House Votes to Extend Pandemic-Era Bankruptcy Relief

House Votes to Extend Pandemic-Era Bankruptcy Relief

ABI Bankruptcy Brief

March 18, 2021

ABI Bankruptcy Brief

House Votes to Extend Pandemic-Era Bankruptcy Relief

Just days before a key deadline, the House yesterday easily voted to extend personal and small business bankruptcy relief provisions that were part of last year's pandemic aid packages through March 2022, Law360 reported. The relief packages raised the maximum debt limit for small businesses using a streamlined bankruptcy process, and allowed individuals to seek COVID-19-related hardship modifications, among other changes. Bankruptcy provisions in the CARES Act are set to expire March 27, while others included in the December relief package have an end date of Dec. 27. House Judiciary Committee Chairman Jerry Nadler, D-N.Y., sponsored the COVID-19 Bankruptcy Relief Extension Act, which would extend certain elements until March 27, 2022. The bipartisan measure passed the House on a 399-14 vote with all opposition coming from Republicans, mostly members of the conservative Freedom Caucus. Rep. Ben Cline of Virginia, the Republican co-sponsor, noted that pandemic lockdowns started just weeks after the Small Business Reorganization Act took effect in February 2020. He said nearly a third of the small businesses entering that streamlined bankruptcy process over the last year would not have been eligible if the CARES Act had not raised the maximum debt limit. The extended measures would prevent COVID-19 relief funds from being counted as income or estate property for the purpose of bankruptcies; allow individuals and families making payments under a chapter 13 plan to seek payment modifications for COVID-19-related hardships; and bar individuals and families in bankruptcy proceedings from being required to put down a deposit to maintain utility services. The bill would also establish that individuals and families in bankruptcy are eligible for CARES Act mortgage forbearance and eviction moratorium provisions, and ensure that families in chapter 13 bankruptcy plans who have made all plan payments but have missed three or fewer mortgage payments can still discharge their debts. The bill now goes to the Senate, where prospects for passage are favorable as Sens. Dick Durbin (D-Ill.) and Charles Grassley (R-Iowa) introduced similar legislation on Feb. 25. (Subscription required.)

Landlords Struggling to Stay Afloat See Lifeline in COVID-19 Relief for Renters

Nearly 10 million Americans are behind on their rent payments, according to the U.S. Census Bureau, and Stephanie Graves is seeing that play out first-hand, NPR reported. She's a landlord in the Houston area and says that tenants in most of her buildings are struggling. Graves says she isn't evicting any tenants who try to pay what they can and who stay in touch with her. But that means she's losing money: The rents coming in don't cover her mortgage payments and paying the staff. Between the last two COVID-19 relief measures, Congress has approved upwards of $50 billion in rental assistance money, and that is just now starting to become available. "February looked really scary for us," says Kelle Senyé, who oversees about 400 affordable housing units around Albuquerque, N.M. She says more than a quarter of those were behind on rent payments last month. And she's just found out that residents can now apply for the federal money approved by Congress. Senyé says she's not evicting anybody for nonpayment of rent during the pandemic. But many other landlords have not been so understanding. Some have been aggressive about evicting people who've lost work and fallen behind on rent, so housing groups say protections are needed as this money gets flowing. Currently, there's an order from the Centers for Disease Control and Prevention aimed at stopping evictions, but it has loopholes and expires in two weeks. "What we're worried about is [what happens] if those protections are allowed to lapse," said Peter Hepburn, an assistant professor at Rutgers University and a researcher at Princeton University's Eviction Lab, which is tracking evictions during the pandemic. "We could see a million eviction cases filed in very short order across the country."

Analysis: The Pandemic Ignited a Housing Boom — but It’s Different from the Last One

The residential real estate market is on its biggest tear since 2006, just before the housing bubble burst and set off a global recession. Yet in nearly every meaningful way, today’s market is the inverse of the previous boom, according to a Wall Street Journal analysis. Buyers have higher credit ratings these days, are flusher with cash and are putting down more up front. In 2020, sales of previously owned U.S. homes surged to their highest level in 14 years, and many economists forecast sales to rise again this year. In the mid-2000s, loose mortgage-lending standards enabled borrowers with poor credit histories to purchase homes beyond their means, sometimes with mortgages that required low payments in the early years of the loan. Too much new construction led to an oversupply of houses. Financial firms packaged these risky mortgages as securities and sold them to investors. When more homeowners started defaulting on their mortgages, lenders suffered large losses and the entire financial system froze up. Many homeowners paid a big price. Between 2006 and 2014, about 9.3 million households went through foreclosure, gave up their home to a lender or sold in a distressed sale, according to a 2015 estimate from the National Association of Realtors. The current housing boom is far more stable than the last one and poses fewer systemic risks, economists say. A downside: There are more barriers to entry, and it’s more difficult for buyers who aren’t already homeowners to make that first purchase. (Subscription required.)

U.S. Weekly Jobless Claims Rise to 770,000 with Layoffs Still High

The number of Americans seeking unemployment benefits rose last week to 770,000, a sign that layoffs remain high even as much of the U.S. economy is steadily recovering from the coronavirus recession, the Associated Press reported. Today’s report from the Labor Department showed that jobless claims climbed from 725,000 the week before. The numbers have dropped sharply since the depths of the recession last spring but still show that employers in some industries continue to lay off workers. Before the pandemic struck, applications for unemployment aid had never topped 700,000 in any one week. The four-week average of claims, which smooths out weekly variations, dropped to 746,000, the lowest since late November. A total of 4.1 million people are continuing to collect traditional state unemployment benefits, down 18,000 from the previous week. Including separate federal programs that are intended to help workers displaced by the health crisis, 18.2 million Americans received some form of jobless aid in the week of Feb. 27, down by 1.9 million from the week before. The continuing layoffs are occurring even as the overall job market has shown solid improvement. Last month, U.S. employers added a robust 379,000 jobs, the most since October and a sign that the economy is strengthening as consumers spend more and states and cities ease business restrictions.

Global Supply Chain Continues to Face Challenges

Supply chain woes mounted worldwide for makers of everything from cars and clothing to home siding and medical needle containers, as the extreme Texas weather and port backlogs compounded problems for manufacturers already beset by pandemic disruptions, the Wall Street Journal reported. Toyota Motor Corp., Honda Motor Co. and Samsung Electronics Co. were the latest multinational companies to chime in about setbacks, with the two automakers saying yesterday they would halt production at plants in North America. Toyota cited a shortage of petrochemicals, the manufacturing of which has been hobbled by last month’s Texas freeze. Honda pointed to a combination of port issues, the semiconductor shortage, pandemic-related problems and the crippling U.S. weather. Samsung, a smartphone and chip-making giant, said a severe global shortage in semiconductors would hurt its business into the next quarter. Koh Dong-jin, the co-chief executive officer of Samsung, told investors yesterday that dealing with the chip supply/demand imbalance had become a priority for staff and that executives were traveling overseas, despite restrictions, to discuss the issue with business partners. The disruptions underscore how several forces are coming together to squeeze the world’s supply chains, from the pandemic-driven rise in consumer demand for tech goods to a backlog of imports at clogged California ports to U.S. factory outages caused by weather woes. They are creating cost increases and delays for numerous industries, company executives and analysts say, affecting profit margins and the prices that companies and consumers ultimately pay for many goods. (Subscription required.)

ASM Spotlight: Don't Miss "The State of the Industry: Perspectives, Opportunities and Predictions" Plenary

ABI’s Annual Spring Meeting returns April 12-22, bringing top bankruptcy practitioners, judges and academics together via an enhanced virtual platform to discuss the most important issues facing the profession. “The State of the Industry: Perspectives, Opportunities and Predictions,” the opening plenary session, sets the stage for the conference by discussing the economic, scientific and behavioral influences that will, at least in part, shape the restructuring landscape in the coming year. Led by a major international media organization, the panel discussion will include leaders in industry, economics, banking and finance, and will focus on macroeconomic predictions for 2021, industry expectations and risks, and how the pandemic and COVID-19 vaccine will impact the economy in 2021 and thereafter.

Evolve and grow your practice by registering for ABI's Annual Spring Meeting today!

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. 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.

Click here for more information.

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New on ABI’s Bankruptcy Blog Exchange: Unbanked Stimulus-Seekers Rush to Open Checking Accounts

The IRS, FDIC, and more than 70 banks and credit unions are urging consumers to open affordable accounts so they can receive their Economic Impact Payments quickly and safely, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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