 22, 2011

Dear Insolvency Law Committee Constituency List members:

The following is an Ebulletin prepared on a case of interest by a member of the Insolvency Law Committee:  

A bill to again revise California Exemptions, introduced by Assembly Member Wieckowski, has recently passed the Assembly without opposition and is now in the Senate.  On June 14, 2011 the bill was favorably reported out of the Senate Judiciary Committee and is slated to be taken up by the Senate Appropriations Committee within the next few weeks.  It appears to be on a fast track.

The Bill, AB 929, results in the second substantial increase in the homestead exemption in the last year and includes major revisions to the exemptions applicable if no homestead is taken.  A copy of the bill can be found at http://www.leginfo.ca.gov/cgi-bin/postquery?bill_number=ab_929&sess=CUR&house=B&author=wieckowski

The stated purpose of the bill is as follows: 

This bill would revise and recast those alternative exemption provisions and would, among other things, increase the exemption available for the debtor's interest in motor vehicles; jewelry, heirlooms, and works of art; and tools and other items used in the debtor's trade, business, or profession or in the trade, business, or profession of the debtor's spouse. The bill would revise the alternative exemption provisions relating to household furnishings, life insurance contracts, wrongful death and personal injury actions, unemployment compensation payments, and cemetery plots and would add to those alternative exemption provisions exemptions for workers' compensation benefits, specified aid payments and relocation benefits, and financial aid for higher education.

Existing law provides an exemption from enforcement of a money judgment for a homestead, as defined, in specified amounts.

With regard to the homestead exemption in CCP section 704.730, the bill results in the increase in the exemption amounts as follows:

 

Current Law

Proposed Change

 

Individual

$75,000

$150,000

Family Unit

$100,000

$250,000

Over 65/Disabled/Low Income

$175,000

$350,000

The bill also increases the maximum income allowed to qualify for the low income homestead exemption for people from $15,000 to $22,000 for an individual and $20,000 to $29,000 for a married couple.

With regard to the exemptions applicable if no homestead is claimed,  CCP section 703.104(b), the bill does not increase the wildcard, per se, but does increase other provisions and also creates new exemptions such that the total amount exemptible has now increased substantially.  .  The stated purpose of these amendments is to conform the CCP Section 703.140(b) exemptions to the CCP Section 704.010 et seq. exemptions to protect those without homes in the event they file for bankruptcy protection.   While the language of the changes to the CCP Section 703.140(b) exemptions would appear to parallel the CCP Section 704.010 et seq. exemptions, the amounts are not the same.  The exemptions available under CCP Section 703.140(b) are substantially higher than those in CCP Section 704.010 et seq.

For example, a burial plot which previously was included under CCP section 703.140(b)(1) now has its own separate section, new CCP section 703.140(b)(17) and is exempt without regard to value.

A chart of certain of the increases follows:

Property Exempt

Current Law

Proposed Change

 

Vehicles

$3,525 (one vehicle only)

$4,800 of aggregate equity

Jewelry, heirlooms and works of art

$1,425

$5,000

Tools of the Trade

$2,200

$6,075 (and if married both spouses entitled to claim exemption)

Unmatured life insurance including annuities but not the loan value

$11,800

unlimited

Loan value of unmatured life insurance

included in $11,800 above

$9,700 (and if married both spouses entitled to claim exemption)

Personal Injury

$22,075 (for actual pecuniary loss)

unlimited

The author has been advised that the Bill has been opposed by the California Bankers Association.  The Bill will result in a reduction in the number of bankruptcy cases administered with assets.  In other words, Debtors, without homes to protect in Chapter 7 bankruptcies, will be able to protect more assets.

These materials were prepared by Elissa D. Miller of Sulmeyer Kupetz, P.C. in Los Angeles, California.

Thank you for your continued support of the Committee.

Best regards,

 Insolvency Law Committee

 

June 23, 2011 | Permalink | Comments (3) | TrackBack

Estate of Anna Nicole Smith loses at Supreme Court

"The Supreme Court ruled Thursday that a bankruptcy court incorrectly granted Anna Nicole Smith over $400 million from the estate of her oil magnate husband J. Howard Marshall. In the 5-4 decision, the nation's highest court held that the US Constitution barred a California bankruptcy court from deciding a matter outside the scope of bankruptcy law. The former Playboy Playmate married the billionaire Marshall in 1994 when she was 26 and he was 89. Marshall died in 1995 and left his entire estate to his son Pierce. Smith sued in response, but a Texas probate court granted the entire estate to Pierce Marshall despite claims by Smith that he had conspired to withhold funds promised to her by his father."

Read more here.

June 23, 2011 in Current Affairs | Permalink | Comments (0) | TrackBack

June 22, 2011

Toby Maguire and others sued over poker winnings

" 'Spider-Man' star Tobey Maguire and other celebrities have been caught in a web of lawsuits seeking to reclaim more than $4 million won during unlicensed poker matches at upscale Beverly Hills hotels.

The lawsuits were filed in March by a bankruptcy trustee attempting to recoup money for investors who were duped in a Ponzi scheme.

The lawsuits claim the clandestine Texas Hold `em matches were played between 2006 and 2009, with some of the money taken in the Ponzi scheme used to pay off debts incurred in the games.

Maguire is being sued for $311,000 plus interest that the lawsuit says was won by the actor in the poker matches."

Read more here.

June 22, 2011 in Current Affairs | Permalink | Comments (0) | TrackBack

Philadelphia Orchestra announces millions in gifts

"The Philadelphia Orchestra Association has announced an aid package worth a potential $45 million - a substantial start to its $160 million drive to help the orchestra emerge from bankruptcy and become stable.

The funding, announced Wednesday, includes only $11.2 million in outright gifts. The rest is conditional: If the orchestra can raise an additional $17.5 million by the end of 2011, that will trigger matching grants from various sources worth $16.3 million.

Total: $45 million."

Read more here.

June 22, 2011 in Current Affairs | Permalink | Comments (0) | TrackBack

June 21, 2011

Onetime socialite Kluge in bankruptcy protection

"Patricia Kluge, a onetime socialite who had entertained the rich and famous at her sprawling Virginia estate in the 1980s and later tried her hand at building up a national winemaking business, has filed for personal bankruptcy protection with her husband.

A lawyer for the couple, Kermit Rosenberg, disclosed details of the filing Tuesday and added: "They're getting on with their lives, trying to discharge their debts and start over."

In U.S. Bankruptcy Court, Kluge and husband William Moses listed business obligations as their chief debts. The filing estimates their assets between $1 million and $10 million, compared with $10 million to $50 million in liabilities. The couple estimated in the filing in the court in Lynchburg that they have between 50 and 99 creditors.

Kluge acquired the 23,500-square-foot Albemarle House and its 3,000 acres in rural Virginia from her 1990 divorce from billionaire media mogul John W. Kluge, who died in September. It was designed after an 18th-century English country manor with multilevel gardens, fountains, a swimming pool and rustic guest cabin."

Read more here.

June 21, 2011 in Current Affairs | Permalink | Comments (0) | TrackBack

June 20, 2011

Bankruptcy Court Questions Naiveté of Debtor – When the Debtor’s Spouse is a Paralegal

Allegations in credit card company’s complaint, that Chapter 7 debtor ran up more than $3,700 in charges against her account in space of roughly one month, at time when debtor’s total unsecured credit card debt of more than $88,000 was in excess of her ability to pay it and when debtor, through her paralegal spouse, had access to legal advice, sufficiently pled facts supporting an inference of fraudulent intent to state plausible claim to except credit card debt from discharge on “false pretenses, false representation, or actual fraud” theory, and to preclude dismissal of complaint as failing to state cause of action. In re Vanarthos 445 B.R. 257 (Bkrtcy.S.D.N.Y.,2011).

Bill Statsky
www.statsky.blogspot.com

June 20, 2011 in Current Affairs | Permalink | Comments (1) | TrackBack

Tuscaloosa Bankruptcy Attorney Charged with Bankruptcy Fraud

"Federal prosecutors today charged a Tuscaloosa attorney with bankruptcy fraud, announced U.S. Attorney Joyce White Vance and FBI Special Agent in Charge Patrick Maley.

The one-count information filed in U.S. District Court charges DONALD DIONNE, 60, with making a false oath or account in relation to a bankruptcy case.

'By including information which he knew was false, Mr. Dionne attempted to subvert the bankruptcy court’s rules regarding the judge and division to which his client’s cases were assigned,” Vance said. “Regardless of his motivation, as an attorney and officer of the court, Mr. Dionne had a duty to put accurate and correct information on the bankruptcy petitions he filed.'

The United States Bankruptcy Court for the Northern District of Alabama is divided into four divisions: Northern, Southern, Eastern, and Western. The local rules of the bankruptcy court require that an individual debtor’s bankruptcy case be assigned to the division that corresponds with the debtor’s residence, principal place of business, or the location of the assets for the person or entity filing bankruptcy for 180 days before the date of the bankruptcy filing."

Read more here.

June 20, 2011 in Current Affairs | Permalink | Comments (2) | TrackBack

Trustee searching for felon's missing artwork

"A bankruptcy trustee is searching for 80 pieces of artwork once owned by a Dickson retirement plan manager who was sent to jail for embezzlement in the hopes of recovering money for his creditors.

Former 1Point Solutions CEO Barry Stokes died in federal prison last year after he was convicted of bilking $19 million from his clients' retirement funds and health care spending accounts. Prior to his arrest, Stokes was also collector of Japanese woodblock prints and about 2,000 pieces of the collection have been recovered and sold for about $1 million to pay off creditors."

Read more here.

June 20, 2011 in Current Affairs | Permalink | Comments (0) | TrackBack