July Commercial Chapter 11s Down 62 Percent from Last Year, Total Filings Decrease 24 Percent

July Commercial Chapter 11s Down 62 Percent from Last Year, Total Filings Decrease 24 Percent

 

 

 

 

 

 

August 5, 2021

 
ABIBankruptcy Brief
 
 
NEWS AND ANALYSIS

July Commercial Chapter 11s Down 62 Percent from Last Year, Total Filings Decrease 24 Percent​​​​​​

Total commercial chapter 11 filings in July 2021 decreased 62 percent from the previous year, according to data provided by Epiq. Commercial chapter 11 filings totaled 244 in July 2021, down from the July 2020 total of 644. Total commercial filings decreased 39 percent in July 2021, as the 1,701 filings declined from the 2,780 commercial filings registered in July 2020. The 32,387 total bankruptcy filings in July 2021 were down 24 percent from the 42,865 total filings in July 2020. Total consumer filings decreased 23 percent in July 2021, as the 30,686 filings fell from the 40,085 consumer filings registered in July 2020.​​

Legal Battle Looms Over New Eviction Moratorium​​​​​​

The Biden administration’s latest eviction moratorium is set to face an immediate and possibly fast-moving legal challenge that could present high hurdles for the White House, the Wall Street Journal reported. A group of property managers and realtors lodged objections in a Washington federal court to the new moratorium late Wednesday. The same plaintiffs, supported by the National Association of Realtors, challenged the previous moratorium, alleging the Centers for Disease Control and Prevention lacked legal authority to issue it. Rather than file a fresh lawsuit challenging the new moratorium, the plaintiffs submitted an emergency motion in their previously filed case, asking a judge to apply a ruling against the last eviction ban to the new CDC effort. The Biden administration itself has acknowledged it might be on tenuous legal footing, and it told members of Congress last week that any new moratorium would need to be enacted by lawmakers. The White House changed course after liberal Democrats pressed the administration to take immediate, unilateral action to prevent people behind on their rent from being forced out of their homes at a time of surging coronavirus cases. On Tuesday, in announcing the new moratorium by the CDC, President Biden said legal experts he had consulted were of mixed opinion but the “bulk of the constitutional scholarship says that it’s not likely to pass constitutional muster.” The ban has protected millions of tenants but created financial hardships for some landlords unable to collect rental income they rely upon for their own livelihoods. Protections for renters during the pandemic originated in the Trump administration, but GOP lawmakers say the time has come to end those measures. (Subscription required.)​​

U.S. Jobless Claims Down 14,000 to 385,000 as Economy Rebounds​​​​​​

The number of Americans applying for unemployment benefits fell last week by 14,000 to 385,000, more evidence that the economy and the job market are rebounding briskly from the coronavirus recession, the Associated Press reported. The Labor Department reported today that unemployment claims dropped last week from a revised 399,000 the week before. The applications have more or less fallen steadily since topping 900,000 in early January. Still, they remain high by historic levels: Before the pandemic slammed the United States in March 2020, they were coming in at around 220,000 a week. Since cratering in the spring of 2020, the U.S. economy has bounded back as the rollout of vaccines encourages businesses to reopen or return to normal operating hours and consumers to return to shops, restaurants and bars. The United States has been adding more than 540,000 jobs a month this year, and the Labor Department’s July jobs report out Friday is expected to show it tacked on nearly 863,000 more last month, according to a survey of economists by the data firm FactSet.​​

Big Economic Challenges Await Biden and the Fed This Fall​​​​​​

The U.S. economy is heading toward an increasingly uncertain autumn as a surge in the Delta variant of the coronavirus coincides with the expiration of expanded unemployment benefits for millions of people, complicating what was supposed to be a return to normal as a wave of workers re-entered the labor market, the New York Times reported. That dynamic is creating an unexpected challenge for the Biden administration and the Federal Reserve in managing what has been a fairly swift recovery from a recession. For months, officials at the White House and the central bank have pointed toward the fall as a potential turning point for an economy that is struggling to fully shake off the effects of the pandemic — particularly in the job market, which remains millions of positions below pre-pandemic levels. The widespread availability of COVID-19 vaccines, the reopening of schools and the expiration of enhanced jobless benefits have been seen as a potent cocktail that should prod workers off the sidelines and into the millions of jobs that employers say they are having trouble filling. But that optimistic outlook might be imperiled by the resurgent virus and policymakers’ response to it. Big companies are already delaying return-to-office plans, an early and visible sign that life may not return to normal as rapidly as expected. At the same time, long-running federal supports for people hurt by the pandemic are going away, including an extra $300 per week for unemployed workers. That benefit expires on Sept. 6, and some states have moved to end it sooner.​​

Senate Infrastructure Final Vote Expected as Soon as This Weekend​​​​​​

The Senate moved through a series of amendments to the roughly $1 trillion infrastructure package on Wednesday, with lawmakers anticipating a vote on final passage of the bill this weekend or early next week, the Wall Street Journal reported. Since negotiators finished the 2,702-page bill last weekend, lawmakers have considered amendments offered by a mix of Republicans and Democrats to fine-tune elements of the bill. Republicans have pushed for an open-ended amendment process, while Senate Majority Leader Chuck Schumer (D-N.Y.) has called for the chamber to move quickly. Democrats are seeking to approve a budget outline for a $3.5 trillion climate and antipoverty package before the chamber departs for its August recess. “The longer it takes to finish this bill, the longer we’ll be here,” Mr. Schumer said. Many of the amendments that have been approved are technical in nature, with one from Sens. Chris Van Hollen (D-Md.) and Mike Rounds (R-S.D.) designed to protect subcontractors on infrastructure projects. The Senate has rejected some amendments offered by Republicans, including one from Sen. Ron Johnson (R-Wis.) that sought to block the federal government from ending efforts to build a barrier along the U.S. border with Mexico. (Subscription required.)



In related news, two senators are bargaining with the White House on a bipartisan proposal to give states flexibility to use some unspent pandemic relief funds on infrastructure projects, which would free up billions of federal dollars, Bloomberg News reported. The Senate has yet to take up the plan by Sen. John Cornyn (R-Texas) and Alex Padilla (D-Calif.). Cornyn and Padilla are presenting their proposal as an amendment to the roughly $550 billion infrastructure package backed by President Joe Biden that is heading toward a Senate vote in the next few days. “We’re making some progress,” Cornyn, Texas’ senior senator, said of his talks with the White House. Padilla, who represents California, said they are “almost there” on getting enough support to add their amendment to the infrastructure legislation, which would release money for states to spend on projects in addition to the $550 billion.​​

CBO Report Finds Income Inequality Has Grown in the U.S. in 40 Years​​​​​​

Income inequality in the United States grew between 1979 and 2018, a recent report on the distribution of household income released by the Congressional Budget Office (CBO) has found, The Hill reported. In the report, which dropped on Wednesday, the office said that after comparing different cumulative growth rates in average household income, it found that income inequality was higher in 2018 than nearly four decades before. The report estimated households sitting at the highest rung of income distribution saw more growth in average household income before transfers and taxes during that period than those at the lowest levels. “Among households in the highest quintile, average real (inflation-adjusted) income in 2018 was 111 percent higher than it was in 1979,” the office said in the report. But average income before transfers and taxes among households in the lowest quintile was estimated to have only grown by 40 percent in that same time frame, the report said. The figure was slightly lower among households in the three middle quintiles reviewed in the report; they saw just 37 percent growth.​​

'Buy Now, Pay Later’ Installment Plans Are Having a Moment Again​​​​​​

“Buy now, pay later” programs are growing fast, both on e-commerce sites and at physical retail checkout counters in the U.S., Bloomberg Businessweek reported. Stores generally offer the programs through third-party financial technology companies including Affirm, Afterpay, and Klarna. Unlike credit cards, on which a borrower paying a minimum could carry a balance indefinitely, these loans are designed to be paid off in a set number of payments — often four. And they’re linked to a specific purchase rather than being a general line of credit. In general, these programs make the lion’s share of their money on fees from retailers, rather than from interest paid by consumers. Stores are willing to pay because the programs make it easier for customers to say yes to items with price tags that might otherwise make them queasy. “We are in the business of turning browsers into buyers, which is fundamentally a merchant service,” Affirm Holdings Inc. Chief Executive Officer Max Levchin told Bloomberg TV in July. His company gets a bit under half its revenue from merchant network fees, with a smaller chunk coming from interest income. Americans spent an estimated $20 billion to $25 billion using deferred payments in 2020, according to a March report by analytics firm CB Insights. Worldwide, that same report projects that transactions through such plans could grow 10 to 15 times by 2025, topping $1 trillion. Each program has its own set of rules on fees, rates, and credit reporting. Afterpay charges late fees of up to $8. Affirm has no late fees, but unlike Afterpay it may charge interest on some purchases, depending on the retailer. Afterpay’s installment plans are designed to be paid off in four chunks over six weeks, while Affirm offers different schedules that may stretch out as long as 60 months. It’s expected that Apple Pay will offer both a short-term pay-in-four plan and longer-term options.​​

ABI's 2021 Virtual Midwest Regional Bankruptcy Seminar: Current Economics and Continuing Effects of COVID-19, Disparate Treatment of People of Color in Bankruptcy, Subchapter V and More on Aug. 19-20!​​​​​​

Top experts from the Cincinnati area will gather to discuss top bankruptcy issues at ABI’s 2021 Virtual Midwest Regional Bankruptcy Seminar Aug. 19-20. The workshop, being presented on an innovative virtual platform, will assemble the region’s top insolvency professionals for two days of engaging sessions and networking. A faculty of outstanding judges, academics and practitioners will present workshops on the key trends in the industry, with concurrent sessions looking at key business, consumer and skill-focused topics. Attendees will also have the opportunity to earn 7.75 hours of CLE credit, including 1.50 hour of ethics, and will have access to program recordings until September 20.

Sessions at the Midwest Regional Bankruptcy Seminar include:

•    Case Law and Rules Update
•    Commercial Session: Out-of-the-Ordinary Out-of-Court Restructuring Issues
•    Consumer Session: “Stop Where You Are: A Bankruptcy Has Been Filed. But Don’t Just Stand There!”
•    Disparate Treatment of People of Color in the Bankruptcy Process
•    Judicial Town Hall
•    Current Economics and the Continuing Effects of COVID-19
•    Subchapter V

Register today!
​​

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BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: Thoughts on Student Loans and the FRESH Start Act

A new bill from Senators Durbin and Cornyn promises a way out of student loan debt through a change in the bankruptcy laws, according to a CreditSlips blog post from Prof. Bob Lawless. The Fresh START Through Bankruptcy Act of 2021 makes one principal change. After 10 years from the date they first came due, federal student loans would be freely dischargeable. Before 10 years, student loans would be dischargeable only if the debtor could show undue hardship, which is the standard currently. Private student loans would remain nondischargeable at all times except upon a showing of undue hardship. This is not the bill Lawless said he would write, but it's a step in the right direction.

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

 
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