Bankruptcies under Subchapter V of Chapter 11 soared to a record high of filings in a single day as the debt limit of $7 million was reverted back to $3 million, with 91 filings on June 20, exceeding the typical volume of eight to 10 filings in a typical business day. Originally intended to last only one year, the higher limit was extended twice, with filings surging both times as the deadline approached. The law introducing Subchapter V went into effect in 2020, with the goal of making Chapter 11 bankruptcies faster and less expensive for small businesses by eliminating the need for disclosure statements and creditors’ committees. The Subchapter also removes the absolute priority rule that mandates priority claims to be fully repaid before the lower-ranking claims receive recoveries. In a report from Law360, Jonathan Grasso of YVS Law LLC represented Julian’s Recipe, a packaged, frozen baked goods company…
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In a recent lawsuit against a Kansas car dealership, an independent arbitrator found the dealership to be liable for more than $14.8 million in damages for customers whose information was falsified on their credit applications. For these customers, this resulted in higher loan payments and increased financial stress. In a report from Missouri Lawyers Media, the lead attorney for the 31 claimants, Ken McClain, said that the dealership was falsifying the information on the applicants’ credit applications. Information like income and job titles were inflated to ensure the applicants would qualify for larger loans, likely loan amounts that these customers would have trouble making repayments on. For example, McClain described that one claimant who works as a front desk clerk at a hotel was described as a ‘front end logistics specialist’ on the credit application submitted for her. With this falsified information, customers were receiving larger loans, which the dealership…
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Banks continue to see an increase in delinquencies on commercial real estate (CRE) loans as interest rates continue to rise and work-from-home policies create empty workspaces. As demand for office space decreases, borrowers have begun to default on their loans, forcing banks and lenders to sell their loans at significantly lower rates or engage in other potentially costly and time-consuming workouts. In reports for the third quarter of 2023, many banks show significant losses, largely due to CRE loans. Morgan Stanley reported setting aside $134 million for credit losses, stating that this was primarily due to “deteriorating conditions in the commercial real estate sector,” according to an article from Yahoo!, Other institutions, like Bank of America, have reported that their loans increased as well. Bank of America’s nonperforming loans increased to nearly $5 billion in the third quarter from $4.27 billion in the second quarter. They attributed this increase to…
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