Judicial Conference Opens Proposed Rules for SBRA for Public Comment

Judicial Conference Opens Proposed Rules for SBRA for Public Comment

ABI Bankruptcy Brief

October 17, 2019

ABI Bankruptcy Brief

Judicial Conference Opens Proposed Rules for SBRA for Public Comment

On February 19, 2020, the Small Business Reorganization Act of 2019, P.L. 116-54 (SBRA), will go into effect – long before the normal three-year rules amendment process runs its course. As a temporary measure, the Advisory Committee on Bankruptcy Rules has drafted Interim Bankruptcy Rules that can be adopted by courts as local rules or by general order when the SBRA goes into effect. The Advisory Committee has also drafted amendments to the Official Forms to address the SBRA. The Standing Committee now seeks comment on the proposed SBRA rules and forms for a short four-week period prior to making final recommendations.

- Interim Bankruptcy Rules 1007(b), 1007(h), 1020, 2009, 2012(a), 2015, 3010(b), 3011 and 3016.
- Official Forms 101, 201, 309E, 309F, 314, 315, 425A, and new Official Forms 309E2 and 309F2

The comment period is open until November 13, 2019. Because of the short publication period for the Interim Rules and related Official Forms, there will be no public hearings.

Read the text of the proposed amendments and supporting materials.

Written comments are welcome on each proposed amendment. The Advisory Committee on Bankruptcy Rules will review all timely comments, which are made part of the official record and are available to the public. The comment period closes on November 13, 2019. Click here to submit a comment.

Commentary: Puerto Rico’s Debt Deal Leaves No Room for Error

Puerto Rico’s Oversight Board has put forward a debt restructuring proposal that, if approved by U.S. District Court Judge Laura Taylor Swain, would allow the commonwealth to emerge from bankruptcy. It promises to make the island’s debt more sustainable and includes necessary protections for pensions and public workers. Yet notwithstanding potential complaints from bondholders, it also leaves no room for error, according to a Bloomberg commentary. Neither does it relieve Congress of its responsibility to support the island’s economic recovery. Prior to the proposed debt-restructuring plan, Puerto Rico had around $50 billion of tax-supported debt. That was far more than the island could afford to pay out of a $70 billion economy. Annual debt service was over 28 percent of Puerto Rico’s revenues, more than five times the average state and three times the average of the 10 most indebted states. A fundamental objective of the board’s debt-reduction plan has been to put the island’s public finances on a sustainable footing to make sure that Puerto Rico isn’t back in bankruptcy 10 years from now. Thus, its plan to restructure the debt would impose haircuts of 28 percent to 36 percent on general obligation and constitutionally guaranteed bonds issued before 2012. Higher haircuts of up to 87 percent would be imposed on subordinated bonds, and bonds issued after 2011 that are being challenged as unconstitutional because they breached the debt limits set in the island’s constitution when they were issued. This would cut Puerto Rico’s tax-supported debt in half, from $50 billion to $25 billion, and keep Puerto Rico’s annual debt service at just under $1.5 billion, or roughly 9 percent of the broadest definition of government revenues.

Reality-TV Show Tries Financial Makeovers for Those with Student Debt

“Going From Broke,” a new reality show created by actor, producer and entrepreneur Ashton Kutcher, looks to illustrate how the financial realities facing young people today are disrupting the traditional ladder to financial success, the Wall Street Journal reported. Kutcher described “Going From Broke”—which will make its debut on Thursday —as a makeover show that includes transformations and reveals, much like the reality programs “Queer Eye” and “The Biggest Loser.” The 10-episode series will stream on Chicken Soup for the Soul Entertainment and Sony Corp.’s Crackle service. Hosts Dan Rosensweig, the chief executive of educational-technology company Chegg Inc., and Danetha Doe, the financial author behind Money & Mimosas, show up with hefty folders and loads of paperwork in tow. They help participants cut credit cards, find new side hustles, restructure student loan payments and otherwise try to figure out what roadblocks are keeping them from their financial goals. “Going From Broke” isn’t the first debt-focused television show; CNBC shows such as “Til Debt Do Us Part” have tackled similar subject matter. “Paid Off,” a truTV game show hosted by Michael Torpey, promises to award contestants the exact amount of their student loan total should they win several rounds of trivia.

Don't miss the ABI Talk at ABI's 2019 Winter Leadership Conference on "The Rhetoric and Reality of Student Debt," to be delivered by Inez Feltscher Stepman of the Independent Women’s Forum (Washington, D.C.). Ms. Stepman will examine whether there is too much emphasis on reducing student loan debt, including through bankruptcy, and not enough about the real causes of skyrocketing college costs. For more information on WLC and to register, please click here

Bank Regulators Present Dire Warning of Financial Risks from Climate Change

Home values could fall significantly, banks could stop lending to flood-prone communities, and towns could lose the tax money they need to build sea walls and other protections: These are a few of the warnings published today by the Federal Reserve Bank of San Francisco regarding the financial risks of climate change. The collection of 18 papers by outside experts amounts to one of the most specific and dire accountings of the dangers posed to businesses and communities in the U.S. — a threat so significant that the nation’s central bank seems increasingly compelled to address it. In a letter to Sen. Brian Schatz (D-Hawaii) this year, Fed Chair Jerome H. Powell wrote that the Fed takes “severe weather events” into account in its role as a financial supervisor. Meanwhile, the San Francisco branch of the Federal Reserve — which is responsible for banking oversight across a major swathe of the American West — has been more blunt, writing this past March that volatility related to climate change has become “increasingly relevant” as a consideration for the central bank. With today’s actions, the San Francisco Fed has taken a further step. The research, conducted by 38 academics and practitioners from around the country and published with the knowledge of the Fed’s board of governors, presents in precise language a dire picture of the risks of a changing climate, and warns that local governments don’t have the means to deal with them.

U.S. Trustee Program Making Adjustments to Implement HAVEN Act and Small Business Reorganization Act, According to October ABI Journal Article

The U.S. Trustee Program (USTP) is adjusting its responsibilities to implement the Helping American Veterans in Extreme Need (HAVEN) Act and Small Business Reorganization Act (SBRA), according to an article in the October ABI Journal. Both statutes were signed into law by President Donald Trump on Aug. 23, 2019, with the HAVEN Act becoming effective immediately and the SBRA effective Feb. 19, 2020. “The HAVEN Act and SBRA represent efforts to expand the availability of bankruptcy relief to different populations of debtors,” write Adam D. Herring and Walter W. Theus of the Executive Office for U.S. Trustees (Washington, D.C.) in their article “New Laws, New Duties.” “Along with that expansion, the USTP will continue to uphold its statutory duties to prevent abuse and provide effective oversight across the bankruptcy system.” Click here to read the full article.

Don't miss the "New Reorganization Hope for Main Street Debtors" ABI Talk by Judge Harner at ABI’s Winter Leadership Conference

To register for the conference, please click here.

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New on ABI’s Bankruptcy Blog Exchange: Supreme Court Is Yet to Decide if It Will Take CFPB Case

A list of upcoming cases published by the high court did not include a challenge to the bureau's constitutionality, but the justices could still decide to review it at a later date, 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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