Category Archives: Bankruptcy

(WEAR)

This number might surprise you: Personal bankruptcy filings are down 50-percent over the past six years. Some of that decline is due to the Affordable Care Act. Consumer Reports is out with a new analysis that looks at how the ACA may have helped millions of Americans from taking the extreme step of filing for bankruptcy.

Courts never ask people why they are filing, but many bankruptcy and legal experts Consumer Reports spoke with agree on this: Medical bills had been a leading cause of personal bankruptcy before health insurance expanded under the ACA. Medical bills are often unexpected and large and unavoidable, so people who dont have insurance can run up massive debt in a relatively short period of time.

Since 2010, personal bankruptcy filings have dropped by about 50%. Experts say some of that is due to an improved economy and laws passed in 2005 that make it harder to declare bankruptcy. But nearly all the experts CR interviewed also point to expanded health insurance as a major driver of the decline.

CRs reporting found that the ACAs provisions for mandatory coverage of pre-existing conditions and against annual and lifetime payout caps has helped consumers especially Americans with serious medical issues avoid bankruptcy.

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Medical bankruptcies - WEAR

Fourteen retailers are on the brink of bankruptcy, according to a recent report from Moodys Investor Service, putting thousands at risk of losing their jobs.

As more people turn to online shopping, traditional brick-and-mortar retailers are at risk of having to close their doors. While 1.5 million jobs have been created in retail since 2010, most of these are on the web, according to the National Retail Federation.

"We believe the kind of competitive challenges that have weighed on the recent earnings performance of the bigger retailers such as Amazon, Walmart, Best Buy, and Target will have potentially devastating ripple effects for the smaller, more challenged retailers the next several quarters," the Moody's report stated. "That doesn't mean all of retail is under siege, however. Distressed issuers make up around 15 percent of the 148 rated issuers in our industry group. In other words, the majority of the industry remains fundamentally healthy.

Take a look at these stores that could be on the brink of bankruptcy.

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These 14 Stores May Be on the Brink of Bankruptcy - NBC Southern California

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June 18, 2017, 6:00 PM EDT June 19, 2017, 4:38 AM EDT

Indias central bank plans to use insolvency laws against more corporate defaulters to speed up resolution of the countrys bad loans that have swelled to $180 billion.

The clocks already ticking -- some cases are already before the National Company Law Tribune," said Sanjeev Sanyal, principal economic adviser to the finance ministry. "More lists will be out in the next few months." Cleaning up Indias stressed loans is the biggest priority of Prime Minister Narendra Modis government, Sanyal said in an interview in New Delhi.

The Reserve Bank of India last week notified 12 large debtors against whom it had ordered banks to use bankruptcy lawsto resolve 2 trillion rupees ($31 billion) or almost a fourth of the countrys bad debts. The process in these cases will be completed within a period of 90 days compared with 180 days in other cases, the government said.

Read more: Indias RBI Said to Order Lenders to Take 12 Debtors to Court

For Modi, getting rid of the bad loans is crucial to reviving investments in Asias third-largest economy to meet his election pledge of adding jobs before the 2019 elections.

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As concerns about slowing growth grow louder, India needs to resolve its debts mess and strengthen its lenders. Last month, the government gave the RBI new powers by amending the Banking Regulation Act. That enabled the central bank to order lenders to initiate insolvency proceedings against defaulters and create committees to advise banks on recovering nonperforming loans. Using the bankruptcy law will ensure company founders and lenders renegotiate terms to resolve stressed loans within 180 days.

Resolving troubled loans will help the government plan capital infusion into state-owned lenders, Sanyal said. India plans to inject at least 100 billion rupees of capital into state-controlled lenders in the year ending March 2018 as it seeks to ratchet up credit growth.

The RBI directive will negatively affect banks profitability over the next year if they need to take large write-downs relative to their existing loan-loss reserves, Alka Anbarasu, senior analyst at Moodys Investor Service said in a note Monday. However, the move is credit positive as it can help improve asset quality and set a precedent for resolving nonperforming loans from smaller borrowers, according to Moodys.

While it may not affect private-sector Indian banks given their strong profitability and capitalization, weaker public-sector banks may require a large capital infusion from the Indian government, Moodys said.

Read more: an explainer on Indias bad debt woes

State banks will require about 800 billion rupees in equity capital over the next two years to support credit growth and to comply with global Basel III norms, ICRA Ltd., the local unit of Moodys Investors Service had said in February.

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Clock Ticking on India's Bad Bank Debts Under Bankruptcy Law - Bloomberg

A worker demonstrates a pyro-electric wheel airbag initiator during a presentation for journalists at the international automotive supplier Takata Ignition Systems in 2014(Photo: Jens Meyer, AP)

Corrections and clarifications: This story originally misstated the parties that settled economic-loss claims involving Takata air bags.

Troubled auto supplier Takata is tumbling toward a widely expected bankruptcy filing following a costly scandal that has killed at least 16 people worldwide.

The Japanese supplierrecently pleaded guiltyin a U.S. court to criminal charges for its handling of the scandal, which involved exploding air bags.

The company agreed to pay $1 billion in penalties, including funds for people injured as a result of the fiery shrapnel hurled from its air bags. The defect has been blamed for more than 100 injuries and 16 deaths.

Morethan 42 million vehicles were equipped with the potentially defective parts, triggering the largest recall in U.S. history.

With reports circulating that the company could file for court protection as early as this week, here are several factors to watch:

1. Repairs won't stop: Although bankrupt companies can sometimes seek to sever obligations such as warranties, Takata will be required to prioritize the production of replacement parts.

Automakers have contributed hundreds of millions of dollarsto accelerate the repairs, ensuring that the recall campaign will continue unimpeded after the bankruptcy filing occurs.

As of May 26, automakers had replaced 38.1% of air bags affected by the recall, according to the National Highway Traffic Safety Administration.

2. Takata likely willget new ownership:Chinese-owned Key Safety Systems is widely expected to acquire Takata as part of the company's bankruptcy restructuring plan.

Key Safety Systems, whose U.S. headquarters is in Sterling Heights, Mich., would become the world's second-largest air bag manufacturer if the deal goes through, according to Evercore ISI analysts. The company would have market share of 20% to 25% following the deal, trailing only Autoliv's 40%.

3. Victims will still get compensation: People hurt by Takata air bags and families whose loved ones died because of the defect are eligible for compensation through a $125 million fund established as part of the company's criminal settlement.

Bankruptcy filings can disrupt previously pledged payments to third parties, but the victim compensation fund pledged as part of the government settlement is expected to take priority over other debts.

Former FBI director Robert Mueller had been appointed to administer the victim compensation funds, but he recently relinquished that post to take over as special counsel investigating Russian influence in the U.S. presidential election. His replacement is Kenneth Feinberg, who administer victim compensation funds for 9/11 and the General Motors ignition switch.

4. Current vehicle owners might get paid: Owners of nearly nearly 16 million Toyota, Mazda, Subaru and BMW vehicles equipped with Takata's defective air bags recently reached a deal with those four automakers for $553 million in compensation to cover the economic losses they've incurred because of the scandal.

The deal, which must still be approved by a federal judge, will cost Toyota $278.5 million, BMW $131 million, Mazda $75.8 million and Subaru $68.3 million. It will not be affected by the bankruptcy.

The accord leaves open the possibility that consumers will reach similar agreements with other automakers, which willremain in place even following the bankruptcy filing.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.

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What to expect in defective air bag maker Takata's looming bankruptcy - USA TODAY

A West Coast retail chains bankruptcy continues to feed the Richmond legal scene.

More local attorneys picked up work last as a result of the June 11 bankruptcy of Gymboree, which is headquartered in San Francisco but filed its Chapter 11 case in Richmond federal court.

Creditors of the debt-ridden retailer have begun hiring lawyers on the ground in Richmond, the latest of which include Chris Perkins of LeClairRyan and Gus Epps of Christian & Barton.

They join local attorneys already on the case from Hunton & Williams, McGuireWoods and Wolcott Rivers Gates.

The lead local attorneys representing Gymboree area group from the Richmond office of Kutak Rock. Theyre working with Chicago-based Kirkland & Ellis.

Richmond hotels also will be glad to know plenty of lawyers from farther afield are likely to travelto Richmond as the case plays out.

The out-of-state firms working for creditors on the case include: Perdue, Brandon, Fielder, Collins & Mott from Arlington, Texas; Ballard Spahr from Los Angeles; Linebarge Goggan Blair & Sampson from Houston; Morris James from Wilmington, Delaware; Frost Brown Todd from Cincinnati; and Kurtzman Steady from Philadelphia, among others.

Gymboree is the latest example of large out-of-town corporations planting bankruptcies in Richmond in recent years, drawn by a court and judges here known to handle complicated bankruptcy cases in a way thats viewed by many as favorable to debtors.

Despite being based in California, Gymboree controls an LLC that was incorporated in Virginia, which allows it to file in the commonwealth. It put eight of its affiliated corporations into Chapter 11 in Richmond on Sunday.

The company, which has 1,300 stores nationwide, was forced to file Chapter 11 as it faced more than $1 billion in debt coming due and had missed a debt payment earlier this month. The reorganization plan, which could be filed by the end of the week and confirmed in 90 days, could reduce its debts by $900 million.

Filings state the company plans to close and liquidate up to 450 stores. It has five locations in the Richmond market, according to its website at Short Pump Town Center, Stony Point Fashion Park, Regency Square, Virginia Center Commons and Chesterfield Towne Center.

Gymboree has not yet announced which stores will close.

Judge Keith Phillips is overseeing the case in Richmond.

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More local attorneys winning work in Gymboree bankruptcy - RichmondBizSense

Deutsche Bank National Trust filed with the U.S. Bankruptcy Court an objection to Novation Companies settlement by and among the Debtors, the noteholders and the creditors committee.

The objection asserts, Although the Trustee is a creditor of both Novation and NMI, the claims the Trustee holds against each of the Debtor Defendants arise from distinct and distinguishable legal obligations, as discussed in more detail herein. Thus, the entire premise underlying the Motion that there is no harm to creditors of NMI because all creditors classified in Class 4(b) under the confirmed Plan have identical claims against each of the Debtor Defendants is fundamentally flawed. Once the Trustees claims are determined by the New York Court, it is plausible that the Trustee may have a judgment against NMI, but not Novation.

In addition, The proposed settlement conflates the identity of Novation and NMI, two distinct legal entities, and attempts to strip the sole asset held by NMI, for the benefit of a single class of Novation creditors the Class 2 Noteholders. Notably, there is no settlement agreement or term sheet attached to the Motion, setting forth the actual terms of the Settlement. Rather, the Motion only refers to the confirmed Plan in the Novation case, without any comprehensive term summary.

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Novation Bankruptcy Objection Filed - Bankrupt Company News (press release) (blog)

Soup Kitchen International on West 55th St. in New York. The "Soup Nazi" Al Yeganeh, the character from the Seinfeld show gave out small cups of gazspacho soup to customers who bought one of his $8.00-$24 bowls of soup to celebrate the end of 'Seinfeld'.Misha ErwittNew York Daily News Archive/Getty Images

(NEW YORK) A company that sells soup from the recipes of the chef who was the real-life model of the Soup Nazi on Seinfeld has filed for bankruptcy less than a month after its chief financial officer was arrested on charges he cheated the government out of employment-related taxes.

Soupman Inc., based in Staten Island, sells soups made from the recipes of Al Yeganeh. Yeganeh and his soup stand were the inspirations behind the Seinfeld television show character, who shouted the catchphrase "No soup for you!"

The company's CEO, Jamie Karson, said Tuesday that "the combination of legacy liabilities and recent company developments have made it necessary to seek bankruptcy protection." Karson said its products, including jambalaya, lobster bisque and chicken gumbo, would still be available in stores.

Last month, CFO Robert Bertrand was charged in Brooklyn federal court with failing to pay Medicare, Social Security and federal income taxes for company employees. The government said he paid employees unreported cash and gave some workers large unreported stock awards from 2010 through 2014.

According to the indictment, the total estimated tax loss to the Internal Revenue Service was $593,000. Bertrand, of Norwalk, Connecticut, has pleaded not guilty and has been released on $50,000 bail.

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Seinfeld-Inspired Soup Company Files for Bankruptcy - TIME

Spraying pesticides for hire requires a license.(Photo: fotokostic, Getty Images/iStockphoto)

MUNCIE, Ind. Delaware County Surveyor Tom Borchers this month started paying off a $3,000 fine related to his former pesticide application business.

Borchers, a Republican who was elected as surveyor last November, was cited in 2016 for intentionally altering his pesticide application license and for 12 counts of falsely professing to have a pesticide business license, according to a report released by the Office of Indiana State Chemist recently.

The state chemist launched an investigation of Borchers after his firm, Shideler Spray Service, Eaton, submitted bids to the Vanderburgh County Surveyor to apply pesticides along ditch banks.

Borchers' and a Shideler employee's pesticide applicator licenses indicated expiration dates of 12/31/2016, but the expiration dates were typed with an unusual font.

When confronted by compliance officers for the state chemist, Borchers explained that as the bidding deadline approached, he realized he had not renewed his pesticide business license or the pesticide applicator licenses for himself and the employee.

The applicator licenses had expired in 2015, about three months before Shideler Spray bid to spray 12 ditches in Vanderburgh County.

"Mr. Borchers admitted he signed and submitted the bid packet prior to becoming licensed for 2016," compliance officer George Saxton wrote in a report. "He indicated he recently sent the (license) renewal and the fees to the OISC. Mr. Borchers later provided a typed statement indicating he 'included a false license' in submitting the bid packet."

In addition, Borchers' license indicated he also was certified to apply pesticides on agricultural crops, when in fact, that certification had expired in 2012, according to the state chemist.

As a result,, Borchers' pesticide certification was revoked.

"To apply pesticides for hire, you must be certified and work for a licensed business," Saxton told The Star Press. "Revocation means you cannot apply pesticides for hire. Revocation is for five years and then an individual can start the certification process again."

Borchers, who did not return telephone and email messages from The Star Press, arranged to pay the $3,000 fine in monthly installment of $100, the first of which he made on June 12, according to Saxton.

Shideler Spray, which had been in business since the 1980s, began facing lawsuits starting in September of 2016 from Crop Production Services and Star Financial Bank for non-payment on an account and on promissory notes totalingmore than $90,000.

This past May 9, Borchers filed a petition for bankruptcy, two weeks before the Indiana attorney general brought a lawsuit against Shideler Spray for non-payment of $15,000 in unemployment insurance taxes.

Contact Seth Slabaugh at (765) 213-5834.

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Surveyor dealing with fine, bankruptcy - Muncie Star Press

Wichita Eagle

Pawnbroker A-OK cites embezzlement in multimillion-dollar bankruptcy Wichita Eagle Wichita's largest pawnbroker, A-OK, has filed for Chapter 11 bankruptcy because of embezzlement, said owner Bruce Harris. In the bankruptcy filing last week, A-OK says that it has about $9.5 million in assets and $11 million in liabilities $4 ...

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Pawnbroker A-OK cites embezzlement in multimillion-dollar bankruptcy - Wichita Eagle

Illinois residents may feel some solidarity with the likes of Puerto Rico and Detroit.

A financial crunch is spiraling into a serious problem for Illinois lawmakers, prompting some observers to wonder if the state might make history by becoming the first to go bankrupt. At the moment, it's impossible for a state to file for bankruptcy protection, which is only afforded to counties and municipalities like Detroit.

Chapter 9 bankruptcy protection could be extended to states if Congress took up the issue, although Stanford Law School professor Michael McConnell noted in an article last year that he believed the precedents are iffy for extending the option to states. Nevertheless, Illinois is in a serious financial pickle, which is why radical options such as bankruptcy are being floated as potential solutions.

Ratings agency Moody's Investor Service earlier this month downgraded Illinois' general obligation bonds to its lowest investment grade rating, citing the state's growing pile of unpaid bills and its mounting pension deficit. Illinois, by the way, has the lowest credit rating of any state. Lower ratings mean higher borrowing costs, since lenders view such borrowers as riskier bets.

"Legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance, allowing a backlog of bills to approach $15 billion, or about 40 percent of the state's operating budget," the agency noted.

As noted by the Fiscal Times, Illinois is the only state that's been operating without a balanced and complete budget for almost two years.

"We're like a banana republic. We can't manage our money," Gov. Bruce Rauner said after the Illinois Legislature failed to produce a full 2017 budget earlier this month.

The situation has prompted comparisons with Puerto Rico, which earlier this year announced a historic restructuring of some of its $70 billion in debt through courts after negotiations with bondholders failed.

Like Puerto Rico, Illinois has a massive pension crisis. Its unfunded pension liability for the state's five major plans grew 25 percent alone in one year, reaching $251 billion, according to Moody's. On a per-household basis, the state's pension debt burden stands at $27,000, according to the conservative-leaning Illinois Policy Institute.

So how did the state's pensions balloon into such a crisis? First, the pension problem has been a long time in the making. The state has more than 660 government pension funds, which are sometimes called defined benefit plans because they promise workers will receive a specific pension when they retire.

But critics say some of those pensions carried overly optimistic assumptions, especially given periods of market turmoil like the global financial crisis, which ate into investment returns. The state's general assembly wasn't required to fully fund pensions, which meant tax money was spent on other priorities such as schools or infrastructure.

The result? Growing unfunded liabilities, or money promised to workers in their pensions when they retire that the state doesn't have. Other contributing factors include inadequate employer contributions and benefit increases, according to the Civic Federation.

Adding to the state's financial pain is a shrinking tax base. For the last three consecutive years, Illinois has lost residents. Its population is now at its lowest in a decade. Tepid wage growth on top of fewer residents puts a strain on the state's ability to grow its tax revenue.

It's not unprecedented for a state to default on its debt. Arkansas defaulted in 1933 as it struggled to repay debt during the the Great Depression. Spending on an ambitious road-building project and a series of natural disasters heightened the Southern state's problems.

Bankruptcy is often seen as a last-ditch effort, but it also can help struggling cities or companies reinvent themselves on a stronger financial footing. Detroit serves an example of how a reorganization can help, at least in the near-term. The city is now paying its bills and is keeping up with maintenance, although it still has a looming pension payment that could spell trouble in just a few years, according to the Detroit Free-Press.

As Michigan Treasurer Nick Khouri told the publication, "We certainly know many people were hurt during the bankruptcy, but what would have been the alternative and how would they have been hurt under the alternative?"

As for Illinois, Rauner on Thursday called state legislators to a 10-day special session starting next week to hammer out a budget deal and end an unprecedented impasse that could soon enter a third year.

The Republican announced the news in a Facebook video and statement, accusing majority Democrats of "ignoring" his recommendations.

"We have tough, urgent choices to make, and the Legislature must be present to make them," he said.

Lawmakers adjourned last month without a deal before a critical May 31 deadline, triggering the need for a three-fifths majority vote instead of a majority on a budget agreement. The new fiscal year begins July 1. Rauner has called for a special session running from June 21 to July 30.

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Could Illinois be the first state to file for bankruptcy? - CBS News