Recent Entries

Alabama County Files Largest Ever Chapter 9 Municipal Bankruptcy: Is This A Trend?

Published on November 17, 2011 in Bankruptcy Filings. 0 Comments

By Scott D. Fink, Esq.

Last week, Jefferson County, Alabama filed for bankruptcy relief under Chapter 9 of the Bankruptcy Code as case number 11-5736 in the Northern District of Alabama.   This represents the 12th municipal entity to file a Chapter 9 Bankruptcy this year, following on the heels of a recent Chapter 9 filing by the City of Harrisburg, Pennsylvania last month.[1]    Based on the total amount of debt scheduled, this case represents the largest municipal Bankruptcy filing in U.S. history[2] , rivaling the bankruptcy filed by Orange County, California (case number 94-22272 filed in the Central District of California on December 6, 1994).    Debts related to Jefferson County’s sewer system, alone, exceed $3.1 billion.  According to the County’s bankruptcy counsel, Kenneth Klee, the filing came as a result of the inability of the County and its creditors to reach a deal to restructure the County’s debt, despite negotiations over the past several months.   Jefferson County had previously defaulted on bonds, which were used to refinance the county’s sewer system.  “There was an impasse reached,”  Klee stated to Bloomberg News in an interview last week.  “None of the creditors — zero– signed up to the deal that we have been negotiating for six weeks.”
 
By seeking Chapter 9 relief, the County may now have the ability to restructure and renegotiate its debt obligations over creditors’ objections.  In addition, Chapter 9 gives the County the option of assuming or rejecting executory contracts, which potentially encompass a whole range of potential obligations, including ongoing service contracts, vendor agreements and perhaps even existing agreements with public employee unions.

Many other municipalities around the country will be watching this case closely, as they are faced with their own budget shortfalls, resulting from cuts in state and federal funding, as well as ever-increasing obligations for retirement benefits and health insurance for their workers and retirees.  Whether the decision to utilize Chapter 9 for debt relief becomes a trend or a cautionary tale remains to be seen.  We will continue to monitor the case as it progresses and will provide further updates as events warrant.

If you have any questions on this matter, please contact Mr. Scott Fink, Esq. Scott is an associate in the Bankruptcy Practice of Weltman, Weinberg & Reis Co., LPA located in the Brooklyn Heights office. He can be reached at 216.739.5644 and .

[1] Bloomberg News, November 9, 2011
[2] Id.

City of Harrisburg, PA files for Chapter 9 Municipal Bankruptcy Relief

Published on October 14, 2011 in Bankruptcy Court. 0 Comments

While still in its early stages, the City of Harrisburg, PA’s recent Chapter 9 Bankruptcy filing represents a rare move by a municipality to seek the protection of the Bankruptcy Code.  The City Council authorized the filing of the Chapter 9 case, while the mayor and other city officials opposed, and continue to oppose, the move.  Chapter 9 is designed to provide a municipality with “breathing room” from its creditors’ collection efforts, which will then enable the municipality to formulate a plan of debt adjustment acceptable to a majority of its creditors.  A municipality in Chapter 9 has the ability to adjust debts and other obligations, with a plan of debt adjustment ultimately resulting in the unpaid claims of creditors being reduced and/or extended or restructured, including those unpaid pre-petition claims of a utility or other creditor.
 
Utilities do not have the same rights to adequate assurance of payment in Chapter 9 as they do in Chapter 11.  In Chapter 11, a debtor must provide a form of adequate assurance of payment that is satisfactory to the utility and is limited to a very small list of options (cash deposit, letter of credit, surety bond, certificate of deposit, prepayment or any other form that is mutually agreed upon by the parties).  However, in Chapter 9, the form of adequate assurance is not limited and may include granting of an administrative priority claim.  Further, the requirement that the offer of adequate assurance be “satisfactory to the utility” is not included in Chapter 9.  In addition, Chapter 9 gives the municipality the option of assuming or rejecting executory contracts.  Such contracts could include a whole range of potential obligations, from ongoing service contracts to vendor agreements and, possibly, collective bargaining agreements with its public employee unions.
 
Weltman, Weinberg & Reis Co., LPA will continue to monitor this case and provide additional updates as events dictate.

If you have any questions on this matter, please contact Mr. Scott D. Fink, Esq. Scott is an associate in Bankruptcy focused on the Consumer Bankruptcy and Commercial Bankruptcy Groups with Weltman, Weinberg & Reis Co., LPA. He is located in the Brooklyn Heights, OH office. Scott can be reached at 216.739.5644 and .

Fraud Training for Creditor’s Counsel & Their Clients

Published on February 2, 2011 in Bankruptcy Court. 0 Comments

Presented by: U.S. Trustee Region 9

You are invited to join the U.S. Trustee Region 9 office and WWR for an educational session on Friday, February 11, 2011, regarding recent trends in debtor fraud. Your speakers are Mark Bennett, Assistant United States Attorney and David Morgan of the Federal Bureau of Investigation. They will be soliciting information from counsel and their clients about the fraud issues and trends they may be experiencing in their business.

Prior to the session at 7:00 a.m., WWR will be hosting a breakfast open house for attendees. Join us in our main lobby conference room at 323 W. Lakeside Ave. Please RSVP to Mr. Scott Fink at or call Carol Higgins at 216.685.1096.

AGENDA
Friday, February 11, 2011

7:00 a.m. – 8:15 a.m.
Breakfast at WWR
Weltman, Weinberg & Reis Co., LPA
Main Lobby Conference Room
323 W. Lakeside Avenue
Cleveland, Ohio

8:30 a.m. – 10:00 a.m.
U.S. Trustee Fraud Session
7th Floor
Carl B. Stokes Federal Courthouse
801 W. Superior Avenue
Cleveland, Ohio


SESSION SPONSOR
U.S. Trustee Region 9

Daniel M. McDermott  U.S. Trustee
Andy Vara  Assistant U.S. Trustee

BREAKFAST SPONSOR
Weltman, Weinberg & Reis Co., LPA

Alan Hochheiser  Partner, WWR
Scott Fink  Bankruptcy Attorney, WWR

RSVP
Scott Fink
Carol Higgins 216.685.1096

U.S. Supreme Court Rules That Attorneys are “Debt Relief Agencies” Under BAPCPA

Published on March 9, 2010 in Bankruptcy Filings and Federal Rules of Bankruptcy Procedure. 0 Comments

In a decision handed down by the United States Supreme Court yesterday in the case of Milavetz and Milavetz v. United States, it has now been held that attorneys who represent debtors and provide bankruptcy assistance are considered “debt relief agencies”, requiring them to include such a disclosure in any advertisements they make.  More importantly, as a “debt relief agency” these attorneys are prohibited from advising a debtor to incur more debt because the debtor will be filing a bankruptcy.  Such actions have, in the past, been termed as “loading up” on debt prior to bankruptcy.

The decision does not, however, preclude such attorneys from advising their clients to incur additional debt “for a valid purpose.”  So long as a valid purpose exists for incurring the additional debt (other than the mere fact that a bankruptcy is to be filed), it would appear that debtor’s counsel would not be held liable for the actions of their clients.  Conversely, an attorney could be held personally liable if he is found to have advised his client to load up on debt solely because a bankruptcy is being considered and no other valid reasoning existed.  

This decision is sure to be studied closely by debtor’s counsel, as they now must consider the consequences of their client consultations and the advice they offer.

If you have any questions, please contact Mr. Scott Fink, Esq. Scott is an Associate in the Bankruptcy department of the Brooklyn Heights office of Weltman, Weinberg & Reis Co., LPA. He can be reached at 216.739.5644 or via e-mail at .

New Bankruptcy Relief from Stay Forms to Take Effect in Northern District of Ohio

Published on February 26, 2010 in Bankruptcy Filings, Chapter 11, Chapter 13 and Chapter 7. 0 Comments

On February 23, 2010, it was announced that the Bankruptcy Court for the Northern District of Ohio will begin utilizing new forms for the filing of Relief from Stay Motions in Chapter 7, Chapter 13 and Chapter 11.  The forms will need to be used for any motions filed on or after April 1, 2010.

The Bankruptcy Courts affected include:  Cleveland, Toledo, Akron, Canton and Youngstown.  The new forms will require much of the same information as had been provided by creditors previously.  However, the forms will require greater specificity as to the calculation of the total balance and arrears owing on a loan, as well as a more structured and detailed analysis of a creditor’s right to enforce the Note, Mortgage or Security Agreement.

No new forms will be required by creditors filing only for Abandonment.  In addition, no new forms were created for the submission of agreed or stipulated orders.

The Bankruptcy Department at WW&R is reviewing the new forms and will provide a more detailed analysis in the coming weeks. If you have any questions, please contact Mr. Scott Fink, Esq. Scott is an Associate in the Bankruptcy department of the Brooklyn Heights office of Weltman, Weinberg & Reis Co., LPA. He can be reached at 216.739.5644 or via e-mail at .