Bankruptcy and Student Loans: The “Undue Hardship” Factor

      As tuition rates climb to an all time high, it is not unusual to hear of students leaving college with 40, 50, or even 60 thousand dollars of debt. Many law and medical students are graduating from school with a degree in one hand and 100 thousand dollars in student loans in the other. This continuing increase in tuition has many eager students pursuing community colleges over four year universities. [1] For example, Mott Community College's Michael Kelly states that enrollement has been up 28 percent in the last five years. [2] Kelly says that for some the choice is simple and "[t]he higher the cost is, the more students we get." [3]

      The increase in tuition has lead many students to even pursue different career routes. Take for example Mayrose Wegmann, a 2004 alumnus from the University of Iowa graduating with a degree in political science

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A Change in the FICO Scoring System Seals the Gap for Authorized User Accounts

I. Introduction:

     In June 2007, the Fair Isaac Corporation announced its plans to
modify the FICO scoring system to better ensure the “continued
reliability and predictive power of FICO scores.” [1] These changes
were set in motion on September 1, 2007, and are declared to be the
most significant alterations made to the scoring system in the last ten
years. [2] Analysts are unsure how the new scoring model, known as FICO
08, will affect the overall credit system, but they have “no doubt that
[FICO 08] will have a major impact on credit scores across the
country.” [3] One of the major changes that will affect over 50 million
consumers [4] is that FICO scores will no longer factor authorized user
accounts into their credit scoring formulas. [5]

II. Who will be affected?

     The practice of becoming an authorized user on another person’s
credit account

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Credit after Filing a Chapter 7 Bankruptcy: how individuals can improve their credit score after a Chapter 7 bankruptcy.


 
   According to the American Bankruptcy Institute, there were 18,466
non-business Chapter 7 bankruptcy claims filed in the state of Illinois
last year.[1] Even though this amount is nearly three times as less as
the amount of Chapter 7 claims filed in 2005, analysts at the Federal
Reserve indicate that household debt is at a record high relative to
disposable income for 2007.[2] Consequently, some analysts are
concerned that the high level of indebtedness will lead to more
bankruptcies in 2007.[3] Nonetheless, filing for a Chapter 7 bankruptcy
is not the end of the world for one’s credit.

I. Introduction

     According to the American Bankruptcy Institute, there were
18,466 non-business Chapter 7 bankruptcy claims filed in the state of
Illinois last year.[1] Even though this amount is nearly three times as
less as the amount of Chapter 7 claims filed in 2005, analysts at the
Federal Reserve

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Going “Stealth”: Executive Compensation in Chapter 11 After Dana

A rose by any other name may still smell as sweet, but execs at Dana
Corp. recently discovered that calling executive compensation by
another name did not pass the smell test in court. S.D.N.Y. Bankruptcy
Judge Burton Lifland recently denied Dana's proposed executive
compensation package as contrary to the provisions of the Bankruptcy
Code. [1]  Nearly one year after BAPCPA, has the Dana case finally ushered in a new approach to evaluating executive compensation plans, as envisioned by Congress?

Executive Compensation After BAPCPA

The Bankruptcy Abuse Prevention and Consumer Protection Act, enacted
last October, added some severe restrictions on the ability of Chapter
11 debtors to adopt so-called "pay to stay" executive compensation
plans. [2]

New Code section 503(c) establishes the guidelines for insider
retention, bonus, and severance plans, also known as KERPS. [3] Under
the new evidentiary standards,the Code bars bonuses to corporate
insiders as an inducement to stay … Read the rest

No One at the Helm: Trustee Appointed to Manage Death Row Records

Suge Knight’s hopes of maintaining control of Death Row Records
during its Chapter 11 reorganization were dashed on July 7, 2006, when
United States Bankruptcy Judge Ellen Carroll placed the company under
the management of a case trustee. Judge Carroll cited gross
mismanagement of the record company’s finances, stating, "it seems
apparent that there is no one at the helm." [1]

The Death Row case illustrates a pervasive tension in corporate
reorganizations: at what point does the interest of the creditors trump
the vested control of management, which may have driven the company
insolvent in the first place? Under certain conditions, the bankruptcy
court has the power to transfer control of the estate from the
debtor-in-possession to a trustee under section 1104(a) of the
Bankruptcy Code. [2]

The Death Row Records Bankruptcy

Rap mogul Marion "Suge" Knight epitomizes the life of ruthlessness
and violence glorified in the gangsta rap genre … Read the rest

Can Congress Save the PBGC? Implications of a Delphi Corp. Distress Termination of Pension and Benefits Plans in Bankruptcy

The negotiation efforts of Delphi Corp.'s union employees took on
new urgency on March 31 as Delphi filed a motion with the U.S.
Bankruptcy Court seeking to reject its collective bargaining agreements
and modify its retiree benefits plans under sections 1113 and 1114 of
the Bankruptcy Code. [1] If Delphi's pension and benefits obligations
are ultimately rejected and then terminated, it will have a profound
effect on the Pension Benefit Guaranty Corp., the federal agency that
insures pension obligations. Already operating at a deficit, PBGC can
ill-afford to take on any of Delphi's estimated $10.7 billion in
under-funded liability for hourly employees' retirement benefits. [2]
In response to the recent distress terminations of pension plans in the
steel and airline industries, Congress has introduced several measure
to bolster the PBGC. As a consequence, Chapter 11 debtors may find it
more difficult to avoid pension liability as part of a reorganization… Read the rest

Bankruptcy Judges Take on “Inane” Credit Counseling Requirements

While bankruptcy judges are obliged to apply and uphold the rule of
law as specifically set out by Congress, some have chosen to publicly
air their misgivings about the lack of discretion left to  judges to
administer bankruptcy cases by the 2005 amendments to the Code. A
recent order by Judge Monroe of the Western District of Texas has
gained widespread attention for its scathing attack on the credit
counseling requirement. [1] It remains to be seen whether bankruptcy
judges and practitioners will be able to prompt review of this
provision, but the frustration evident in Judge Monroe's decision has
sent Congress a clear message.

The
credit counseling prerequisite to filing a bankruptcy petition is just
one example of how the 2005 Bankruptcy Abuse Prevention and Consumer
Protection Act has made bankruptcy relief more expensive, time
consuming, and restrictive than before. One initial study suggests that
the credit counseling industry … Read the rest

The Bankruptcy Exception to State Sovereign Immunity

On January 23, 2006, the U.S. Supreme Court handed down its decision in Central Virginia Community College v. Katz
[1], holding that a state cannot assert its sovereign immunity as
grounds to block the avoidance of a preferential transfer to a state
agency under § 547(b)
of the Bankruptcy Code [2]. At the heart of the matter was whether
Congress overstepped its constitutional power when it enacted § 106(a) of the Code, which waives state sovereign immunity in bankruptcy.

However fair the outcome may be, the rationale of the Court cannot
be reconciled with its prior decisions addressing Congress's ability to
waive state sovereign immunity under its Article I powers. Indeed the
Court's theory of implied waiver does little to justify why there
should be a "bankruptcy exception" at all. On its face, Katz
may be expected to open the door to broader Congressional abrogation of
state sovereign immunity in … Read the rest

Bankruptcy Abuse Prevention Takes Aim at Attorneys

"I don't
think you can make a lawyer honest by an act of legislature. You've got
to work on his conscience. And his lack of conscience is what makes him
a lawyer." [1]

While
the lawyer joke is an art form dating back centuries, it is not
actually the case that firms throughout the country are staffed with
snakes, shysters, and snollygosters. Nor is there much evidence that
attorneys who counsel clients through bankruptcy proceedings are a
particularly shady lot. So it has come as a surprise to many attorneys
that Congress has enacted strict requirements, backed by monetary and
criminal sanctions, for attorneys practicing in consumer bankruptcy.
The burden of personal liability raises fundamental questions about the
role of the attorney and the sanctity of the attorney-client
relationship under the new bankruptcy law.

As
a whole, the Bankruptcy Code as currently in effect reflects an
underlying disapproval of bankruptcy … Read the rest

Under Pressure: Delphi Files Chapter 11 in Advance of New Law

On Saturday October 8th, Delphi Corporation ended the intense
speculation of media and industry watchers by filing for Chapter 11
bankruptcy protection in the U.S. Bankruptcy Court for the Southern
District of New York.[1]  Sources inside Delphi had indicated as late
as Friday that such a move was likely unless Delphi could negotiate a
last-minute reprieve in the form of a bailout package from its largest
creditors, General Motors and the United Autoworkers Union.

While Delphi is surely struggling, it is not currently strapped for
cash. So why file now? The answer lies in both the legal climate and in
business strategy.

Avoiding the New Bankruptcy Law

Delphi Corporation, along with 38 domestic subsidiaries and affiliates, filed voluntary petitions per 11 U.S.C. §
311 of the Bankruptcy Code, seeking relief under Chapter 11. [2]  In
one of the 40-plus motions filed on Saturday, Delphi requested joint
administration [3] to allow … Read the rest