Amid the ongoing COVID-19 pandemic, U.S. Senate Democratic Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, and U.S. Senator Chuck Grassley (R-IA), Ranking Member of the Senate Judiciary Committee, today introduced the COVID-19 Bankruptcy Relief Extension Act, bipartisan legislation to temporarily extend COVID-19 bankruptcy relief provisions enacted as part of the March 2020 CARES Act and December 2020 omnibus appropriations bill, according to a press release. The bill would extend for an additional year CARES Act bankruptcy provisions that are set to expire on March 27, 2021. These provisions do the following:
- Allow more small businesses to file for streamlined chapter 11 bankruptcy proceedings under Grassley’s Small Business Reorganization Act of 2019 by increasing the maximum debt limit for those procedures from $2.7m to $7.5m.
- Amend the definition of income for chapters 7 and 13 to exclude federal COVID-related relief payments from being treated as “income” for purposes of filing bankruptcy.
- Clarify that the calculation of disposable income for purposes of confirming a chapter 13 plan does not include COVID-related relief payments.
- Permit individuals and families in chapter 13 to seek payment plan modifications for plans confirmed before the date of enactment of this extender bill if they are experiencing a material financial hardship due to the coronavirus pandemic.
In addition, the bill would extend until March 27, 2022, several additional COVID bankruptcy relief provisions that were included in the December omnibus/COVID relief package and that are set to expire in December 2021. These provisions do the following:
- Provide that federal COVID relief payments to individuals are exempt from being treated as property of the estate in bankruptcy proceedings.
- Ensure that families in chapter 13 bankruptcy plans who have made all plan payments but have missed 3 or fewer mortgage payments because of the pandemic are not denied a discharge for their other debts (though the mortgage payments would continue to be owed).
- Ensure that families that are or were in bankruptcy proceedings are not ineligible from CARES Act mortgage forbearance and eviction moratorium provisions.
- Set forth a process for creditors to file a proof of claim for payments deferred during forbearance periods granted under the CARES Act, and permit modification of a chapter 13 plan to account for such proofs of claim.
- Prevent the termination of utility services in bankruptcy by ensuring that individuals and families will not be required to furnish a security deposit to maintain utility services during bankruptcy.
- Exempt customs brokers who collect and pay duties to Customs and Border Patrol on behalf of importers from the clawback provisions of the Bankruptcy Code when an importer files bankruptcy.
Get the insight, analysis and statistics you need on the Small Business Reorganization Act and subchapter V elections by visiting ABI’s SBRA Resources website.
‘Purgatory’ Grips $146 Billion of Distressed Commercial Property
The coronavirus outbreak helped push about $146 billion of commercial real estate into serious risk of bankruptcy or default at the end of last year, particularly in hotels and retail, according to data compiled by Real Capital Analytics, a commercial real estate data firm, Bloomberg News reported. Troubled borrowers secured breaks of six to 18 months on their debt last spring as the pandemic shut down large parts of the economy and revenue dried up. But nearly a year later, some lenders are running out of patience and don’t have the ability to keep extending credit. A glimpse of what lies ahead is provided by the $540 billion market for mortgage loans bundled into securities. About 7.58% of the loan recipients were at least 30 days late on a payment in January, led by 19.19% of hospitality loan recipients and 12.68% of retail loan recipients, according to Trepp, the real estate data firm. The special servicing rate was 9.72% for the overall market, with nearly a quarter of them hospitality loans and 17% of them retail loans. “We have tons of stuff that’s in purgatory,” according to Manus Clancy, a senior managing director at Trepp. “The workout notes every month say the special servicer and the borrower are talking about forbearance and extension.” Roughly $430 billion of commercial real estate debt comes due this year, out of $2.3 trillion that matures in the next five years, according to Morgan Stanley.
Unemployment Claims Dropped Last Week
New claims for unemployment fell last week, the government reported on Thursday, the latest sign that the labor market’s recovery, however slow and unsteady, is continuing, the New York Times reported. A total of 710,000 workers filed first-time claims for state benefits during the week that ended Feb. 20, a decrease of 132,000, the Labor Department said. In addition, 451,000 new claims were filed for Pandemic Unemployment Assistance, a federal program covering freelancers, part-timers and others who do not routinely qualify for state benefits, a decline of 61,000. Neither figure is seasonally adjusted. On a seasonally adjusted basis, new state claims totaled 730,000, a decline of 111,000. Although initial jobless claims are nowhere near the eye-popping levels seen last spring, they are still extraordinarily high by historical standards. There are roughly 10 million fewer jobs than there were last year at this time. Analysts also cautioned against reading too much into a single week’s changes. The combined average of new state and federal unemployment insurance claims over the first eight weeks of this year is actually slightly higher than it was over the last eight weeks of 2020.
Democrats Call for Relief Package to Waive Taxes on Unemployment Benefits
A group of House Democrats is urging leadership to provide tax relief for recipients of unemployment benefits in the $1.9 trillion coronavirus relief package the House is expected to vote on this week, The Hill reported. "As we work to deliver on much-needed support for families, workers, and businesses, we should not be extending benefits with one hand and taxing them with the other," the lawmakers wrote in a letter dated today. Rep. Cindy Axne (D-Iowa) took the lead on the letter, which was signed by 11 other House Democrats and sent to Speaker Nancy Pelosi (D-Calif.), House Majority Leader Steny Hoyer (D-Md.), House Budget Committee Chairman John Yarmuth (D-Ky.) and House Rules Committee Chairman James McGovern (D-Mass.). The pandemic resulted in millions of Americans receiving unemployment benefits for the first time in 2020. Relief legislation enacted last year created several federal unemployment programs. Unemployment compensation is subject to federal income taxes, but many Americans were unaware of this when they received benefits. As a result, people may be surprised when they file their 2020 tax returns this year that they owe money to the IRS or are entitled to smaller refunds than they expected. The relief package that the House is considering this week extends federal unemployment programs, but it doesn't exempt any unemployment benefits from taxes. The Democratic lawmakers who wrote the letter are sponsors of a bill that would exempt the first $10,200 in unemployment insurance (UI) received last year from federal income taxes, and they want their measure to be included in a manager's amendment to the relief package.
Report: New York City’s Arts and Recreation Employment Down by 66 Percent
Employment in New York City’s arts, entertainment and recreation sector plummeted by 66 percent from December 2019 to December 2020, according to a report released on Wednesday by the New York State Comptroller’s office that detailed the economy’s devastation from the coronavirus and the serious obstacles to recovery, the New York Times reported. The report from Thomas DiNapoli’s office said that the sector had seen the largest drop of all the parts of the city’s economy. A full comeback, it said, would depend on significant government assistance. The sector “is a cornerstone of the city’s ability to attract businesses, residents and visitors alike,” the report said. “Yet the sector relies on audiences who gather to take part in shared experiences, and this way of life has been significantly disrupted by the pandemic.” Although nearly all business has been affected by the pandemic, its impact on arts, entertainment and recreation entities has been particularly striking. From 2009 to 2019, employment in the sector — which in this report includes performing arts, spectator sports, gambling, entertainment, recreation, museums, parks and historical sites — grew by 42 percent, faster than the 30 percent rate for total private sector employment. In 2019, according to the report, more than 90,000 people in 6,250 establishments were employed in the arts, entertainment and recreation. Those jobs had an average salary of $79,300 and provided $7.4 billion in total wages. In addition to businesses with employees, the report said, there are a large number of people who were self-employed, including artists and musicians. In February 2020, just before the pandemic shutdown in New York City, nearly 87,000 people were employed in the arts, entertainment and recreation sector there, the report said. Many major institutions announced closures on March 12. A statewide stay-at-home order went into effect on March 22. By April, employment in the sector stood at 34,100 jobs.
U.S. Retirement Crisis Hits Black Americans Hard
Many American households aren’t prepared for retirement, but Black Americans are even further behind than whites, according to academic and government data, the Wall Street Journal reported. The recent economic turmoil is likely widening the disparity. Many Black Americans are hampered in saving for retirement by such factors as less intergenerational wealth, more college debt, lower incomes and lower homeownership rates than white Americans, according to academic and government data. Even before the pandemic hammered the economy, Black families on average had roughly one-sixth the savings set aside for retirement compared with white families, according to an analysis of government data by the Urban Institute think tank. That is $25,000 in retirement savings accounts for Black households as of 2016 versus $158,000 for white households. Hispanic households fared only slightly better than Black ones at $29,000. Black families often have less cushion in their paychecks to draw on in case of emergencies and are more likely to pull from retirement accounts when a problem arises. White households earned a median income of $69,823 in 2019 versus $43,862 for Black households, census data shows. (Subscription required.)
Submissions for Asset Sales Committee’s “Asset Sale of the Year” Award Extended to April 5!
ABI’s Asset Sales Committee has extended the application period for its 3rd Annual Asset Sale of the Year Award. Submissions are now due by Monday, April 5, 2021. Please see below for more information regarding the contest as well as previous winners. Criteria for submissions include:
• Completion of a sale that was strategic and provided stakeholders with value;
• A display of excellence across the full spectrum of the sale process, from the initial targeting through pursuit, structuring and financing to complete a transaction;
• A sale that reflects a high level of professional expertise in the design of the transaction, and that tested creativity and skill in completing the transaction; or
• A sale of strategic or legal significance and impact (winning entries might focus on overcoming challenges to complete the sale, innovative financial engineering, and motivating agreement across multiple stakeholders)
A bankruptcy sale (via either § 363 or a plan) that closed between January 1 and December 31, 2020.
At least one professional involved in the sale must be a member of the Asset Sales Committee as of the nomination deadline. Self-nominations are permitted.
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