News and Information on Bankruptcy cramdown legislation and other issues from Fort Lauderdale lawyer David Langley. See also our pages on Bankruptcy Reform Legislation and Corporate and Civil Matters.

Chrysler, LLC
Chrysler, LLC, filed for bankruptcy pursuant to Chapter 11 of the Bankruptcy Code on Thursday, April 30, 2009. CNN Money reports that a deal has been reached to combine the company with Fiat in order to allow Chrysler to stay in business.

The bankruptcy filing, which was made in bankruptcy court in New York, comes after some of Chrysler's smaller lenders refused a Treasury Department demand to reduce the amount of money the troubled automaker owed them.

In remarks at the White House, President Obama said that the bankruptcy filing is not a failure for the company but "one more step on the path to Chrysler's revival."

Obama vowed the bankruptcy process would be quick, efficient and controlled. A senior administration official predicted it would be completed within 30 to 60 days. The combination with Fiat is also due to close during that period of time. While this appears optimistic, it does indicate that a lot of planning has gone into this particular bankruptcy case. For more information Click here.

"Cramdown" Proposal would allow Bankruptcy Judges to modify terms of mortgages

(RTTNews) - The Senate Thursday, Apri 30, 2009, blocked an attempt to allow bankruptcy courts to modify the terms of mortgages.

By a vote of 45 to 51, Sen. Dick Durbin, D-Ill., failed to attach an amendment to permit mortgage modification, called 'cramdown' by its detractors, to a housing bill being considered by the Senate.

Durbin laid the failure of the measure, which he said was backed by President Barack Obama, squarely at the feet of the banking industry and their lobbyists, accusing them of negotiating in bad faith in his attempts to craft the legislation in a way that would not be too onerous.

"I am sick and tired of being asked to give billions of dollars to these banks when they won't in any way help the people who are facing mortgage foreclosure," Durbin said. "They're not renegotiating these mortgages and they refuse to support an effort to add legislation that would give them the keys to the courthouse door."

He added, "The American Bankers Association and the Community Bankers Association walked away from the table."

The actions of the bankers have soured Durbin on any further efforts to provide federal support for the banking and financial industry.

"If they have no sympathy for 8 million families that are facing foreclosure in this country, then I have no sympathy for them," he said. "A year ago, I brought this up and they said it's not that big a problem; two million foreclosures. Now we're at 8 million foreclosures and they say its not that big a problem."

He added, "I don't believe we'll get out of this recession until we deal honestly forthrightly with this foreclosure crisis. And I just don't know what it will take to bring people around to the belief that these bankers don't have the right formula for the future of this country's economy.

The House passed the Bill HR 1106 ) on March 5, 2009. Greater opposition to the bill was expected in the Senate.

One consumer group estimates that 600,000 foreclosures could be avoided over the next two years by making a simple change to the bankruptcy code.The Center for Responsible Lending (CRL) calls it a tweak, but it could be a significant change for homeowners and the market for mortgage-backed securities.

They argue the modification could prevent 600,000 homes falling into foreclosure, and thus help lenders just as much as borrowers. However, other groups, like the American Bankruptcy Institute and the Financial Services Roundtable, warn the proposal is far from minor, and that it could further destabilize mortgage markets.

Florida Senator Mel Martinez may back the Cramdown Bill

Politico.com reports that Republican Sen. Mel Martinez is seriously reconsidering his opposition to the “cram down” mortgage proposal — giving Democrats hope that they could reach the critical 60 vote mark on a major housing initiative.

“I was against it, but I’m evolving in my thinking,” Martinez said in an interview. “I’m not a definite no on it; I am maybe a yes.”

Martinez’s changing position is a boost for Senate Democratic leaders who are faced with the usual challenge of finding 60 votes to pass the legislation that contains the bankruptcy measure. Republicans, spurred by the mortgage industry, have long opposed the legislation.

Martinez has good reason to be open-minded about reducing foreclosures. Florida has been slammed by the crisis. It has the second-highest foreclosure rate in the country, with foreclosures jumping more than 133 percent from 2007.

“I’m trying to analyze the reasons it would be so different for a home loan than it is for so many other loans. I’m having a hard time justifying that in this economy,” Martinez said. “I’m very open to analyzing the cram down in light of where we are economically and everything else.”

KB Toys files for Bankrupty Protection

KB Toys Inc, one of the largest U.S. toy retailers, filed for Chapter 11 bankruptcy protection on December 11, 2008, with a plan to close all its stores and begin liquidation sales in the middle of the holiday season.

KB Toys is the latest retailer to succumb to a sharp decline in consumer spending this year. Others like apparel retailer Steve & Barry's to jeweler Whitehall Jewelers Holdings filed for bankruptcy protection earlier this year and started selling their merchandise at deep discounts.

"The liquidity crisis is directly attributable to a sudden and sharp decline in consumer sales due to macro-economic forces," KB Toys said in court papers.

KB Toys, which runs about 460 stores, said it will try to find a buyer for its wholesale distribution unit as it conducts going-out-of-business sales.

Circuit City Files for Chapter 11 Protection

November 10, 2008 - Circuit City Stores, the nation's second-largest consumer electronics retailer, said that tightened credit and rapidly declining consumer spending forced it to file for bankruptcy protection, underscoring the perils facing retailers as they head into the crucial holiday season during the worst economic crisis in a generation.

The season generally accounts for about 20 percent of all retail sales, providing the cash that stores use to pay for merchandise ordered on credit earlier in the year. But as Circuit City's troubles mounted, its suppliers feared that it would not be able to pay its bills.

David Langley handles bankruptcy cases in Miami, Hollywood, Fort Lauderdale, Plantation, Pembroke Pines, Pompano,Coral Springs, Deerfield, Boca Raton, Delray and West Palm Beach.

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