In a March 30, 2021 announcement, the Biden administration announced that it would be extending relief to approximately 1.14 million student loan borrowers who previously were not covered under the CARES Act relief enacted last year. These are borrowers who have defaulted on loans issued pursuant to the Federal Family Education Loan Program (“FFELP”). Specifically, under the measure, borrowers who have defaulted on FFELP loans will not face further penalties (and will see penalties already assessed unwound) and will also see their current interest rates reset to 0%.[1] The Biden administration’s action will be retroactive to March 13, 2020—the day the governmental formally declared a state of emergency due to the COVID-19 pandemic—and will return FFELP loans that defaulted during this period to good standing, with credit bureaus asked to remove any related negative credit reporting, allowing the applicable borrowers to rehabilitate their credit scores.[2]
Continue Reading Approaching Student Loan Relief Piecemeal: The Biden Administration Extends CARES Relief to Defaulted FFELP Student Loan Borrowers; Weighs Options for Further Measures

Breaking with a Sixth Circuit decision to the contrary, in a March 2021 decision in Stewart v. Holland, the District Court for the Western District of Pennsylvania held that unfair labor claims brought by the Department of Labor against a debtor under the Fair Labor Standards Act (“FLSA”) were not barred by the automatic stay but could instead proceed under the “police powers exception.”1

Continue Reading Opinion of Interest – When the Automatic Stay is No Shield – Pennsylvania Court Holds that Government’s Unfair Labor Claims Are Subject to Police Power Exception

Bloomberg Law reports that that the U.S. Trustee’s Office is working to combat the recent rise of “pre-packaged” chapter 11 bankruptcy filings. A pre-packaged bankruptcy or a “pre-pack” refers to the circumstances in which a debtor negotiates its reorganizational agreements with key stakeholders before filing its chapter 11 case and then files and confirm its

The American Bankruptcy Institute reported that President Biden signed the “COVID-19 Bankruptcy Relief Extension Act” into law Saturday, March 27, 2021, which extends through March 27, 2022, provisions providing financially distressed consumers and small businesses with greater access to bankruptcy relief.  The provisions were included in the original CARES Act that was passed in the wake of the Covid-19 outbreak and were originally set to expire this month. [ABI; March 29, 2021].

Continue Reading What We’re Reading This Week [March 29, 2021]

The Consolidated Appropriations Act of 2021 (the CAA), which President Trump signed into law on December 27, 2020, amends several provisions of the Bankruptcy Code.  While a number of the amendments are applicable only to small businesses (e.g., businesses eligible to file under the new small-business subchapter of the Bankruptcy Code and/or businesses eligible to receive PPP loans), several others have more general application, as discussed below.

Continue Reading December 2020 Appropriations Act Amends Several Provisions of the Bankruptcy Code