Category Archives: Bankruptcy

Teen Retailer Rue21 Files for Chapter 11 Bankruptcy Wall Street Journal (subscription) Teen-apparel retailer Rue21 filed for bankruptcy late Monday, having already begun the process of closing many of its 1,179 stores to survive a rapidly changing retail landscape. Months of planning went into Rue21's strategy of tackling more than $1 ...

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Teen Retailer Rue21 Files for Chapter 11 Bankruptcy - Wall Street Journal (subscription)

Posted: May. 16, 2017 12:01 am

VERNON -- Less than two years after acquiring Mountain Creek, the resort's new ownership has filed for Chapter 11 bankruptcy reorganization.

The filing, which had been rumored to be in the works for some time, was submitted in federal court Monday morning and seeks a restructuring of the resort's debt including an estimated $26 million in contractually obligated sewer debt payments to the Vernon Township Municipal Utilities Authority.

The debt obligations to the township stem from a 2012 agreement under which the resort's former principal owner, Gene Mulvihill, had agreed to have the resort assume approximately 65 percent of the MUA's debt to the Sussex County Municipal Utilities Authority for the buildout of the township's sewer system.

Mountain Creek CEO Jeff Koffman, reached by phone Monday, declined to elaborate but said he was still optimistic about the prospects for growing the tourism and resort industry in the Vernon Valley area.

In a press release late Monday, a Mountain Creek spokesperson indicated the filing would not affect existing operations at the resort and would best enable it to attract outside investment for other planned ventures. According to its website, the resort's waterpark is scheduled to open the weekend of June 10-11 and seven days a week starting June 22.

"The four-season resort, which offers gourmet restaurants, lodging and a variety of outdoor sports and activities, will continue to operate fully during the bankruptcy process," according to the press release.

Koffman, in a prepared statement included with the press release, said "(Monday's) filing will allow us to deal with the legacy debt we inherited from the property's former owners and attract new investment into the resort.

"We remain committed to seeing Mountain Creek develop to its full potential with new hotels, new outdoor attractions and expanded residential homes," he said. "Our vision to create a world class, four-season resort here in New Jersey is still our main objective and this move will put us in the best position to achieve that."

With Vernon's sewer system currently facing a cumulative debt of more than $40 million, it is unclear how the debt restructuring might impact the township or how much of the sewer system debt might otherwise fall on the balance of ratepayers, most of whom dwell in condominiums and single-family homes, if the court approves the restructuring.

Mayor Harry Shortway said late Monday that he was aware of the bankruptcy filing but had not yet had a chance to review it. He suggested, however, that the pickle in which the township now finds itself was the direct result of the township being misled by professionals under prior administrations who over-projected the amount of sewerage capacity the township would need, with the result that existing ratepayers have largely now been left holding the bag.

He also suggested that the resort's former owners -- who had previously talked of building an indoor waterpark and up to 1,500 new condominiums -- never intended to fulfill their contractual obligations to assume the lion's share of debt for the sewer system expansion.

Regarding the resort's current owners, "it's a major problem for them and I hope they can come out of this reorganization stronger," Shortway said.

Shortway nonetheless noted that 90 percent of the township's tax base was residential and suggested the collective well-being of smaller tourism-oriented businesses was as vital to the township's long-term economic future as that of Mountain Creek.

"We want all our businesses to do well, but I also believe in the smaller mom-and-pop shops and don't believe we can put all your eggs in one basket," Shortway said.

As for the township, "We have to find a way to get through this and we will," Shortway said. "We'll likely be looking to hire a bankruptcy counsel and will take the steps necessary to protect the township and to ensure this doesn't all fall on the existing base of ratepayers."

Council President Jean Murphy said late Monday that she was aware of the filing but said she and the other council members had not yet been briefed on its details.

"Our attorney is reviewing it, and we'll be considering all the options the town may have," she said.

Councilman Pat Rizzuto, who attended Monday's debate between the two Republican candidates for state Senate in the 24th District, said he, too, was aware of the filing.

Among the 17 other creditors named in the bankruptcy filing is Crystal Creek Associates, a special-purpose financing entity affiliated with and domiciled at Crystal Springs Resort, to which Mountain Creek owes approximately $885,000.

Mountain Creek is being represented in the bankruptcy proceedings by the Roseland-based law firm of Lowenstein Sandler.

The same firm also was retained by Sussex County last year as part of a review of cost overruns and delays associated with the county-wide solar project that was approved in 2011. The investigation by former State Comptroller Matt Boxer, a partner at the law firm, is ongoing.

Eric Obernauer can also be contacted on Twitter: @EricObernNJH or by phone at 973-383-1213.

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Mountain Creek files for Chapter 11 bankruptcy; plan would allow debt restructuring - New Jersey Herald

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May 15, 2017, 10:14 AM EDT May 15, 2017, 12:44 PM EDT

A divided U.S. Supreme Court ruled that debt collectors can use bankruptcy proceedings to try to collect liabilities that are so old the statute of limitations has expired.

Voting 5-3, the court said companies dont violate the U.S. Fair Debt Collection Practices Act when they file bankruptcy claims on that type of years-old debt. Justice Stephen Breyer joined the courts conservative wing in the majority.

Critics accused debt collectors of violating the law by filing tens of thousands of outdated claims with bankruptcy courts in the hope that some debtors wont object.

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The result of decision appears to give creditors a free pass to file stale claims without fearing FDCPA liability, Andrew Muller, a partner at Stinson Leonard Street LLP, said in an interview. The flip side is that trustees and debtors lawyers may be under increased pressure to more closely review claims to determine whether the claims are subject to a statute of limitations defense, Muller said.

The ruling is a victory for Encore Capital Group Inc.s Midland Funding in an Alabama case that started with an effort to collect a $1,900 credit-card debt. The debtor, Aleida Johnson, sued Midland after a bankruptcy judge threw out Midlands claim.

Midland argued that federal bankruptcy law lets creditors file claims in those proceedings even if the statute of limitations wouldnt allow a lawsuit.

Like the majority of Courts of Appeals that have considered the matter, we conclude that Midlands filing of a proof of claim that on its face indicates that the limitations period has run does not fall within the scope of any of the five relevant words of the Fair Debt Collection Practices Act, Breyer wrote.

Johnsons lawyers said that, by filing outdated requests, debt collectors are falsely suggesting those claims are valid and enforceable.

Justice Sonia Sotomayor filed a dissenting opinion in which Justices Ruth Bader Ginsburg and Elena Kagan join. Justice Neil Gorsuch, who joined the court after the case was argued in January, didnt participate in the ruling.

Professional debt collectors have built a business out of buying stale debt, filing claims in bankruptcy proceedings to collect it, and hoping that no one notices that the debt is too old to be enforced by the courts, Sotomayor wrote. This practice is both unfair and unconscionable, she added.

Debt collectors do not file these claims in good faith; they file them hoping and expecting that the bankruptcy system will fail., Sotomayor wrote.

Lower courts had been divided on the issue. The Obama administration backed Johnson in the case.

The case is Midland Funding v. Johnson, 16-348.

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Supreme Court Backs Bids to Collect Outdated Debt in Bankruptcy - Bloomberg

Isaac Groves Times-News @TNIGroves

The U.S. Supreme Court gets something like 8,000 petitions every year to hear cases including this year one from a dentist with a practice in Burlington but it hears 80 or fewer.

Theres about a 1 percent chance of being granted cert, said Scott Gaylord, a professor at the Elon University School of Law, who represented North Carolina in a suit over its Confederate flag license plate that got to the high court.

In that case, the court put North Carolinas case on hold and heard a similar case from Texas.

At 1 percent, no is usually a safe bet, Gaylord said.

Cert is legal shorthand for a writ of certiorari, which means a higher court agrees to hear a case from a lower court.

Lawyers representing Dr. Sharon Cobham submitted such a writ at the end of February, and it was scheduled for conference last Thursday, meaning the court could decide this week whether it will hear the case.

A local case going to the nations highest court may not be unheard of, but is not well remembered. Chief Superior Court Judge Wayne Abernathy said he couldnt remember another.

Its really unusual, Abernathy said, and very expensive.

Its expensive because you dont start with the Supreme Court, and it takes a lot of billable time to go through all the steps. If this case Nicole LeCann DDS v Sharon Cobham DDS goes all the way, the Supreme Court would be the fifth court to hear it.

Whether the court hears a case is totally up to the justices. If four of the nine want to hear it, the case is in.

Its informally called the rule of four, Gaylord said.

When writing a petition to the Supreme Court, Gaylord said, you have to consider who will probably be reading it first, which is probably a clerk. Before taking it to a justice, the clerk wants to see an issue of national significance or a conflict among the 13 powerful circuit Courts of Appeals. So if the Fourth Circuit Court, which handles North Carolina cases, writes that the Ninth Circuit misinterpreted the law in some way, the high court might want to settle that.

Youve got to get noticed, Gaylord said. Youve got to get out of that big pack.

It also takes persistence. Some legal issues have to come to the court more than once.

Its unlikely it will be granted the first time because the courts not doing that lately, Gaylord said.

While the issue could come up again, this case just gets this chance.

"It they don't grant cert," said Cobham's lawyer Joshua Bennett, "that's the end of the road."

THE COBHAM CASE is about whether someone can declare bankruptcy on a court judgment for fraud, and the argument has turned on whether doing something knowing it would do harm means intending to do harm.

"We argue the judgment doesn't contain the requisite intent elements," Bennett said.

The case was not originally heard in Alamance County, but by the N.C. Business Court, which handles complex business cases. Cobham was a partner in dental practices in Burlington, Winston-Salem, Durham and Apex with LeCann, an old friend from dental school.

In 2012, the Business Court ruled in favor of LeCann, finding Cobham, president of the joint enterprises, in 2007 started making unauthorized transfers from the businesses she owned with LeCann, often without her partners permission or even over her objections. Sometimes these were loans to herself, and sometimes unjustified expenses, like a mortgage payment on a condominium her brother lived in, a pair of Prada shoes she called a uniform expense, even a Match.com account.

The court ordered Cobham had to pay back $559,888 to the joint businesses including $74,879 from the Burlington practice and because fraud was found, she also had to pay triple that in punitive damages: $1,679,664 for a grant total of $2,238,552.

IT IS HARD TO COLLECT money from judgments like these in North Carolina. Sam Piero, one of LeCanns lawyers, is pretty familiar with how hard. He has been struggling to collect a six-figure fraud judgment in a local case since 2012.

Im not sure there is any way to collect this money, Piero said. All you can do is go after them and continue going after them until they give in.

This state doesnt let plaintiffs garnish debtors wages. Courts can freeze their assets, but that freeze is put on hold if the case goes on to higher courts or bankruptcy court.

In 2014, the U.S. Bankruptcy Court for the Eastern District of North Carolina denied Cobhams petition for Chapter 7 bankruptcy LeCann had filed a motion in opposition because the U.S. Bankruptcy Code doesnt protect debtors from fraud judgments.

Cobham appealed the bankruptcy court decision to the U.S. District Court for the Western District of North Carolina, which found the bankruptcy court was right but for the wrong reason.

To be denied bankruptcy protection because of fraud in North Carolina, it must be shown that the debtor not only meant to take money but also intended to do harm. The business and bankruptcy courts decided Cobham knew she was doing harm to the businesses, so she must have meant to. The District Court didnt buy that, but decided Cobham couldnt declare bankruptcy because she broke her duty of loyalty to the company, which, for some reason, is called defalcation.

Cobham appealed that to the U.S. Fourth Circuit Court of Appeals, which agreed with the bankruptcy court.

IN THE PETITION TO the Supreme Court, Cobhams lawyers argue that the bankruptcy court read things into the law when it found that knowing the results of her actions would be harmful to her partners business, and finances showed she had the malicious intent required by North Carolinas laws to give LeCann the close to $2 million in punitive damages, so that willful and malicious injury now means willful and malicious act leading to injury. And by upholding it, the Fourth Circuit changed and expanded the law, going against earlier Supreme Court decisions and creating more reasons to deny bankruptcy protection. And as a bankruptcy issue, Bennett said, it does affect the whole country.

"(The Supreme Court) aught to review this because the Fourth Circuit, in our view, not only didn't follow its own precedent, but Supreme Court precedent as well," Bennett said. "It's an important issue."

LeCanns lawyers have submitted a brief in opposition, basically, asking the Supreme Court to let this one go, saying the Appeals Court interpreted the law correctly, and even if it didnt, the District Court made a good alternative argument not to grant bankruptcy. They also argue there is no national issue for the court to decide.

The petition presents no issue of importance beyond these litigants, the brief reads.

Reporter Isaac Groves can be reached at igroves@thetimesnews.com or 336-506-3045. Follow him on Twitter at @tnigroves.

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Burlington dentist takes bankruptcy to U.S. Supreme Court - Burlington Times News

Marsh Supermarkets tried to keep its stores in shape, but ultimately couldnt withstand a two-front competitive assault from Kroger and Meijer.

The latter two companies dumped hundreds of millions into Marshs regional marketplace in the last two years with multiple remodels and new store construction, Marshs Chief Restructuring Officer Lee A. Dierks said in a disclosure statement accompanying Marshs Chapter 11 bankruptcy petition in Wilmington, Del., Thursday.

Marsh tried to fight back by slashing costs and spending $15 million of its own on store refurbishments over the same period, Dierks said, but was unable to achieve the sales lift the company had sought. When new Kroger and Meijer stores opened, competing Marsh units saw double-digit sales declines and liquidity challenges followed shortly, he added.

According to Metro Market Studies, Marsh has lost more than two percentage points of market share in its home Indianapolis market between 2013 and 2017 before rounds of recently announced closures, falling to fourth in the market behind Kroger, Walmart and Meijer all of which operate at least some large-scale supercenters there.

Krogers market fill-in strategy a program directing capital spending to markets where it feels it can meaningfully grow share has been especially effective in Indianapolis, officials have remarked, citing its success there as a model for places like Wisconsin, where it is addressing the recently acquired Pick n Save banner.

Kroger just over two years ago said it would invest nearly half a billion dollars in the Indianapolis area on 11 new stores including seven Kroger Marketplace supercenters and 17 remodels.

That investment put additional pressure on Marsh, which was also dealing with high debts and underfunded pensions, Dierks noted in the disclosure.

Pension funds Central States Southeast and Southwest (owed $61.5 million) and Marsh Supermarkets PRIAC (owned $21.7 million) are identified as the companys two largest unsecured claimants. Marsh also owes $8 million to Supervalu, which took over its supply contract last year from C&S Whole Grocers. C&S is Marshs seventh largest creditor with an $800,000 claim.

Marshs objective in bankruptcy court is to find a buyer for its remaining stores as quickly as possible, the company said, in order to avoid being forced to close the 44 core stores that remain open. According to Scott Moses, managing director of Peter J. Solomon Co., the company as constituted cannot afford July rents due June 25, so is aiming to be able to assume or reject those leases by June 19.

Moses, whose firm was engaged by Marsh late last year to explore options, said five parties have expressed interest in some combination of the stores but a going concern offer has yet to have emerged. Marsh and Solomon would continue to market the assets, he said.

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High debts, competitive investments sent Marsh to bankruptcy - Supermarket News

Dive Brief:

Toshibas partners are preparing for the electronics giant for a possible bankruptcy filing in Japan, The Wall Street Journal reports, a move that would add to the uncertainty surrounding two nuclear power plants under construction in the U.S.

Toshiba holds guarantees for its bankrupt nuclear power unit Westinghouse Electric that could be key to the completion of Georgia Powers Vogtle nuclear project in Georgia and SCANAs V.C. Summer nuclear project in South Carolina. The company denied the bankruptcy reports, which cited anonymous sources.

Thomas Fanning, CEO of Southern Co., the corporate parent of Georgia Power, has been particularly vocal about being paid a $3.7 billion guarantee by Toshiba, saying in March that its bankrupt Westinghouse subsidiary had a "moral commitment" to complete its nuclear projects.

Even with the guarantee, however, Fanning told shareholders last month that Georgia Power and its partners might not be able to complete construction of the Vogtle project.

Vogtles two reactors were originally due online in 2016 and 2017 and were budgeted at $14 billion. The most recent estimates call for the reactors to be completed by 2019 and 2020 at a total cost of $21 billion. The construction delays and cost overruns ran Westinghouse into bankruptcy in March.

Now those deadlines may need to be extended again. Local TV station WSAV reports that David McKinney, vice president of nuclear development at Georgia Power, told the Georgia PSC that the 2019 and 2020 deadlines no longer seem feasible.

McKinney said Georgia Power is considering three different scenarios, one in which work on both reactors would be completed, one in which only one reactor would be finished and a third option in which the project would be abandoned.

On May 1, Southern reached an agreement with Westinghouse to continue construction on Vogtle until May 12 while the companies continue negotiations. The agreement could be extended again today if no decision is reached, but it remains unclear whether rumors of a Toshiba bankruptcy filing have affected the talks.

Late last month, Toshiba announced plans to spin off its four main business units as a way to safeguard them from the fallout of Westinghouses bankruptcy. The Journal reports that Japanese restructuring laws could allow Toshiba to keep its profitable electronics business if it files for bankruptcy as a whole, but the company denied anonymous reports that it is considering that option.

SCANAalso extended its construction agreement with Westinghouse on May 1, but it has until June 26 to reach a deal with the developer.

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Toshiba said to be preparing for bankruptcy as Southern faces Vogtle deadline - Utility Dive

A group of sexual abuse survivors engaged in bankruptcy court mediation with the Archdiocese of St. Paul and Minneapolis has overwhelmingly rejected the archdioceses proposed bankruptcy reorganization plan, which includes how much it should pay victims.

The archdiocese and a group of survivors the largest class of the archdioceses creditors in the bankruptcy court have submitted opposing plans over how much the archdiocese should offer survivors for abuse that occurred at the hands its clergy.

U.S. Bankruptcy Judge Robert Kressel ruled in December to allow both plans to move forward to a vote by all creditors.

On Thursday, 94 percent of the survivor group comprising over 400 members voted that they preferred their plan over the archdioceses.

Kressel could still rule in favor of the archdiocese plan over that vote.

The plan submitted by the survivor group would require the archdiocese to directly pay up to $80 million (depending on the archdioceses existing assets) out of pocket to victims, and immediately release an investigative report concerning former Archbishop John Nienstedt.

The archdioceses plan calls for it to pay $13 million. There is no mention of the report on Nienstedt in that plan.

But the bigger sticking point is over how much exposure the archdioceses insurers should have. The archdiocese negotiated with insurers for $114 million in claim exposure, and another $13 million in exposure for its parishes.

The survivors say the archdiocese negotiated with insurers without them, and believe the archdioceses assets were highly undervalued during that negotiation. They believe the true claim exposure could be over $1 billion.

Church officials argue their offer would make money available quickly to survivors, while the opposing plan would require survivors to sue the archdioceses insurance companies, which would significantly prolong litigation.

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Archdiocese bankruptcy reorganization plan rejected by sex-abuse survivors - TwinCities.com-Pioneer Press

Personal Bankruptcy

In a nutshell, most individuals and married couples have two types of bankruptcy under the Bankruptcy Code: Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. While you can receive a bankruptcy discharge and thus eliminate your debts by filing either chapter, Chapter 7 and Chapter 13 function very differently.

Chapter 7 is intended for those looking for a fresh start. Its often referred to as liquidation bankruptcy -- meaning that you must be prepared to give up any assets that you cant protect by your jurisdictions bankruptcy exemptions to get a clean slate of your debts. Below is a checklist of needed information for Chapter 7. For more detailed information on any of the checklist items, please click the highlighted links.

Chapter 13 is commonly referred to as the reorganization bankruptcy. Its filed for many reasons - most commonly to save a home from foreclosure, stop IRS collection or to consolidate debts into a single monthly affordable payment. Below is a checklist of needed information for Chapter 13. For more detailed information on any of the checklist items, please click the highlighted links.

There are many different life situations that result in people filing personal bankruptcies. Some of them are:

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Bankruptcy - All You Need to Know | Bankruptcy HQ

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Bankruptcy - Debt.org

Dealing with Puerto Ricos crushing debt has started to resemble a circular firing squad.

Simply put, the bankrupt island cant pay everything it owes, so creditors are taking aim at each other as they squabble over who will get whats left. But the debts size and the tangled process invented to rescue Puerto Rico mean theres no established rule book to shape what comes next.

Holders of general-obligation debt have declared their right to be paid first, owners of sales-tax bonds are squabbling with one another over who deserves priority, and theyre all up against the commonwealths leaders, who want the cash for essential services. Amid this melee, Puerto Ricos federal overseers will have to choose between paying U.S. hedge funds everything theyre owed or keeping schools, water and electricity running.

There just isnt enough money, said Matt Fabian, a partner with Municipal Market Analytics Inc. in Concord, Massachusetts, who foresees a chaotic brew of lawsuits, federal interventions and politics. Nobody has any idea whats going to happen.

All told, Puerto Rico has about $74 billion in debt and $49 billion in pension liabilities. Hedge funds holding $1.4 billion of general-obligation bonds, including Aurelius Capital Management and Monarch Alternative Capital, have already sued to get overdue principal and interest. On the other side, owners of $17 billion in sales-tax bonds, including Tilden Park Capital Management and GoldenTree Asset Management, have entered the fray. Theyll meet for the first time in court on May 17 in San Juan.

The dispute over the sales-tax bonds, named Cofinas after the agency that issued them, began in earnest May 4. Thats when the trustee, Bank of New York Mellon Corp., sent a notice of default to the authority that sold the bonds. The object was to keep the government from diverting the sales-tax revenue to other purposes before it pays what it owes to investors.

The New York-based bank acted after weeks of pressure from senior bond owners who urged the trustee to safeguard their claims. In the process, junior bondholders were irked because the default notice could mean no payments for them until the senior bondholders are paid in full. The notice sets a 30-day deadline for a response from Puerto Rico, which is supposed to pay about $256 million of principal and interest on Aug. 1, according to data compiled by Bloomberg.

Puerto Ricos status as a commonwealth means its not subject to traditional bankruptcy laws. Instead, the island filed for the next best thing to deflect claims, called Title III. Its an in-court restructuring based on the U.S. bankruptcy code that was created under Puerto Ricos Promesa law last year. But its never been used before, which means any cuts imposed by U.S. District Court Judge Laura Taylor Swain will be more likely to face years of appeals than a typical case.

Puerto Ricos initial Title III filing on May 3 didnt include Cofina. If it had, BNY Mellon may have been prohibited from sending its May 4 default notice. But the oversight and management board didnt file its separate Title III action for Cofina until May 5, giving the bank a window to declare the default.

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The delay means its unclear whether the Title III filing voids BNY Mellons default notice, as well as a separate default notice sent by Ambac Assurance Corp. on May 1. Regardless, BNY Mellon and senior creditors are prepared contest a courts decision if its not in their favor, according to a person familiar with the matter, who asked not to be identified discussing private information. The government hasnt said how it will respond.

As a public policy, legal defense strategies are not discussed until they are presented in judicial forums, Yennifer Alvarez, a spokeswoman for Governor Ricardo Rossello, wrote in an emailed comment.

The senior bondholder group, which controls about one-third of the senior Cofina bonds, is led by hedge funds Whitebox Advisors, Tilden Park Capital Management, GoldenTree Asset Management and Merced Capital, according to Susheel Kirpalani, a lawyer at Quinn Emanuel Urquhart & Sullivan who represents the group.

For investors, theres a lot at stake. Cofina holders are owed more than $8 billion in debt service through 2026, with $704 million in payments due in the next fiscal year, which starts in July, according to the commonwealths fiscal plan.

The territory owes all bondholders $33.4 billion in debt payments between now and 2026, according to the plan, but it proposes to pay only about $8 billion. The government hasnt said how bondholders should divide those payments, or which group is first in line.

This is a government restructuring, not a court one, so the government will be in the drivers seat, Fabian said. Creditors will not be heard to the extent theyre saying, lets do it a different way. Those arguments wont have any standing in a court.

Owners of junior Cofinas could be left vulnerable. BNY Mellon holds a trustee reserve fund of sales-tax revenue with about $400 million, more than enough to handle the upcoming August payment, according to people familiar with the matter.

But because of the default notice, junior bondholders are unlikely to be paid, in order to safeguard claims of the senior Cofinas, said the people, who asked not to be identified discussing private transactions. Given the limited funds available for debt repayment, theres a chance the subordinated holders could get little or no recovery. A representative for BNY Mellon declined to comment.

Whats more, general-obligation bondholders claim that the entire Cofina structure violates the islands constitution, and all the sales-tax revenue is owed to them. If the general-obligation claims are supported in court, all of the Cofina debt could be ruled invalid and investors could receive nothing at all.

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Puerto Rico's Bankruptcy Fight Is About to Plunge Into the Unknown - Bloomberg