The 5th Circuit had an opportunity to interpret the 'without deduction for costs of sale or marketing' language of §506(a) with respect to the valuation of a lien on a mobile home in In the Matter of: KAYLA GLENN, Debtor 21ST MORTGAGE CORPORATION, Appellant, v. KAYLA GLENN, Appellee., No. 17-60533, 2018 WL 3846202, (5th Cir. Aug. 13, 2018).  The case involved a chapter 13 debtor valuing a purchase money lien on a mobile home in a chapter 13 case.  The creditor filed a claim for $27,714.  Debtor's plan provided for amortization of the value over the life of the plan at a 5% interest rate.  The creditor objected to confirmation, primarily over whether the $4,000 alleged cost of necessary delivery and setup services for the mobile home should be included.  Since the mobile home was delivered and setup prepetition, these expenses will not be incurred again for debtor.    The bankruptcy court excluded these fees, finding that to include them in a home that was already delivered would be inconsistent with the statutory mandate to consider the 'proposed disposition or use' of the property.  The district court agreed in light of Associates Commercial Corp. v. Rash, 520 U.S. 953 (1997),   The creditor asserted that replacement value 'without deduction for costs of sale or marketing' requires inclusion of delivery and setup costs.   Further, that 'replacement value', defined as 'the price a retail merchant would charge for property of that kind' necessarily includes delivery and setup costs.  Finally it argued that the proposed disposition or use language did not apply because this language from §506(a)(2) was added after Rash and applies whether or not the debtor retains the property.  The debtor did not file a brief.  Upon request, the US Trustee's office submitted a brief supporting the district court's position, and emphasizing that §506(a)(2)'s exception for 'costs of sale or marketing' does not apply because deliver and setup costs are not 'costs of sale', which refers to the seller's costs of doing business.  The 5th Circuit first examined the language of the statute.  If the debtor is an individual in a case under chapter 7 or 13, such value with respect to personal property securing an allowed claim shall be determined based on the replacement value of such property as of the date of the filing of the petition without deduction for costs of sale or marketing. With respect to property acquired for personal, family, or household purposes, replacement value shall mean the price a retail merchant would charge for property of that kind considering the age and condition of the property at the time value is determined.11 U.S.C. § 506(a)(2).   The language should be read consistently with §506(a)(1).  In Rash the Supreme Court stated in interpreting the language that is now in §506(a)(1) that the proposed disposition or use of the collateral is of paramount importance to the valuation question.1  The court noted that valuation should exclude the value of items the debtor does not receive when he retains the vehicle, such as warranties, inventory storage, and reconditioning.    Under §506(a)(2) the valuation of a mobile home is determined by its replacement value, i.e. the price a retail merchant would charge for property of that kind considering the age and condition of the property at the time value is determined, considering its proposed use and disposition.  the phrase 'of that kind' means a mobile home of that kind that is already fixed in place, and therefore not in need of delivery, setup, or other connection costs.2  Thus, given the nature of the property at issue and in light of the property's proposed disposition or use, the 5th Circuit held that delivery and setup costs on a mobile home retained by a debtor must be excluded from the home's valuation under §506(a).    This is not inconsistent with §506(a)(2)'s definition of replacement value as including costs of sale or marketing.  Such inclusion does not extend to costs tangential to the replacement of a mobile home.  Costs of sales and marketing are repeat costs of doing business, while delivery and setup costs are completed service charges which will not be repeated.  Instead, they are more akin to sales taxes and service agreements, separate and apart from that value.  Michael Barnett www.hillsboroughbankruptcy.com1 520 F.2d at 962↩2 ; In re Prewitt, 552 B.R. 790, 799 (Bankr. E.D. Tex. 2015) (reasoning that § 506(a)(2) is consistent with Rash because it defines “replacement value of collateral securing a consumer debt ... as the price a retail merchant would charge for the property itself—not for tangential services that will not be actually performed”).↩

Sentences in Pennsylvania are not arbitrarily made. A judge cannot say, “you, sir, are sentenced to 25 years of prison.” It doesn’t work like that. In Pennsylvania, we have what’s known as “Sentencing Guidelines.” These guidelines prescribe a range of possible sentences that a judge may impose so that the sentence is not arbitrary, but […] The post How Criminal Sentencing Works in the Pennsylvania Criminal Justice System appeared first on .

By Gregory BresigerDespite a booming economy, many Americans are having trouble paying credit card bills, industry observers warn. An increasing number of auto borrowers are also asking for more time to pay. These trends disturb card industry experts. “It is a problem we should watch,” says Bill Hardekopf, founder of LowCards.com. “I would say that credit card defaults is definitely a cause for concern,” says Joe Resendiz, an analyst with ValuePenguin, which tracks the credit industry. Resendiz noted the recent second-quarter net credit card default numbers rose for Bank of America and JP Morgan. In an otherwise rosy report, the amount of in-default charge card bills rose by 10 percent and 9 percent, respectively, compared with the same period in 2017. But JP Morgan charge-off rates remain “low” on a historical basis, said spokeswoman Betty Riess. The latest numbers also come at the same time that those with the poorest credit card records — subprime borrowers — saw their credit card debt increase by 26 percent, ValuePenguin said. Another observer, LendingTree.com, noted a $16.25 billion increase in revolving debt in May. “This was the biggest May jump since 1995,” it said. Revolving debt is the card debt that is carried from month to month, usually at high interest rates because a card, unlike a house, is an unsecured debt. Revolving and non-revolving debt is currently at $3.86 trillion, LendingTree said. It predicts it will pass $4 trillion this year. Some borrowers, credit industry analysts say, are forgetting the disasters of 2008. That’s when a sudden recession left many Americans without jobs and big banks with huge unpaid debts. Resendiz said most big banks are seeing default rates rise. The credit card default rate rose in the latest Federal Reserve numbers to 3.65 percent.This was the seventh straight quarterly increase, yet still far from the 2008 numbers, when default rates were above 10 percent. © 2018 NYP Holdings, Inc. All Rights Reserved.

By Winnie Hu and Mariana AlfaroJenine James no longer worries about getting stranded when the subways and buses are unreliable — a constant frustration these days — or cannot take her to where she needs to go. Her Plan B: Uber.So Ms. James, 20, a barista in Brooklyn, sees New York’s move to restrict ride-hail services as not just a threat to her own convenience and comfort but also to the alternative transportation system that has sprung up to fill in the gaps left by the city’s failing subways and buses. She does not even want to think about going back to a time when a train was her only option, as unlikely as that might be.“It was bad, so imagining going back, it’s terrible,” she said.The ride-hail cars that critics say are choking New York City’s streets have also brought much-needed relief to far corners of the city where just getting to work is a daily chore requiring long rides and multiple transfers, often squeezed into packed trains and buses. The black cars that crisscross transit deserts in Brooklyn, Queens, the Bronx and Staten Island have become staples in predominantly black and Hispanic neighborhoods where residents complain that yellow taxis often refuse to pick them up. They come to the rescue in the rain, and during taxi shift changes, when rides are notoriously hard to find even in the heart of Manhattan.New York became the first major American city on Wednesday to put a halt on issuing new vehicle licenses for Uber, Lyft and other ride-hail services amid growing concerns around the world about the impact they are having on cities.The legislation calls for a one-year moratorium while the city studies the booming industry and also establishes pay rules for drivers. It was passed overwhelmingly by the City Council and is expected to be signed into law by Mayor Bill de Blasio, a Democrat, who attempted to adopt a similar cap in 2015 but abandoned the effort after Uber waged a fierce campaign against him.The cap was supported by many transportation analysts who say the ride-hail cars have contributed to worsening traffic in Midtown and Lower Manhattan, and by taxi drivers whose financial plight has become precarious in the past year, underscored by a spate of suicides. Mr. de Blasio held a celebratory rally on Thursday with Corey Johnson, the City Council speaker who wrangled widespread support for the cap among his colleagues by focusing on the plight of taxi drivers. Bruce Schaller, a transportation consultant who has studied the ride-hail services, said that it was only a matter of time before city officials took action. Since Uber successfully fended off a proposed limit three years ago, the number of for-hire vehicles in the city has soared from about 63,000 to more than 100,000.“You can’t have Uber and Lyft growing forever in Manhattan without having total gridlock,” Mr. Schaller said. “At some point, the city was going to have to say enough — and they have now said enough.”But Alix Anfang, a spokeswoman for Uber, said the city’s “12-month pause” on issuing new vehicle licenses will threaten a reliable transportation option for New Yorkers without improving the reliability of the subways outside Manhattan. “As Uber continues to grow in communities outside of Manhattan, we will do whatever it takes to ensure that no New Yorker who needs a ride is left stranded,” she said.Nisha James, 34, a nanny from Brooklyn, said she felt the cap on the ride-hail services had been a Manhattan-centric decision without regard for what it will mean for riders in the other boroughs. “I don’t think they were thinking about anywhere else,” she said, adding that the cap will likely send her and other Uber riders back to public transit when they cannot get a car.In the Bronx, Jeff Gutierrez, 26, said that he only takes Uber now to commute to his job in media sales for a cable news station across the borough. Uber takes 15 minutes. The bus takes 1 hour and 30 minutes and is so crowded he cannot always get a seat. There is no contest. “We should not be stuffed like sardines in a bus,” he said. “Uber is so affordable and convenient. I will never ride the bus or train again as long I work in the city.”Uber officials said that they planned to recruit drivers who already hold for-hire vehicle licenses in the city to work for Uber, a group that represents as many as 35,000 potential new drivers. Moreover, since the moratorium is on new vehicles — not new drivers — they also hoped to maximize the use of existing vehicles by encouraging their owners to allow other drivers to use them when they are sitting idle.Though the cap would apply citywide, the ride-hail companies have warned that it could lead to fewer cars and worse service with longer wait times and higher prices, particularly in the boroughs outside Manhattan. With a limited supply of vehicles, too many drivers could opt to remain in Manhattan picking up well-heeled tourists and business workers, leaving too few drivers in the other boroughs where ridership has been growing the fastest. Yellow taxis, which are similarly limited in number, have traditionally been concentrated in Manhattan’s business districts, though they can legally operate anywhere in the city.Mr. Schaller acknowledged such concerns, but added that unlike taxis, the ride-hail cars are dispatched with technology that allows the drivers to see exactly where the calls are coming in. He said that if they see more calls coming from, say, Queens, they will go there. “Water doesn’t bunch up at one end of the lake, it levels off across the whole lake,” he said. “The drivers chase the money — and if the money is all over the city — they go all over the city.”Not all fans of the ride-hail services were disappointed by the regulations. Shiri Wolf, 38, a lawyer who recently moved back to the Upper West Side, said that even though she has come to rely on the ride-hail services, something needed to be done about the “horrendous” traffic on city streets.“In the five years I’ve been gone, I think traffic must have doubled,” she said. “It’s fair to have cabbies earn a decent living, and they may have some efficiencies to gain, to learn from Lyft and Uber, but on the whole they’re more expensive because they’re regulated and I think regulation is a way to keep things fair for everybody.”Still, some riders are bracing for the worst. Carmel Maurice, a client coordinator from Brooklyn, was seething as she waited for an Uber outside the Atlantic Terminal, a major transit hub in Brooklyn, on Thursday morning, less than 24 hours after the legislation passed. “I feel like it’s unfair,” she said, adding that she had opted out of public transit in Brooklyn because “it’s never reliable, it’s never on time.”Darella Jasper, a Brooklyn security worker, said that if the rides become more expensive, she might have to cut back on her use of Uber and Lyft, even though they are the easiest way for her to get around Brooklyn and Queens. “To get from point A to point B,” she said. “We’re just going to have to find other alternatives.”Copyright 2018 The New York Times Company.  All rights reserved.

  In In re: ROBERT ANTHONY ARTHUR & KALAIVANI ARTHUR, Debtors. COOSEMANS MIAMI, INC., Plaintiff, v. ROBERT ANTHONY ARTHUR & KALAIVANI ARTHUR, Defendants., No. 17-17829-BKC-RAM, 2018 WL 3816761 (Bankr. S.D. Fla. Aug. 7, 2018) Judge Mark ruled on a §523(a)(4) claim in a chapter 7 case of a produce dealer having fiduciary duties under the Perishable Agricultural Commodities Act (PACA).  This act creates a trust to protect produce suppliers like plaintiff.   The debtor/defendants, Robert & Kalaivani Arthur, owned a company that purchased and sold wholesale produce.  Prior to the bankruptcy the plaintiff's, Cooseman's Miami, sold produce to the Arthurs and, on nonpayment, sued them for the unpaid balance, alleging a violation of PACA.  The parties entered into a settlement agreement wherein the Arthur's agreed to be liable to plaintiffs in the amount of $298,048, of which $280,581 was due as of the bankruptcy date.   Plaintiff alleges that its produce was the statutorily protected corpus of a PACA trust, and that when the produce was sold the proceeds also became the corpus of the PACA trust, and Defendants breached their duty to ensure sufficient proceeds remained in the trust to satisfy Plaintiff's invoices in full.  Defendants filed a motion to dismiss for failure to state a claim.  Judge Mark first examined the requirements under §523(a)(4).  The meaning of 'fiduciary capacity' under this section is a question of federal law, and is narrower than the general term 'fiduciary duty.'  It is to be construed only in reference to technical trusts.  The Eleventh Circuit has not defined a technical trust, but does provide examples of trusts that are not technical trusts.  A technical trust is not a trust created involuntarily, by operation of law, to right a wrong, like a resulting or constructive trust.  Technical trust is more like a trust created by voluntary agreement, i.e. an 'express' trust.1   Statutory trusts fall in between these examples.   §523(a)(4) only applies to debts incurred while acting in a fiduciary capacity.  Thus, the hallmarks of a technical trust must exist prior to any alleged defalcation for  trust to qualify as a technical trust.  Thus, a PACA trust is not a technical trust until a court imposes additional duties and restrictions after a prior showing of malfeasance.  This is supported by the 11th Circuit's prior PACA decision in  Frio Ice, S.A. v. Sunfruit, Inc., 918 F.2d 154 (11th Cir. 1990).  This decision held that a PACA trust is a trust ex maleficio, noting that the deistrict court should requir the PACA debtor to escrow proceeds from sales, and segregate and maintain these assets as the PACA trust upon a showing that the trust is being dissipated or threatened with dissipation. 2   In Frio Ice the Eleventh Circuit explained that segregation may be the only means by which a federal court can prevent dissipation, but also recognized that Congress allowed for PACA trusts to be non-segregated floating trusts because Congress sought to minimize the burden of the PACA trust on produce dealers.  Thus, while there is a pre-defalcation duty to maintain sufficient assets to pay sellers, there is no meaningful enforcement of that duty until there is proof of dissipation and a court order to segregate trust assets.  It is this requirement to segregate assets that is the hallmark of the type of trust relationship that would establish fiduciary capacity under §523(a)(4).  PACA trust assets may be commingles.  7 C.F.R. §46.46(b).  Courts interpreting PACA have read the statute and regulations as not requiring segregation.  Other bankruptcy courts from the middle district of Florida have referred to a three part test to find a technical trust: 1) a segregated trust res; 2) and identifiable beneficiary; and 3) affirmative trust duties established by contract or statute. 3   An additional problem with use of §523(a)(4) in the case of PACA trusts is that a PACA dealer has the right to use PACA trust assets for other purposes besides payment of the agricultural commodity sellers.  While the assets may not be dissipated, they can be used for practically any purpose. The fact that such trust funds can be used for non-trust purposes is another reason why such a trust cannot be a technical trust within §523(a)(4)   The majority of cases have found PACA trusts to be technical trusts, finding 1) the PACA trust res is identifiable, 2) a PACA trustee risks personal liability for failure to maintain in the PACA trust sufficient trust assets to satisfy the claims of PACA trust beneficiaries, and 3) a PACA trust is created upon receipt of perishable agricultural commodities without regard to malfeasance.   Judge Mark rejected this analysis on three grounds.  An identified trust res without a segregation requirement is insufficient.  In Frio Ice the 11th Circuit interpreted PACA as requiring neither seprate identification or actual segregation until after an alleged defalcation.   Further, the PACA dealer's duty to maintain trust assets so that they are freely available to satisfy outstanding obligations of sellers cannot be meaningfully enforced without mandated segregation.  The toothless enforcement of such pre-defalcation duty does not satisfy the stringent standards of fiduciary capacity.   Finally, while PACA expressly states that a trust is born upon receipt of perishable agricultural commodities, without material restraints on a PACA trustee's keeping or use of trust assets pre-defalcation it cannot qualify as a technical trust.   While PACA trusts identify trust assets and impose duties on produce dealers such as defendant, defendant was not acting in a fiduciary duty at the time of the alleged defalcation.  Judge Mark granted the debtor/defendant's motion to dismiss for failure to state a claim. 1 Quaif v. Johnson, 4 F.3d 950, 953 (11th Cir. 1993)↩2 Frio Ice, 918 F.2d at 159↩3 Donald Hanft, M.D., P.A. v. Church (In re Donald Hanft, M.D., P.A.), 315 B.R. 617, 623 (S.D. Fla. 2002)↩Michael Barnett www.hillsboroughbankruptcy.com

 By Emma G. FitzsimmonsNew York became the first major American city on Wednesday to halt new vehicle licenses for ride-hail services, dealing a significant setback to Uber in its largest market in the United States.The legislation passed overwhelmingly by the City Council will cap the number of for-hire vehicles for a year while the city studies the booming industry. The bills also allow New York to set a minimum pay rate for drivers.Uber has become one of Silicon Valley’s biggest success stories and changed the way people across the globe get around. But it has faced increased scrutiny from government regulators and struggled to overcome its image as a company determined to grow at all costs with little regard for its impact on cities.New York’s move to restrict the number of ride-hail vehicles and to establish pay rules for drivers — another step no other major city has taken — could provide a model for other governments that want to rein in the industry. New York’s aggressive stance also raises questions over how fast Uber can continue to grow as the company, which has been valued at $62 billion, plans to move toward an initial public offering next year.The proposal to cap ride-hail companies led to a clash among interest groups with taxi industry officials saying the companies were dooming their business and Uber mounting a major advertising campaign to make the case that yellow cabs have a history of discriminating against people of color.Mayor Bill de Blasio and Corey Johnson, the City Council speaker, said the bills will curtail the worsening traffic on the streets and improve low driver wages.“We are pausing the issuance of new licenses in an industry that has been allowed to proliferate without any appropriate check or regulation,” Mr. Johnson said before the vote, adding that the rules would not diminish existing service for New Yorkers who rely on ride-hail apps.Mr. de Blasio praised the bills and said he planned to sign them into law. The cap on new for-hire vehicles would take effect immediately.“More than 100,000 workers and their families will see an immediate benefit from this legislation,” Mr. de Blasio said, referring to the city’s army of for-hire drivers. “And this action will stop the influx of cars contributing to the congestion grinding our streets to a halt.”But Uber has warned its riders that the cap could produce higher prices and longer wait times for passengers if the company cannot keep up with the growing demand. Ride-hail apps have become a crucial backup option for New Yorkers swept up in the constant delays on the city’s sputtering subway, as happened on Wednesday when signal problems again snarled train lines across a large swath of the city. Ride-hail services have also grown in neighborhoods outside Manhattan where the subway does not reach.The battle over Uber’s future in New York has been prompted in part by growing concerns over financial turmoil among drivers — a problem underscored by six driver suicides in recent months. On Wednesday, a large group of drivers rallied outside City Hall before the vote and held signs displaying the names of the drivers who took their lives.New York is the latest city to grapple with questions over how to regulate the company. In London, Uber’s most lucrative European market, Uber recently regained its taxi license after the company agreed to stricter regulations, including providing the city with the trove of traffic data that the firm collects and has often been reluctant to share. Uber has also faced regulatory battles in American cities, like Austin, Tex., and in countries like Canada, Brazil and Italy.In Seattle, the City Council approved a bill allowing Uber drivers to form unions, but the measure has faced a legal challenge. Uber left Austin in 2016 after the City Council passed a measure requiring the company to perform fingerprint background checks, though Uber later returned to the city. The mayor of Honolulu recently vetoed a bill to cap price increases by Uber during busy periods.The company’s new chief executive, Dara Khosrowshahi, has embarked on a global charm offensive to repair the company’s image after a series of controversies, including complaints among workers over gender discrimination and harassment.Uber criticized the Council’s decision to approve the cap, but said the company would work to keep up with the increasing appeal of its service despite the limit on new vehicles. “The City’s 12-month pause on new vehicle licenses will threaten one of the few reliable transportation options while doing nothing to fix the subways or ease congestion,” Josh Gold, a spokesman for Uber, said in a statement.Anand Sanwal, chief executive of CB Insights, a software company that examines technology trends, said the cap could impact Uber’s public offering if it reduces revenues and emboldens other cities to take similar action.“If it changes their growth trajectory, that could have an impact on their valuation and the narrative around the company,” Mr. Sanwal said.Uber said the company would immediately reach out to tens of thousands of for-hire vehicle owners who are already licensed but work for other local car services and try to recruit them to work for Uber. The company said it would also continue to press for another solution, known as congestion pricing — a proposal to toll drivers entering Manhattan’s busiest neighborhoods and that would require approval from state lawmakers.Many experts believe congestion pricing is the best way for New York City to fix congestion and secure the funds needed to fix the subway. Mr. Johnson supports the idea, but Mr. de Blasio has opposed it. Gov. Andrew M. Cuomo, who controls the subway, has said he will push for congestion pricing during the next state legislative session to help pay for an ambitious, multibillion dollar overhaul plan for the subway.The City Council approved the cap in a 39-to-6 vote. Councilman Eric Ulrich, a Republican from Queens, said he opposed the cap, arguing that limiting Uber to help yellow taxis was similar to regulating Netflix, the streaming service, to help Blockbuster, the video rental chain.The legislation allows for the city’s taxi commission to add more licenses if there is a clear need for more vehicles in some neighborhoods. In New York, many Uber drivers work full time and the city regulates Uber vehicles as part of the for-hire vehicle industry, which is different than other cities.The City Council also moved recently to regulate Airbnb, another tech company that has upended the hotel industry. Mr. Johnson, a Democrat who became City Council speaker in January, has quickly taken bold steps to make a name for himself on high-profile issues, including convincing the mayor to pay for half-price MetroCards for poor New Yorkers.Many taxi and Uber drivers say they support the cap proposal. They hope it will halt the flood of new vehicles clogging city streets and allow them to make more trips and improve their earnings. Uber and other ride-hail services could add new vehicles only if they are wheelchair accessible.Lyft, the second most popular app in New York, also criticized the vote: “These sweeping cuts to transportation will bring New Yorkers back to an era of struggling to get a ride, particularly for communities of color and in the outer boroughs,” Joseph Okpaku, a vice president at Lyft, said in a statement.The vote was a moment of vindication for Mr. de Blasio, a Democrat, who lost a bruising battle with Uber over a proposal for a cap in 2015. Since then, the number of for-hire vehicles in the city has surged to more than 100,000 vehicles, from about 63,000 in 2015, according to the city.The taxi industry has also been decimated by Uber’s rise. The price of a taxi medallion, which is required to operate a taxi in New York, has plunged from more than $1 million to less than $200,000.Elizabeth Cassarino, a yellow taxi driver, said she supports the cap and hopes it will improve business for taxis. As she drove a taxi through the clogged streets of Manhattan on Wednesday, she said her credit cards were maxed out and she had trouble making enough money to pay for food.“Finally,” she said. “We’re starving to death.”Copyright 2018 The New York Times Company.  All rights reserved.

Many individuals who owns taxi medallions that are “underwater” (the amount of the bank loan exceeds the value of the medallion) are interested in cramming down the taxi medallion loan so that the secured portion of the taxi medallion loan equals the value of the taxi medallion and the remainder of the taxi medallion loan would be treated as unsecured debt. As discussed below, the secured portion of the taxi medallion loan would be paid in full and the unsecured portion would be paid pennies on the dollar, allowing the medallion owner to pay the bank less than the full amount of its loan and keep the medallion!In the way of background, chapter 13 is not available to corporations or limited liability companies; pursuant to § 109(e) of the Bankruptcy Code, only individuals can file for chapter 13 bankruptcy. So, if a mini fleet was owned by a corporation or an LLC, a chapter 13 filing would not be permitted. The corporation or LLC could file for chapter 7 or chapter 11 bankruptcy (see our previous blog post on chapter 11 and cramdown). In our example, let’s assume that a taxi medallion is worth $175,000 and the individual who owns that medallion owes the bank $500,000 (the collateral for the loan is the taxi medallion). $175,000 of the debt would be deemed secured and the remaining $325,000 would be deemed unsecured.To file for chapter 13 bankruptcy, there are debt limitations; pursuant to § 109(e) of the Bankruptcy Code, an individual debtor must have unsecured debt of less than $394,725 and secured debt of less than $1,184,200.Chapter 13 also requires that the debtor (medallion owner) must have a job or regular source of income to fund the chapter 13 plan. The duration of a chapter 13 plan is generally three to five years. A medallion owner filing for chapter 13 must pay the bank and other creditors $1 more than they would get in a chapter 7 bankruptcy (the “best interest of creditors” test) and the bankruptcy judge must determine that the plan is feasible, meaning that the debtor will be able to make the payments under the plan.If the above requirements are met, and the bank will not agree to have its debt bifurcated into secured and unsecured components, the debtor must move to “cram down” the bank or secured creditor.Cramming down a secured creditor is detailed in § 1325(a)(5)(B) of the Bankruptcy Code and the relevant provisions are as follows:The first essential element in chapter 13 cramdown is that the plan provides for the retention of the lien securing the allowed secured claim by the bank.Chapter 13 cramdown requires that the chapter 13 plan propose to distribute property having a value, as of the effective date of the plan, at least equal to the amount of the allowed secured claim. The effective date of the plan will ordinarily be provided for by the plan and may be the date the order confirming the chapter 13 plan becomes final.Property can be distributed to the bank over the course of the plan period. The property may be property of the estate in existence at the date of confirmation, or deferred cash payments representing future earnings or income of the chapter 13 debtor, provided that at the time the plan becomes effective, the value of the property to be distributed in the future equals the amount of the allowed secured claim.Section 1325(a)(5)(B)(iii)(I) provides that if property to be distributed to the holder of an allowed secured claim is via periodic payments, such payments shall be in equal monthly amounts.The valuation conducted by the court under § 1325(a)(5)(B)(ii) is meant to determine whether the property to be distributed under the plan is at least equal in value to the amount of the allowed secured claim. In most chapter 13 cases, the property to be distributed under the plan will consist of deferred cash payments derived from the earnings or other future income of the chapter 13 debtor during the plan period.Section 1325(a)(5)(B)(ii) requires the court to determine the value of property to be distributed under the plan, as of the effective date of the plan. In other words, the court must ascertain the present value of the property to be distributed. Accordingly, in addition to deferred principal payments aggregating the face amount of the allowed secured claim, a chapter 13 plan need only propose to pay interest on the amount of the allowed secured claim at the appropriate rate (many courts have endorsed using the prime rate plus a risk premium of 1 to 3 percent) over the duration of the plan.Section 1325(a)(5)(B)(ii) requires that the present value of property to be distributed under the plan be not less than the amount of the allowed secured claim. The amount of the allowed secured claim is determined in accordance with the provisions of §§ 506(a) and (b) of the Bankruptcy Code. Section 506(a) provides that an allowed claim is either undersecured or oversecured, based on a determination by the court as to whether the property secured by the creditor’s lien has a value that is greater or smaller than the amount of the allowed claim.Therefore in our example, let’s assume that the interest rate on the $500,000 loan was 5% (the current prime rate) and the Debtor proposed a chapter 13 plan, to cramdown the bank, by allowing the bank to retain its lien during the term of the loan and repaying the bank $175,000 over 5 years at 6% (prime rate plus a risk premium of 1%), or monthly payments of $3,383.00, month, plus chapter 13 Bankruptcy Trustee payments of a maximum of 10% per plan payment, then the Debtor could confirm a chapter 13 plan and keep the medallion, if it made 5 years (60 months of payments) at $3,383 per month or $3,721.30 per month with the 10% Bankruptcy Trustee fee included. Besides a chapter 13 cramdown, a medallion owner may also want to consider a workout with the bank, a chapter 7 bankruptcy or surrendering the medallion to the bank. Individuals with underwater medallions should talk to an experienced bankruptcy attorney before deciding on what strategy to pursue. Jim

The July 2018 New York City Taxi & Limousine Commission (TLC) sales results have been released to the public. And as is our practice, provided below are James Shenwick’s comments about those sales results.1. The volume of transfers fell from June. In July, there were 36 taxi medallion sales.2. 22 of the 36 sales were foreclosure sales, which means that the medallion owner defaulted on the bank loan and the banks were foreclosing to obtain possession of the medallion. We disregard these transfers in our analysis of the data, because we believe that they are outliers and not indicative of the true value of the medallion, which is a sale between a buyer and a seller under no pressure to sell (fair market value).  Three transfers were estate sales for no consideration and two transfers were also for no consideration, which also do not reflect fair market value and which we have also excluded from our analysis.3. However the large volume of foreclosure sales (approximately 61%) is in our opinion evidence of the continued weakness in the taxi medallion market. 4. The nine regular sales for consideration ranged from a low of $160,000 (two medallions), $170,000 (two medallions), $175,000 (two medallions), $200,000 (one medallion) and an unusual high of $500,000 (two medallions). 5.  Accordingly, the median value of a medallion in July was $175,000.Please continue to read our blog to see what happens to medallion pricing in the future. Any individuals or businesses with questions about taxi medallion valuations or workouts should contact Jim Shenwick at (212) 541-6224 or via email at jshenwick@gmail.com.

By Emma G. Fitzsimmons and Aaron RobertsonAs New York City weighs new regulations for Uber and other ride-hail companies, a group that is often overlooked has entered the spotlight: the thousands of drivers who ferry New Yorkers across the city every day.It is their economic despair — underscored by six driver suicides in recent months — that has prompted the City Council to consider legislation this week to cap ride-hailing vehicles in the city and set a minimum pay rate for drivers.Both taxi and Uber drivers are optimistic that the city’s proposals would halt the flood of vehicles clogging city streets and start making it easier for drivers to earn a decent living.“There will be more wages for the drivers and things will get better,” S.N. Singh, a taxi driver for more than 40 years, said on a recent morning as he waited at the taxi parking lot near Kennedy International Airport.Drivers sometimes have to wait at the lot for two or three hours until they are dispatched to a terminal to pick up a passenger. They can often be found playing backgammon on trash bins, chatting in small groups or, on hotter days, napping in their cabs with the windows rolled down.With an influx of vehicles from Uber and other ride-hail apps, drivers are having a difficult time finding passengers and traffic is slower than ever, Mr. Singh said.“You can’t move in the city,” Mr. Singh said. “You can’t move anywhere.”The City Council is expected to vote on the proposals on Wednesday. Uber has mounted an aggressive and highly visible campaign against the cap, but Corey Johnson, the Council speaker, believes it has enough support to pass — a stark difference from three years ago when Uber defeated an earlier cap proposed by Mayor Bill de Blasio.The legislation would limit the number of vehicles at the current level by stopping the issuance of new for-hire vehicle licenses while the city studies the rapidly changing industry, which has been transformed by Uber’s remarkable rise. Ride-hail companies would be able to add new vehicles only if they are wheelchair-accessible. The legislative package, which Mr. de Blasio supports, would make New York the first major American city to impose a limit on ride-hail vehicles. The regulations could set a precedent for other cities seeking to rein in Uber.There is “resounding support” for the cap among drivers, said Bhairavi Desai, executive director of the New York Taxi Workers Alliance, a group that represents many taxi and Uber drivers. At a recent driver meeting after the Council revived the idea, Ms. Desai said: “It was the first real moment of hope that I’ve seen at any of our meetings in the last three years.”Her group has raised concerns about the recent driver suicides, which included three taxi drivers and were attributed in part to financial stress. Taxi medallions — the aluminum plates required for the roughly 13,500 yellow taxis in New York — once sold for more than $1 million but are now worth less than $200,000. The number of for-hire vehicles, which was 63,000 when the cap was proposed in 2015, has surged to more than 100,000 vehicles.Mr. de Blasio defended the cap on Friday and argued that it was part of his broader efforts on income inequality.“What’s happening across the board because of these huge corporations is they are driving down the wages of hard-working people who work in this field,” Mr. de Blasio said in a radio interview. “That alone is a reason to call a time out and assess what’s going on here.”Taxi and Uber drivers compete on the streets for passengers, but they find common ground on the cap. Uber drivers say they also struggle to make a good living after Uber takes its commission — sometimes more than 20 percent — and after paying for high vehicle costs. With no new vehicles joining the app, Uber drivers say they will have less competition and could spend more of their day carrying passengers, instead of driving around in an empty car.“There’s a better chance of drivers getting better trips,” said Jacky Lin, who has driven for Uber for more than a year and is part of another driver group called the Independent Drivers Guild.Lyft, the second most popular app, has joined Uber in opposing the cap and says that nearly a quarter of its drivers could leave because of routine turnover, leading to a shortage of drivers over the next year if a cap is adopted. Lyft’s leaders say the city declined an offer from the ride-hail companies to establish a $100 million fund to help taxi drivers in exchange for dropping the cap.“The bills as drafted didn’t really do anything to address the people who are in the most trouble right now, which are the taxi drivers with the underwater medallions,” Joseph Okpaku, a Lyft vice president, said in an interview.Uber has sent emails to its riders urging them to oppose the cap, arguing that it would raise prices and lengthen wait times for passengers. The cap would raise rental costs for Uber drivers who lease their vehicles and create a more restrictive leasing arrangement for drivers, said Josh Gold, a spokesman for Uber. Uber supports a separate bill before the Council to set minimum driver wages.“It boggles the mind that the Council would take action to help drivers with an earnings bill while at the same time hurt drivers who can least afford to pay higher rental costs through a cap bill,” Mr. Gold said in a statement. Uber also claims that it provides transportation alternatives to riders outside Manhattan who are ill-served by public transit or have grown tired of the constant subway meltdowns.But Carl Dauphin, a taxi driver since 1986, said it was time for the city to finally curb Uber’s growth.“They got to do it — they have no other choice,” Mr. Dauphin said as he waited at the Kennedy parking lot before picking up a passenger. “Their back is against the wall right now.”The problems in the industry have reached a breaking point because many New Yorkers have become fed up with constantly congested streets, he said.“It’s not about us no more; it’s about the people in the city,” Mr. Dauphin said. “Because when you have the city crawling with traffic, everybody’s losing.”Yousaf Latif, another longtime taxi driver, said he has started coming to the airport lot in search of a fare because Uber had taken over Manhattan.“We don’t have enough passengers for the yellow where we can survive and stay in the city,” Mr. Latif said.Some drivers hope the legislation will mean a return to the better wages that they earned in the past. Anila Nargis, an Uber driver, said she earned more money last year when Uber offered better driver incentives.“It was easier for my family,” she said, “because I don’t have to run that much and then I can spend a little more time with my kids.”Copyright 2018 The New York Times Company.  All rights reserved.

By Tara Siegel BernardFor a rapidly growing share of older Americans, traditional ideas about life in retirement are being upended by a dismal reality: bankruptcy.The signs of potential trouble — vanishing pensions, soaring medical expenses, inadequate savings — have been building for years. Now, new research sheds light on the scope of the problem: The rate of people 65 and older filing for bankruptcy is three times what it was in 1991, the study found, and the same group accounts for a far greater share of all filers.Driving the surge, the study suggests, is a three-decade shift of financial risk from government and employers to individuals, who are bearing an ever-greater responsibility for their own financial well-being as the social safety net shrinks.The transfer has come in the form of, among other things, longer waits for full Social Security benefits, the replacement of employer-provided pensions with 401(k) savings plans and more out-of-pocket spending on health care. Declining incomes, whether in retirement or leading up to it, compound the challenge.Cheryl Mcleod of Las Vegas filed for bankruptcy in January after struggling to keep up with her mortgage payments and other expenses. “I am 70, and I am working for less money than I ever did in my life,” she said. “This life stuff happens.”As the study, from the Consumer Bankruptcy Project, explains, older people whose finances are precarious have few places to turn. “When the costs of aging are off-loaded onto a population that simply does not have access to adequate resources, something has to give,” the study says, “and older Americans turn to what little is left of the social safety net — bankruptcy court.”“You can manage O.K. until there is a little stumble,” said Deborah Thorne, an associate professor of sociology at the University of Idaho and an author of the study. “It doesn’t even take a big thing.”The forces at work affect many Americans, but older people are often less able to weather them, according to Professor Thorne and her colleagues in the study. Finding, and keeping, one job is hard enough for an older person. Taking on another to pay unexpected bills is almost unfathomable.Bankruptcy can offer a fresh start for people who need one, but for older Americans it “is too little too late,” the study says. “By the time they file, their wealth has vanished and they simply do not have enough years to get back on their feet.”The data gathered by the researchers is stark. From February 2013 to November 2016, there were 3.6 bankruptcy filers per 1,000 people 65 to 74; in 1991, there were 1.2.Not only are more older people seeking relief through bankruptcy, but they also represent a widening slice of all filers: 12.2 percent of filers are now 65 or older, up from 2.1 percent in 1991.The jump is so pronounced, the study says, that the aging of the baby boom generation cannot explain it.Although the actual number of older people filing for bankruptcy was relatively small — about 100,000 a year during the period in question — the researchers said it signaled that there were many more people in financial distress.“The people who show up in bankruptcy are always the tip of the iceberg,” said Robert M. Lawless, a law professor at the University of Illinois and another author of the study.The next generation nearing retirement age is also filing for bankruptcy in greater numbers, and the average age of filers is rising, the study found.Given the rate of increase, Professor Thorne said, “the only explanation that makes any sense are structural shifts.”Ms. Mcleod said she had managed to get by for a while after separating from her husband several years ago. Eventually, though, she struggled to make ends meet on her income alone, and she fell behind on her mortgage payments.She collects a small Social Security check and works at an adult day care center for people with intellectual disabilities and mental health problems. For $8.75 an hour, she makes sure clients participate in daily activities, calms them when they are irritated and tries to understand what they need when they have trouble expressing themselves.“When I moved here from Los Angeles, I was wondering why all of these older people were working in convenience stores and fast-food restaurants,” she said. “It’s because they don’t make enough in retirement to support themselves.”Ms. Mcleod said she hoped that filing for bankruptcy would help her catch up on her mortgage so she could stay in her home. “I am too old to move out of here,” she said. “I am trying to stay stable.”The bankruptcy project is a long-running effort now led by Professor Thorne; Professor Lawless; Pamela Foohey, a law professor at Indiana University; and Katherine Porter, a law professor at the University of California, Irvine. The project — which is financed by their universities — collects and analyzes court records on a continuing basis and follows up with written questionnaires.Their latest study —which was posted online on Sunday and has been submitted to an academic journal for peer review — is based on a sample of personal bankruptcy cases and questionnaires completed by 895 filers ages 19 to 92.The questionnaire asked filers what led them to seek bankruptcy protection. Much like the broader population, people 65 and older usually cited multiple factors. About three in five said unmanageable medical expenses played a role. A little more than two-thirds cited a drop in income. Nearly three-quarters put some blame on hounding by debt collectors.The study does not delve into those underlying factors, but separate data provides some insight. The median household led by someone 65 or older had liquid savings of $60,600 in 2016, according to the Employee Benefit Research Institute, whereas the bottom 25 percent of households had saved at most $3,260.That doesn’t provide much of a financial cushion for a catastrophic health problem. Older Americans typically turn to Medicare to pay their medical bills. But gaps in coverage, high premiums and requirements that patients shoulder some costs force many lower-income beneficiaries to spend more of their own income on those bills, the Kaiser Family Foundation found.By 2013, the average Medicare beneficiary’s out-of-pocket spending on health care consumed 41 percent of the average Social Security check, according to Kaiser, which also estimated that the figure would rise.More people are also entering their later years carrying debt. For many of them, at least some of the debt is a mortgage — roughly 41 percent in 2016, compared with 21 percent in 1989, according to an Urban Institute analysis.And those who are carrying debt into retirement are carrying more than members of earlier generations, an analysis by the Employee Benefit Research Institute found.Perhaps not surprisingly, the lowest-income households led by individuals 55 or older carry the highest debt loads relative to their income. More than 13 percent of such households face debt payments that equal more than 40 percent of their income, nearly double the percentage of such families in 1991, the employee benefit institute found.Older Americans’ finances are also being strained by the needs of those around them.A little more than a third of the older filers who answered the researchers’ questionnaire said that helping others, like children or older parents, had contributed to their seeking bankruptcy protection. Marc Stern, a bankruptcy lawyer in Seattle, said he had seen the phenomenon again and again.Some parents, Mr. Stern said, had co-signed loans for $10,000 or $20,000 for adult children and suddenly could no longer afford them. “When you are living on $2,000 a month and that includes Social Security — and you have rent and savings are minuscule — it is extremely difficult to recover from something like that,” he said.Others had co-signed their children’s student loans. “I never saw parents with student loans 20 or 30 years ago,” Mr. Stern said.“It is not uncommon to see student loans of $100,000,” he added. “Then, you see parents who have guaranteed some of these loans. They are no longer working, and they have these student loans that are difficult if not impossible to pay or discharge in bankruptcy, and these are the kids’ loans.”Keith Morris, chief executive of Elder Law of Michigan, which runs a legal hotline for older adults, said the prospect of bankruptcy was a regular topic for his callers.“They worked all of their lives, and did what they were supposed to do,” he said, “and through circumstances like a late-life divorce or a death of a spouse or having to raise grandkids, have put them in a situation where they are not able to make the bills.”For Lawrence Sedita, a 74-year-old former carpenter now living in Las Vegas, the problems began when he lost his health insurance about two years ago. He said he had been on disability since 1991, when a double pack of 12-foot drywall fell on his head at work.After his union, the New York City District Council of Carpenters, changed the eligibility requirements for his medical, dental and prescription drug insurance, he lost his coverage.Mr. Sedita, who has Parkinson’s disease, said his medical expenses had risen exponentially. (A spokesman for the union declined to comment.)A medication that helps reduce the shaking — a Parkinson’s symptom — rose to $1,100 every three months from $70, Mr. Sedita said. “I haven’t taken my medicine in three months since I can’t afford it,” he added.He said he and his wife, who has cancer, filed for bankruptcy in June after living off their credit cards for a time. Their financial difficulty, he said, “has drained everything out of me.”Copyright 2018 The New York Times.  All rights reserved,