Yeah, well I am a bankruptcy law specialist, and we still have rules. We scoff at the irrelevance of your so-called doctrinal rules in banking . . . wait . . . reading your next post about SVB Financial venue . . . never mind.

This is exactly my question too. I don't know the CDARS market. My guess is that, at some point, the cash balance is so much that CDARS is not a practical alternative. But, as you point out, you can effectively insure a lot of bank deposits. It still leaves one wondering whether the relative success of our banking system lulled a lot of corporate money managers into complacency. They seem to have forgot the first principle I teach my students . . . you don't have "money in the bank," you have an unsecured promise from the bank to pay you back.

This is really interesting, Mitu. Thanks for posting it. I have been co-authoring since early in my career and have been at places both more or less friendly to it. The legal academy's reluctance (hostility?) on co-authoring always has been a mystery. I was once talking with a scholar in another field who commented negatively on someone else's record, noting they never co-authored (among other things). That seemed odd, given our disciplinary priors. "Why is it bad that they don't co-author," I asked. The response--"Because it shows the person's peers don't respect them enough to work with them." That was an eye-opening perspective.

My memory is that this auto-renewal practice is not new, and I remember having raised the issue with ABI also a few years ago.

Thanks for a thoughtful question. Pamela Foohey just wrote on this blog about ideas of things the Department of Education could do administratively to help with the student-loan problem (https://www.creditslips.org/creditslips/2021/07/the-department-of-education-can-help-with-student-loans-in-bankruptcy.html). At the heart of the question is the scope of bankruptcy's fresh start. Even if many (although not all) student-loan borrowers might qualify for income-driven repayment (IDR) plans, should they have to spend decades in these plans? After all, most of us don't feel that we should say to someone with thousands of dollars in medical debt, "That's OK. You can just pay a few hundred dollars each month for the rest of your life." Even if the IDR amount is zero, how long should the debtor have to stay in the IDR? The law does not require people who filed bankruptcy years ago to repay the discharged debts if their circumstances improve. A big part of the motive for bankruptcy filers under this law would be the clean slate. An IDR does not eliminate the debt. It continues to hang over the person and affect ability to borrow. Also, as an administrative forbearance, it can be taken away should the political pendulum give us another secretary of education who is hostile to student borrowers. Finally, there can be tax consequences to any debt forgiven outside the bankruptcy system. Discharging a student loan in bankruptcy generally will not have any tax consequences.

P.S.--I should be clear that I am not accusing you of sophistry. Those are the arguments the lawyers for J&J will make.

Remedy, Adam? You sue the guys and gals with the money. My more serious answer is that you sue whoever has the assets the company "indirectly parted" with. Completely off the top of my head, I don't think anyone other than the assets you want back is a necessary party to the proceeding. My quibble with your response is that you're partly arguing the definition. I take your point, but aren't you using a nonstatutory, everyday meaning of the word "transfer." Under the statute, it includes "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset." That is a pretty broad signal to ignore this sophistry of "I didn't 'part' with the asset. I just never had it."

It is "far from clear" that Texas's Uniform Fraudulent Transfer Act (UFTA) would defer to the Texas Corporate Code on the definition of a "transfer?" I'll only buy that if "far from clear" means UFTA clearly would not defer to the Texas Corporate Code. UFTA says "As used in this Act" certain words have certain definitions. It would be lawyerly sophistry to argue that another statute then somehow mysteriously controls the definition, almost as if there is some natural law meaning of "transfer." The same is true for the Bankruptcy Code. Both UFTA and the Bankruptcy Code have a deliberately broad definition of "transfer" and that includes the "indirect parting" of an interest in asset. That broad language is there to eliminate exactly the sort of form-over-substance lawyering happening with the "Texas Two-Step." As you allude, Adam, the game here is a nonfrivolous argument that will allow these companies to create costs and litigation leverage to escape full responsibility. P.S.--I still have concerns about the potential for abuse of criminal fraudulent liability claims in consumer cases. It gives creditors and trustees too big of a hammer to wield against consumers.

When one is looking at total bankruptcy filings, the subchapter V and even all the chapter 11s put together are such a small percentage that they don't move the needle at all.

Interesting. I don't think subprime auto loan defaults will drive the bankruptcy filing rate, especially if the result is that people are losing their automobiles anyway after they file. Are we sure that subprime auto loan delinquencies are rising? I don't know either way. I looked for some data, and the most recent I could find was from September 2020. It was only for auto loans generally. It suggested auto loan delinquencies were down slightly during the pandemic.

Except that is a pretty big caveat. The "child" cases--corporate subsidiary/affiliate filings--are not small numbers. In my blog post, I pointed out that Le Pain Quotidien accounted for 43% of all the chapter 11 "filings" in May. In the big chapter 11 venues--Manhattan, Delaware, Houston, and Richmond--filings by large corporate filers are almost certainly the reason those places look to have had big increases. Even in smaller jurisdictions that have fewer filings to begin with, one corporate filing could produce a spike. I think it's really difficult to understand what is going with chapter 11 filings without backing out the affiliate filings.

Like Adam said, the calculations depend on household size and state. But, let's use a 2-person household in Indiana. The median income for a 2-person household in Indiana is $65,577. A monthly income of $15,500 is $186,000. That is over the applicable median income by $186,000 - $65,577 = $120,423. Therefore the MPO should be $58,500 plus 150% of the excess over $100,000. Stated mathematically: $58,500 + 150% * ($120,423 - $100,000) = $58,500 + $30,634.50 = $89,134.50. The plan would have to pay that amount over 36 months which is a monthly payment of $2,476 or 16% of their gross monthly income. (The bill says that the relevant amount should be $94,500 plus 150% of the excess of the amount over $100,000. That was a mathematical error. The figure should have been $58,500, which is the sum of the amounts for a person with income of an excess of $100,000 over the state median income.) The means-test payment would depend on a lot of things, not the least of which are secured debt payments. The $257,000 payment you calculated would be for a five-year plan where CBRA plans are three-year plans. The $257,000 total payment works out to about 27% of monthly gross income. That does not sound like a lot in the abstract, but considering that take-home pay will be a lot less and with some home-loan and car-loan payments, there will be little margin for error. Indeed, even at 16% of gross monthly income, the MPO is hardly a free ride.