September Commercial Chapter 11 Filings Up 33 Percent over Last Year; Total Filings Increase 6 Percent

September Commercial Chapter 11 Filings Up 33 Percent over Last Year; Total Filings Increase 6 Percent

ABI Bankruptcy Brief

October 3, 2019

ABI Bankruptcy Brief

September Commercial Chapter 11 Filings Up 33 Percent over Last Year; Total Filings Increase 6 Percent

Commercial chapter 11 filings totaled 414 in September, a 33 percent increase over September 2018’s total of 312 filings, according to data provided by Epiq Systems, Inc. Overall business filings increased 11 percent to 3,129 filings in September from September 2018’s total of 2,822 business filings. Total U.S. filings registered 61,113 in September 2019, up 6 percent from last September’s total of 57,619. The 57,984 consumer filings in September also represented a 6 percent increase from the September 2018 consumer total of 54,797.

Wall Street Falls in Love Again with Companies Loaded Up on Debt

For the first time since 2016, companies with fragile balance sheets are outperforming their sturdier peers and the broad market, a pair of Goldman Sachs indexes show, Bloomberg News reported. That’s a clear sign that the rate cuts are shoring up investor confidence in heavily indebted companies. The outperformance is so stark that a pure measure of leverage is the top equity factor this year among 10 styles tracked by Bloomberg. It’s a big turnaround for traders who had recently pushed relative valuations for financially solid firms to a 16-year high. The change in heart comes as the Fed seeks to stoke growth by reducing borrowing costs, reacting to signals that the U.S. economic expansion is slowing. With long-term Treasury yields reaching a record low last month, investors may be betting that all that inexpensive debt financing will help those companies expand and drive future earnings growth.

Commentary: CFPB Enforcement Must Be Undone if Agency Is Unconstitutional, According to New SCOTUS Petition

The drama over the constitutionality of the Consumer Financial Protection Bureau took another surprise turn on Monday when a Mississippi payday lender, All American Check Cashing, filed a petition asking the U.S. Supreme Court to grant review of its constitutional challenge to the CFPB before the U.S. Court of Appeals for the Fifth Circuit issues an opinion in the case, according to a Reuters commentary. But All American’s lawyers at Gibson Dunn & Crutcher are asking the Supreme Court for more than just a ruling that the CFPB’s unusual structure is unconstitutional. Their petition also argues that the justices can only cure the bureau’s constitutional defect with a drastic remedy: undoing CFPB enforcement actions or even striking down the law that created the bureau. The Supreme Court seems likely to take up the question of whether the bureau’s structure — in which a lone director who can only, by statute, be removed from office for good cause — violates the separation-of-powers doctrine. The justices could opt to resolve the constitutional question without calling the CFPB’s entire existence into doubt. All-American’s petition challenges the Supreme Court to address both the purported constitutional defect and its remedy.

The Seven-Year Auto Loan: America’s Middle Class Can’t Afford Its Cars

Walk into an auto dealership these days, and you might walk out with a seven-year car loan, the Wall Street Journal reported. That means buyers are being saddled with monthly payments that last well past when the brake pads give out and potentially beyond when the car gets traded in for a new one. About a third of auto loans for new vehicles taken in the first half of 2019 had terms that are longer than six years, according to credit-reporting firm Experian PLC. A decade ago, that number was less than 10 percent. Car loans that are increasingly stretched out are a pronounced sign that some American middle-class buyers can’t afford a middle-class lifestyle. Incomes have risen at a sluggish pace in the past decade, but car prices have grown rapidly. New technological and safety features, such as larger and more sophisticated multimedia displays, have made even the most basic cars more expensive. U.S. consumers have also veered toward pricier rides such as sport-utility vehicles, which tend to dominate auto showrooms. The result is that consumers are seeking bigger loans than ever to purchase autos. (Subscription required.)

Global Trade Is Deteriorating Fast, Sapping the World’s Economy

As President Trump intensifies his trade war with China, and as factories slow in major industrial nations, world commerce is deteriorating rapidly, a perilous development that threatens the health of the global economy, the New York Times reported yesterday. A global recession remains unlikely, even as growth slows, most economists say. But the dangers are clearly mounting, threatening to spread from the factory floor to households in many major economies. The latest sign arrived on Tuesday morning, as the World Trade Organization slashed its forecast for trade growth for this year and next. World trade in merchandise is now expected to expand by only 1.2 percent during 2019, in what would be the weakest year since 2009, when it plunged by nearly 13 percent in the midst of the worst global financial crisis since the Great Depression. Only six months ago, the organization was forecasting more than double that pace of growth, a 2.6 percent expansion in merchandise trade.

Latest ABI Podcast Examines ABI Endowment-Funded Research that Found Individuals with Gap in Medical Coverage More than Twice as Likely to File for Bankruptcy

ABI Consumer Committee Co-Chair Jon Jay Lieberman of Sottile & Barile LLC (Loveland, Ohio) talks with Profs. Brook E. Gotberg of the University of Missouri School of Law (Columbia, Mo.) and Michael D. Sousa of the University of Denver Sturm College of Law (Denver) about their research that found that individuals who experienced a gap in medical care coverage over a two-year period were roughly twice as likely to file for bankruptcy as those who retained continuous coverage. Their research appeared in the Summer 2019 edition of the ABI Law Review and was funded in 2016 by ABI's Anthony H.N. Schnelling Endowment Fund. Profs. Gotberg and Sousa detail their research, which examined data from a national survey of adults from 2004 through 2014 that indicates that the principal predictor of consumer bankruptcy is a lapse in medical insurance coverage.

To view the Law Review article, please click here.

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New on ABI’s Bankruptcy Blog Exchange: Third Circuit Decision Is a Cautionary Tale About the “Security” of Tax Lien Certificate Holders’ Security in Bankruptcy

Tax lien certificates are a marketable commodity in several jurisdictions, including New Jersey. The Third Circuit’s recent decision in In re Hackler v. Arianna Holdings Company, LLC, No. 18-1650, (3d Cir. Sept. 12, 2019), however, will leave certificate holders insecure about their tax lien rights in the face of the Bankruptcy Code’s avoidance powers, 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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