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Jason Kilborn
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What is it like to be desperately insolvent with no access to a relief system like the bankruptcy discharge? Many, many people are likely to find out in the coming months in China and India in light of recent developments... Continue reading
Posted 2 days ago at Credit Slips
At long last, the World Bank Group's insolvency and debt resolution team has finally released to the public its report on the treatment of the insolvency of micro-, small-, and medium-sized enterprises, Saving Entrepreneurs, Saving Enterprises : Proposals on the... Continue reading
Posted Oct 9, 2018 at Credit Slips
It seems fairly clear that, if Trump's latest nominee to the Supreme Court, Brett Kavanaugh, is sworn in, the Court's trend of resolving virtually all statutory disputes on the basis of "plain meaning" will be cemented in place. An analysis... Continue reading
Posted Jul 11, 2018 at Credit Slips
Agreed, Chuck! Partisans often gravitate toward extremes in both directions. Full stop. Now the but ... If BAPCPA had been implemented as planned, for example following Chuck Grassley's insistence on every single consumer debtor filling out the entirety of the means test forms, the effect would have been more devastating. As I think Angie Littwin (and probably others) pointed out, moderate policy decisions by the US Trustee and courts have powerfully mitigated the ill effects of BAPCPA, for example allowing 90% of filers to avoid the means test's step two expense analysis after reporting below-median income. And as Lois Lupica's and others' work has shown, many consumer debtors have been priced out of bankruptcy by BAPCPA's formality-fest. Not the end of consumer bankruptcy writ large, but the end for many honest and unfortunate debtors. But again, good point on the "good for the goose, good for the gander" comment. Thanks!
As anyone familiar with bankruptcy would have predicted, the dire predictions of disaster for municipalities seeking bankruptcy protection have proven to be ... let's just say exaggerated. Bloomberg is out with a notable story this morning on Jefferson County's healthy... Continue reading
Posted Jun 21, 2018 at Credit Slips
Points well taken, Bob, but the crazy thing is that this is both a moving and a scattershot target. Asking about how "Chinese people" feel about debt relief (or petty graft, or honesty, ...) is like asking what the Congressional intent behind a statute was--it was the lowest common denominator among a huge cacophony of competing feelings. Even in the US the feelings you've mentioned are clearly present among both members of the public and Congress--recall the rant on the Chicago Board of Trade floor by the commentator angry about writing down mortgage balances a few years back. I've focused on the moving target part, since these attitudes have changed dramatically over time in such varying places as Denmark, France and the Netherlands on the one hand, to places like Russia, Slovakia, Poland, etc., etc., on the other. In Russia, a country that epitomizes anon's petty-graft-is-the-norm attitude, legislators finally swept aside both fear of abuse and petty jealousies to enact a relief statute that rivals the US in terms of openness, but it took until 2015 to get past the "this could never work in our corruption-infested country" sentiment. Legislators did this based in large part on a cold intellectualization of the issue--is this better for us in the long run than not having it, as Greg suggests. Where personal insolvency has succeeded, cold reasoning seems to have won the day; where it has not, irrational emotional resistance has been to blame. I'm left struggling to either formulate compelling intellectual arguments or to structure an empirical study that can actually demonstrate something robust and useful. I think I just have to accept Joseph Spooner's conclusion that we just have to wait until the golden moment when the political stars align with a sensitive policymaker taking the reigns. Keeping up the drumbeat of counter-commentary is useful, though, especially marshaling evidence that "everybody's doing it"--another powerful heuristic.
Thanks, Greg! I've generally taken the approach you suggest in trying to make more vivid the costs of Type 2 under-treatment, or at least point out that other legislators (particularly in Europe) have concentrated on the many negative consequences to creditors, debtors, and society of such under-treatment. This discussion appears in a long introductory section of the World Bank's Report on the Treatment of the Insolvency of Natural Persons, which I urged attendees at a conference in Beijing this past Friday to read with care--even if quantification is elusive, as you say, I hope it helps policymakers to feel the costs of doing nothing (or at least not enough) in an increasingly competitive global marketplace. Your comment dovetails nicely with anon's, as I fully well appreciate that honesty is measured and valued differently in different cultures and regions. If Type 2 under-treatment is hard to quantify, so too is Type 1 over-treatment; that is, giving relief to scoundrels. How much "dishonesty" is a real problem, beyond a societal tolerance level? In the parole context, violent crime is a real, palpable cost of Type 1 errors; in the personal insolvency context, a few creditors losing the right to pursue their likely practically uncollectible claims ... not so much, it seems to me. But I admit that it seems to ME that way, and I am sensitive to the fact that some people are very bothered by ill-gotten gains. Even more than parole, I think tax evasion is a useful parallel context. How much are we willing to spend to collect all the tax that's due--and how much cheating are we willing to accept (implicitly) by not funding an IRS to the hilt? It's all about trade-offs, and I will continue to struggle to express the costs of doing nothing and allowing Type 2 under-inclusion to be the status quo (as compared with allowing Type 1 errors of cheaters keeping their tax money to be the status quo in the tax system!).
Over the past few weeks, at conferences with judges and policymakers in Varna (Bulgaria), Seoul, and Beijing, I've been confronted with a surprising degree of skepticism about personal insolvency systems and fear of opportunistic individuals abusing the ability to evade... Continue reading
Posted Jun 18, 2018 at Credit Slips
Leiden University in the Netherlands has established an impressive strength in insolvency law studies. For example, following his retirement, the eminent Bob Wessels left his massive collection of literature on the subject to a foundation, which permanently lent the collection... Continue reading
Posted Apr 23, 2018 at Credit Slips
It's not federal legislators I had in mind, but states, who have forbidden the use of credit reports in such contexts as hiring, and the notion that US regulators are still allowing data like medical records to influence credit scores makes me not more comfortable with the Chinese plan, but even less comfortable with the US approach. I find it terrifying that more and more instances of correlation-causation confusion are being foisted on the lending and consuming public in the guise of supposedly reliable big data crunching. That my credit score should be impacted by what I search for in Google is ... deeply disturbing. That this phenomenon is not limited to China again makes me feel worse, not better. But again, it's the attitude signal I'm looking for here. That national regulators, rather than private lenders, are planning such aggressive use of this sort of data, and that the resulting score will be used not in lending decisions, but in the provision of basic human services, is again deeply disturbing. That a society (governing authority) is so willing to capitulate to a computer-generated message that so-and-so is a deadbeat, rather than so-and-so having been the possible victim of global economic volatility is the problem I'm concerned with here. If that contagion is spreading, even more cause for concern.
Toggle Commented Mar 30, 2018 on Orwellian Debt Collection in China at Credit Slips
Matthew, the system is far more than a measure of (financial) creditworthiness. The plan is apparently to aggregate data including things like search engine query histories (!), social media postings (including those about someone, not only by that person), online purchasing habits (i.e., the things one purchases, not simply whether one pays for them), whether one visits one's parents regularly enough, and who one's friends are. I would hope that it would be uncontroversial that most of this has little to do with (financial) creditworthiness, and who my friends are and what I'm searching for online have absolutely nothing fairly to do with my creditworthiness. More troubling, the score generated from this data is to be used in non-financial contexts, like speeding processing of housing applications and work promotions, and perhaps job applications--a context where US (state) regulators have wisely forbidden consideration of irrelevant "creditworthiness" data. This seems to be a Big Brother monitoring system expressly designed to reward virtuousness and punish what system architects regard as signs of vice, all with precious little if any transparency about the data or its use. While credit scoring in the US is far from perfect, the Social Credit System takes it to an entirely new level in every way.
Toggle Commented Mar 29, 2018 on Orwellian Debt Collection in China at Credit Slips
Trying to get a handle on the potential for a workable personal bankruptcy procedure in China, I've repeatedly encountered evidence that the most important element might be lacking: attitude. Successful personal insolvency systems around the world differ in design and... Continue reading
Posted Mar 29, 2018 at Credit Slips
I assume that when I disagree with Adam, I'm wrong, but ... I just looked at 546(e) again, and it does NOT seem to read as I understand the opening para of Adam's post to suggest. The safe harbor applies only if the payment is BOTH a settlement payment AND is "made by or to ... a financial institution." No? I see that there is a second safe harbor ("or that is a transfer made by or to ... [a] financial institution ... in connection with a securities contract"), but again, this safe harbor ALSO requires a connection to a financial institution. If the selling shareholders ARE financial institutions, then I agree that they might be able to raise the defense (and perhaps always if we read the "plain language" of the definition in 101(22)(A) raised by Henry Kevane of Pachulski Stang--I can't take credit for this brilliant find). But an ordinary stockholder, without that odd definition characterizing a human as a financial institution, could not raise the 546(e) defense. What am I missing?
If you're challenging a Seventh Circuit ruling in a bankruptcy case on appeal to the Supreme Court, especially if (retired) Judge Posner was in the majority, you've got a challenge ahead. The Court's announcement this morning of its judgment in... Continue reading
Posted Feb 27, 2018 at Credit Slips
Thanks, Abdullah! Though the definitions have been reshuffled a bit from the Ministry's earlier proposal, the law still formally includes within its scope all persons, juridical and natural (companies and individuals), who owe debts. I agree entirely that the law will likely be of little assistance to natural persons (including those who bear liability for the debts of their juridical-entity businesses), as few will successfully engage a negotiation process to release unpaid debt. The notion that this is a law for SMEs thus seems rather obviously inaccurate. It is clearly designed to provide a negotiating platform to large, multinational business actors. It's a nice first step, I guess.
Saudi Arabia's King Salman has approved a new bankruptcy law. {Download Saudi BK final 2-2018} Commentators have heralded this new law as a boost to economic reforms, in particular to the SME sector, but I have some serious doubts about... Continue reading
Posted Feb 23, 2018 at Credit Slips
Most of us Credit Slipsters enjoyed an absolutely fabulous symposium over the weekend celebrating the illustrious career of one of our own, Jay Westbrook. The Texas Law Review will publish a selection of several of the papers presented at the... Continue reading
Posted Feb 5, 2018 at Credit Slips
I thought Credit Slips readers might be interested in using some holiday down-time to catch up on a couple of recent comparative insolvency conferences with particularly cutting-edge presentations, some of which are or will be available for viewing online (and... Continue reading
Posted Dec 21, 2017 at Credit Slips
On November 6, the Supreme Court will hear arguments in a case only a lawyer--and probably only a commercial or bankruptcy lawyer--could love, Merit Management Group v. FTI Consulting. Simplifying quite a bit, the issue is whether a payment by... Continue reading
Posted Oct 25, 2017 at Credit Slips
Read and very much enjoyed the paper! The descriptive part is well-taken, though only if one accepts an aggressive application of "equities of the case" in s. 552(b). I don't think your detractors (the blanket lien enthusiasts, whose argument you seem to be responding to) would embrace or encourage such a position on proceeds. And moving to the normative side, your thesis seems to be supported largely if not entirely by the operation of section 552(a) and (b) in cutting off what the blanket lien enthusiasts would regard as creditors' legitimate state law rights--certainly not normatively desirable from their perspective. I'm probably missing something, but your paper struck me as rejoining and reiterating a longstanding debate about the desirability of the Bankruptcy Courts intervening between secured creditors and their whole-kit-and-kaboodle rights under state law by, in part, imposing artificial values on assets (at varying points in time, by the way) rather than allowing "the market" to do so when the secured creditor(s) engaged its/their rights. I'm not sure the other side will feel at all moved by this paper's argument. Yes, we understand the Code does this, they'll say, we've been criticizing precisely these artificial effects of the automatic stay and the Chapter 11 plan process all along. What does this paper add to the debate other than a nice articulation of exactly what value (from operations, proceeds, and after-acquired collateral) is being expropriated from secured creditors for the benefit of out-of-the-money unsecured creditors et al.?
A historic vote was announced overnight that signals a new era for large pension reform. As is often the case, "reform" here means that ordinary, hard-working folks will suffer a significant amount of pain as big companies are relieved of... Continue reading
Posted Sep 14, 2017 at Credit Slips
It seems to me a sign of serious regulatory dysfunction when a government expressly uses bankruptcy law as a means of collection, rather than rescue or at least collective redress, with an aim to treating economic stagnation. I've seen several... Continue reading
Posted Aug 24, 2017 at Credit Slips
Good question, Christopher, to which I'm afraid there isn't a clear best answer. First, though, Sharjah (the court where Dana lodged its challenge), with a "j", is a city, one of the United Arab Emirates (like Dubai, to its southwest). The pronunciation and transliteration of this emirate's name is another long story, but for another time ... As for sharia, or shariah, or shari'ah, I strongly suspect the first spelling is as close to a Western standard as one can get--sharia. Because I spent so much time studying this stuff, and at the risk of sounding (reading) like Alex Trebek, I generally use a more technical but (excessively?) accurate transliteration, shari'ah. So why the apostrophe and why the "h"? The h stands for the letter "tied t" (taa marbuta) at the end of most feminine words in Arabic--it is an "h" (a round character, thus "tied") with two dots written above it (which otherwise would indicate a "t"), which together simply indicate that an unwritten, unstressed vowel "a" ends the word. It is pronounced "a" but transliterated "ah" to indicate the unwritten "a" with the written "tied-t h thingy". Confusing enough? Then just wait for the apostrophe. It stands for a full-blown letter, called "3ain." The "3" is often used instead of an apostrophe to indicate the 3ain, but a backwards apostrophe (or better yet, a small raised "c") is more common. The letter is generally not indicated in English transliteration (hence sharia) because very few English speakers can produce its sound--it's the sound you make if someone is choking you or you're gagging and you tried to say a following vowel, here it happens to be "a". So the word is pronounced "sha-ri-3ah" with the "3" standing for that choking/gagging sound--and it's quite hard to pronounce in this position. Bottom line, unless you're trying to be super technical (to respect and speak to an audience who knows and expects the word to be transliterated as technically accurately as possible), you're probably best off just sticking with "sharia."
FJP, this is why the case has so roiled the Islamic financing markets. It is NOT normally the case (or hasn't been) that there is "always uncertainty lurking in the background," as no issuer has been so bold as to try to subvert international consensus on basic structures like mudaraba. If the Sharjah court accepts this machination--as sometimes has been the case in the West in high-profile shock cases before English, American, and other courts going rogue on various issues (yes, I mean you, Rubin!)--I would hope the markets would shake if off as an isolated incident, but we just can't know how deep the rot will be if it goes the other way. Obviously, it will be better if the Sharjah court puts Dana Gas in its place, and the rule of (Islamic) law is confirmed.
stella, I hope you realize how shockingly ignorant your comment is. I considered deleting it, but I thought it better to post a sensitive response. First, Muslims as a group are among the most generous people in the world, with two distinct Islamic mandates to give alms to the poor (obligatory zakat and highly encouraged sadaqa). Second, judging hundreds of millions of Muslims by the actions of one venal multinational business conglomerate is just stunningly short-sighted. I would think you would resist being judged by the actions of Goldman Sachs, Enron, etc., etc. Not all Americans and not all Christians behave as the leaders of these companies did, and the same is clearly true of Muslims and Dana Gas. Sheesh!