Last Updated 11/07/05

News and Information from Fort Lauderdale lawyer David Langley
See also our pages on Bankruptcy Reform Legislation , the Winn-Dixie Bankruptcy, and Corporate and Civil Matters.

IRS to Launch Collections Program with Private Contractors

This coming February, the IRS plans to hire three private contractors in order to launch their new tax collection program. The number of outside contractors is expected to grow over the next three years and eventually incorporate ten to twelve private-sector agencies. The firms will only collect on the basis that taxpayers acknowledge that certain dues are owed. Contractors will have limited contact, and will not hold any law enforcement authority.

Winn-Dixie Stores, Inc.

Winn-Dixie Stores, Inc., filed for bankruptcy pursuant to Chapter 11 on February 21, 2005 in the Southern District of New York. An order was entered on April 13, 2005, transferring the cases to the Middle District of Florida, Jacksonville Division. These cases are assigned to The Honorable Jerry A. Funk.

According to the Associated Press, the supermarket chain is hoping to resolve its deep financial crisis by closing more than a third of its stores and slashing 22,000 people from its work force under a proposed reorganization plan to leave Chapter 11 protection.

Winn Dixie said it will close or sell 35 percent, or 326 of its 913 stores in the coming months. It will cut 22,000 of 78,000 positions and an additional 500 workers will lose their jobs in the company's corporate headquarters in Jacksonville.

Winn-Dixie Stores Inc. will cease operations in four states — Tennessee, Virginia and North and South Carolina — and will trim operations in its five remaining states. Those are Florida, Georgia, Alabama, Mississippi and Louisiana. It also has stores in the Bahamas.

The company said it will try to find buyers for the closing stores and ask the new owners to retain as many employees as possible. "We made a very detailed announcement and I am confident we are making the right decision," said Peter Lynch, company president and CEO.

In a statement, Winn-Dixie also said it will try to sell six dairy plants, its pizza plant in Montgomery, Ala., and its Chek Beverage/Deep South Products plant in Fitzgerald, Ga., which produces Chek soda, shelf-stable juices and condiments. If buyers are not found, Winn-Dixie said it would continue to operate the Chek Beverage plant and its Hammond, La., and Plant City, Fla., dairies.

The company also said that is working to find a third party to produce elsewhere the items made at its Astor Products plant in Jacksonville and the condiments at the Deep South plant. Those plants will then be closed.

Lynch had said for months that the reorganized company must be smaller and he said it was difficult to determine which stores to close.

Winn-Dixie is leaving a number of larger markets, including Atlanta, Augusta and Savannah in Georgia; Charleston, Columbia and Greenville-Spartanburg in South Carolina; Charlotte, Greensboro-High Point and Raleigh-Durham in North Carolina; Chattanooga, Tenn.; Columbus, Tupelo and Jackson in Mississippi and Alexandria, La. An announcement on corporate restructuring will be made later this summer.

Burt P. Flickinger III, managing director of Strategic Resources Group in New York, said he doesn't believe the changes will save Winn-Dixie, which must still battle Publix Super Markets and Wal-Mart.

"They really need to close over 500," Flickinger said. "Sadly, they cut too far at corporate headquarters and haven't sufficiently cut the number of stores."

Mark Hamstra of Supermarket News said Winn-Dixie still needs to define itself and find a niche. But he thinks the decision to close stores should help.

"It looks like they are getting rid of their weakest performing stores. That should help reduce their overhead and bring them closer to profitability," Hamstra said.

Winn-Dixie, which filed for bankruptcy on Feb. 21, is No. 182 on the 2005 Fortune 500 list of the country's largest corporations. Winn-Dixie was ranked No. 8 among 19 food and drug store companies, while Lakeland-based Publix was ranked No. 6 among supermarkets and No. 117 overall.

The Jacksonville-based supermarket chain listed assets of $2.2 billion and liabilities of $1.9 billion in the February bankruptcy filing.

PRESIDENT SIGNS BANKRUPTCY REFORM LEGISLATION

President Bush signed the Bankruptcy Reform Bill into law on Wednesday, April 20, 2005. The Senate passed the Bankruptcy Reform bill on March 10th and the House then submitted and passed the identical bill on April 14th without amendment.

Effective Dates

Some provisions of the new bankruptcy legislation have specific effective dates. All other provisions take effect 180 days from April 20, 2005.

Sections 308, 322 and 330, all concerning the homestead exemption, take effect immediately. This will have a major impact on many Florida residents. See the discussion below on homestead protection. Section 1234, concerning involuntary bankruptcies, takes effect immediately on passage and will apply to existing cases as well. Most other provisions concerning consumer bankruptcies fall under the general effective date of 180 days after enactment.

Bankruptcy Filings Set New Calendar Year Record In 2003

Bankruptcy filings in the federal courts broke a record during calendar year 2003, according to data released by the Administrative Office of the U.S. Courts. Total bankruptcies filed in the 12-month period ending December 31, 2003, totaled 1,660,245, up 5.2 percent from the previous record of 1,577,651 bankruptcies filed in the 12-month period ending December 31, 2002. The calendar year total for 2003, however, did not break the historic high for a 12-month period, which was reported for the 12-month period ending September 30, 2003, at 1,661,996. The overwhelming percentage of bankruptcy filings are non-business (personal) filings, totaling 1,625,208 in calendar year 2003, up 5.6 percent from the 1,539,111 personal bankruptcies filed in calendar year 2002. The number of business filings continued to decline, totaling 35,037 in 2003, down 9.1 percent from the 38,540 business bankruptcies filed in the 12-month period ending December 31, 2002. Large public company cases filed under chapter 11 fell to 142 in 2003, down from 191 in 2002.

Bill allowing for private collection of tax debt moving through Congress

After multiple failed attempts at cloture, Senate Republicans and Democrats reached an agreement to move forward on S. 1637, a bill which includes a provision allowing for private debt collection of outstanding federal tax debt.

Greenspan says U.S. May Need to Trim Retiree Benefits

Federal Reserve Chairman Alan Greenspan said on February 26th that Congress should consider cuts to U.S. Social Security benefits by raising the retirement age and offering less generous adjustments to future payments. Urging swift action on a spiraling budget deficit Greenspan told the House Budget Committee that spending restraint was the best way to meet future commitments rather than raising taxes and endangering the economy. "The exact magnitude of such risks is very difficult to estimate, but they are of enough concern, in my judgment, to warrant aiming to close the fiscal gap primarily, if not wholly, from the outlay side," he said. Greenspan warned a major budget crunch looms as early as 2008 as tens of millions of baby boomers begin to qualify for early retirement benefits. "This dramatic demographic change is certain to place enormous demands on our nation's resources -- demands we almost surely will be unable to meet unless action is taken," he said. "For a variety of reasons, that action is better taken as soon as possible," he said, reported the newswire.

NEW BOOK RINGS ALARM ON FINANCIAL STATUS OF AMERICAN MIDDLE CLASS

In “The Two-Income Trap: Why Middle-Class Mothers & Fathers Are Going Broke" (Basic Books, $26), authors Elizabeth Warren and Amelia Warren Tyagi report the following alarming statistics:

• In the past 25 years, the number of families in bankruptcy has increased 400 percent, and housing foreclosures are up 350 percent.

• The average middle-class family can no longer buy a house without putting both husband and wife to work.

• Parents with young children are more than twice as likely to go bankrupt than any other segment of the population.

• More than 90 percent of those in bankruptcy would qualify as middle-class.

If these trends continue, the authors contend, more than 5 million families with children will file for bankruptcy by the end of this decade.

"That would mean that across the country nearly one of every seven families with children would have declared itself flat broke, losers in the great American economic game," Warren and Tyagi write.

 

Copyright © 2005 by David W. Langley. All rights reserved.