Tuesday Morning potpourri
Court Hands Creditors An Important Win
A unanimous Supreme Court handed creditors an important victory that will help keep the time it takes to resolve Chapter 13 bankruptcies from getting longer than your typical Red Sox baseball game-which seems to last forever. (Their starting pitchers take five minutes between pitches.) The case is Bullard v. Blue Hills Bank, No. 14-116, 2015 WL 1959040, at *8 (U.S. May 4, 2015).
Louis Bullard filed a petition for Chapter 13 bankruptcy in Federal Bankruptcy Court in Massachusetts. For our purposes, the important thing to remember is that he ultimately proposed splitting the debt into a secured claim in the amount of his house’s then-current value (which he estimated at $245,000), and an unsecured claim for the remainder (roughly $101,000). Bullard would continue making his regular mortgage payments toward the secured claim, which he would eventually repay in full, long after the conclusion of his bankruptcy case. He would treat the unsecured claim, however, the same as any other unsecured debt, paying only as much on it as his income would allow over the course of his five-year plan. At the end of this period the remaining balance on the unsecured portion of the loan would be discharged. In total, Bullard’s plan called for him to pay only about $5,000 of the $101,000 unsecured claim. The bank objected and after a hearing the bankruptcy court refused to accept the plan.
Here is where it gets technical but important. Instead of submitting another plan Mr. Bullard immediately appealed the bankruptcy court’s refusal to confirm his plan. The question that the Supremes decided yesterday was whether debtors have the right to immediately appeal a judge’s decision rejecting a repayment plan or whether they have to wait until a bankruptcy plan is agreed to or the bankruptcy dismissed before bringing an appeal? The Court ruled that debtors had to wait until a bankruptcy is finally resolved. The ruling is consistent with the Second Circuit approach to bankruptcies appeals.
The ruling means that debtors must either resubmit a less favorable payment plan or move to dismiss the bankruptcy and bring an immediate appeal. This would end the automatic stay on collection efforts. As a result, creditors have more leverage over debtors when it comes to repayment plans-a fact acknowledged by the Court. “We do not doubt that in many cases these options may be, as the court below put it, “unappealing.” But our litigation system has long accepted that certain burdensome rulings will be “only imperfectly reparable” by the appellate process.”
Besides, the court’s approach is a heck of a lot better than letting debtors drag out bankruptcies for years by appealing every time they propose an inadequate bankruptcy plan.
Interstate oversight Pact Agreed To
The CU Times informs us that Michigan’s Department of Financial Services announced on Friday that it was joining an interstate compact for the supervision of state chartered credit unions that operate in more than one state. Why do I care? Because one of the key questions facing New York federal credit unions considering converting to the state charter is who will regulate their out-of-state activities? No such concerns exist for federal charters.
At last week’s State GAC conference Ruth Adams, NY’s Deputy Superintendent for Community and Regional Banks who oversees supervision of state chartered credit unions , said that the state is interested in developing similar supervisory agreements as part of its efforts to encourage more state charters. Michigan’s announcement is another indication that such agreements have risen on regulator to-do lists and this is a good thing. To give you a sense of what these agreements do here is a link to the Southeastern cooperative agreement entered into in 2008.
It’s Deja Vu All over Again
In case you missed it, NY’s State Senate Majority Leader Deal Skelos of long Island was arrested on federal corruption charges yesterday. We will have to wait and see what unfolds in the coming days. Since Senate Republicans hold a one seat majority and democrats hold all of the other statewide offices the Senate Majority leader is the most powerful Republican in New York State.