When I started A Clean Slate back in April, it was mostly because I was noticing topics which interested me but for whatever reason wouldn't make good articles. I didn't know who was going to read the blog and didn't really care. Whether I had a handful of readers or hundreds or thousands wasn't too terribly important. I didn't know what would come from it and still don't.
One of the very pleasant benefits of writing here though is the little bits of positive feedback from old friends, colleagues, or just random folks who post a comment. I'll get an email, a Linkedin message, or even a Christmas card with a little note from someone who has been reading the blog. It's a great feeling. I feel immensely honored that people take a few minutes to reads the posts here and grateful that anyone besides me finds them interesting.
So today I just want to thank all of you for coming to the site and wish everyone the best this holiday season. I will be celebrating the usually wonderful Christmas with my family and gearing up for 2010. We will have some changes here in January so stay tuned.
Thursday, December 24, 2009
Happy Holidays from A Clean Slate
Wednesday, December 9, 2009
An Excellent Read on Claims Trading Disclosures at In The Red
Claims trading is a relatively obscure issue but one that practitioners in larger chapter 11 cases encounter routinely. For those who are unfamiliar, there is a sophisticated market for trading in bankruptcy claims. Hedge funds and other similar investors speculate about the return to creditors and then purchase claims from the creditors based upon such speculation. So, for example, if during a case the market believes that unsecured creditors might receive 50 cents on the dollar for their claims, claims traders might offer creditors 35 cents on dollar and hope to make a profit on the difference. The selling creditor gets the benefit of cash up front and the trader assumes the risk that the unsecured creditors ultimately get a lower dividend.
For various reasons, claims purchasers prefer to disclose as little as possible about their transactions. And, generally speaking, relatively little disclosure is required. Rule 3001(e) of the Federal Rules of Bankruptcy Procedure provides for the filing of evidence that the claim has been transferred. But Rule 3001(e) is designed largely to prevent claims from being transferred fraudulently rather than to force disclosure of the parties purchasing their claims and/or their motivations for doing so.
What happens, though, when claims purchasers decide to work together to try to influence the outcome of a case? Rule 2019 of the Federal Rules of Bankruptcy Procedure requires fairly detailed disclosures about "every entity or committee representing more than one creditor or equity security holder." So, for example, when a group of creditors forms an informal committee to represent their interests collectively, does Rule 2019 apply?
Yes, according to Judge Walrath in a decision last week. Bob Eisenbach at In The Red has a nice post today about it. Judge Walrath joins with the Judge Gropper of the Southern District of New York in holding that Rule 2109 applies in such situations.
Wednesday, December 2, 2009
Transcripts From The Supreme Court Arguments In Bankruptcy Cases
As discussed here, the Supreme Court held arguments on two bankruptcy cases yesterday. Transcripts are available.
Here is the transcript for the Milavetz case, the First Amendment challenge to portions of the 2005 amendments to the Bankruptcy Code.
And here is the transcript to the Espinosa case, the student loan case
Tuesday, December 1, 2009
Another Summary of the Milavetz Case
Not sure how I missed this a couple months ago but here is a good discussion of the Milavetz case from Law.com.
I worked some with Eric Brunstad on the Anna Nicole Smith case years ago. He is, of course, a very bright guy. I'm sure the petitioners handled the case well.
Article: Did U.S. Bankruptcy Laws Exacerbate the Housing Crisis?
We touched on this some earlier in one of the very first posts on the blog, but there is a new study suggesting that the 2005 amendments to the Bankruptcy Code helped worsen the housing crisis. Wenli Lee and Michelle L. White discuss the study in an article today in the Wall Street Pit. The basic idea is that by making bankruptcy less available and preventing people from being able to discharge their unsecured debts, the 2005 amendments increased the budget constraints on homeowners and "set the stage for an increase in mortgage defaults."
The article also argues that the 2005 amendments to the Bankruptcy Code should be reversed:
There is an efficiency gain from using bankruptcy policy to discourage defaults and foreclosures. In particular, the 2005 bankruptcy reform should be at least partially reversed, since lowering the cost of filing for bankruptcy will encourage more homeowners to file and therefore reduce foreclosures.
Read the article here.
Supreme Court Bankruptcy Case Discussed On National Public Radio
The student loan bankruptcy case being heard at the Supreme Court today received some attention from National Public Radio's Nina Totenberg this morning. On Morning Edition, she discussed the facts and procedural history of the case.
Listening to the report reminded me of the "Catch-22" nature of the government and lenders' position. They argue that for any portion of a student loan obligation to be discharged, the debtor should file an adversary proceeding to establish that there would be undue hardship if the debt were enforced. If you consider the cost of an adversary proceeding however, few debtors who are experiencing the kind of severe financial strain likely to show undue hardship could afford to prosecute an adversary proceeding.
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