Appeals Court Rules That a Discharge Injunction Bars a Fraudulent Transfer Claim Based on a Non-Dischargeable Debt
A discharge of debt in bankruptcy “operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor. . . .” 11 U.S.C. § 524(a)(2). Certain debts, however, including debts “for violation of . . . any of the State securities laws,” are not subject to discharge. See 11 U.S.C. § 523(a)(19). A discharge injunction does not bar the collection of such debts. Does a discharge injunction bar a fraudulent transfer action, when that action is brought based on an underlying non-dischargeable debt? In a recent decision, the United States Court of Appeals for the Eleventh Circuit considered this issue, and concluded that the discharge injunction barred a fraudulent transfer action under the Alabama Uniform Fraudulent Transfer Act (“AUFTA”), because the fraudulent transfer claim gave rise to a separate liability from the underlying non-dischargeable debt. SuVicMon Development, Inc. v. Morrison, 991 F.3d 1213 (11th Cir. March 25, 2021).
It is well-settled that if you are a debtor in chapter 11, you do not have the unfettered right to convert the case to a chapter 7 liquidation. A recent 10th Circuit decision shows why. Kearney v. Unsecured Creditors Committee et al., BAP No. 20-33, 2021 WL 941435 (B.A.P. 10th Cir. Mar. 12, 2021).
When serving pleadings in an adversary proceeding, you may want to skip the certified option and go with regular first-class mail, or do both.
Federal Rule of Bankruptcy Procedure 7004 governs service of process in adversary proceedings. The statute specifically provides for service by first class mail. And while some courts will also permit service of pleadings by certified mail, other courts forbid the use of certified mail.
In January 2020 we reported that, after the reconsideration suggested by two Supreme Court justices and revisions to account for the Supreme Court’s Merit Management decision, the Court of Appeals for the Second Circuit stood by its original holding, in an appeal that was first argued in 2014, that the payments to former Tribune shareholders that Tribune creditors were seeking to avoid were protected from avoidance by the “safe harbor” provided by Code Section 546(e). The creditors filed a petition for certiorari with the Supreme Court, and extensive briefing by the parties and several amici ensued.
Debtor Alleges Thirteenth Amendment Violation; Court Says Debtor Has Standing to Assert the Claim; Decision on the Merits to Follow
It’s rare for a debtor in bankruptcy to raise allegations of involuntary servitude and a violation of the Thirteenth Amendment. But one debtor did just that in a recent chapter 11 case. The court had appointed a trustee to take over the debtor’s bankruptcy estate. This prompted the debtor to assert a violation of his constitutional rights, arguing that he would be involuntarily forced to work for his creditors.
It is well known in the restructuring world that a debtor in bankruptcy can’t get a PPP loan. But what if you’re a debtor and decide a PPP loan could save your business? Will a court dismiss the case so you can seek a loan?
On Wednesday, February 23, just after 5:00 p.m., Belk, Inc. – a North Carolina-based department store chain – and its affiliates filed voluntary petitions under Chapter 11 of the Bankruptcy Code. Less than 24 hours later, Bankruptcy Judge Marvin Isgur of the United States Bankruptcy Court for the Southern District of Texas entered an order confirming Belk’s Chapter 11 plan. As a result, Belk “has received $225 million of new capital, significantly reduced its debt by approximately $450 million and extended maturities on all term loans to July 2025.” Critically, the plan leaves all unsecured creditors unimpaired.
“Diminishing” Returns: A Pre-Petition Change of Life Insurance Beneficiary is Not Subject to Avoidance as a Fraudulent Transfer
Does a debtor’s pre-petition change of the beneficiary of a life insurance policy constitute a “transfer” of an interest of the debtor in property? Not according to the U.S. Bankruptcy Court for the Eastern District of North Carolina, which held earlier this week that such transfers do not “diminish” the estate.
A seat at the table: this is what you likely want when your financial interests are drawn into a bankruptcy court proceeding. You’ll seek to be heard and do what you can to maximize your recovery. This is especially true if you’re a creditor in a chapter 11 case. Yet a recent decision shows what can happen if you do the opposite and choose to “sit one out” rather than have a say in the outcome of a chapter 11 case. In re Fred Bressler, No. 20-31023, 21 WL 126184 (Bankr. S.D. Tex. Jan. 13, 2021).
Perfect your liens on time or you may lose them. That’s the painful lesson U.S. Bankruptcy Judge Karen B. Owens taught Halliburton Energy Services, Inc. in her recent decision.
In 2019, we began following a Circuit split regarding a secured creditor’s obligation to return collateral that it lawfully repossessed pre-petition after receiving notice of a debtor’s bankruptcy filing. In our prior posts, which you may wish to review and can find here and here, we explained that the Third Circuit, joining the minority of courts to have ruled on the issue, held in November 2019 that a creditor does not violate the stay if it retains estate property until the debtor seeks turnover of the seized property under Section 542. The Seventh Circuit had reached the opposite conclusion in June 2019, holding that the automatic stay “becomes effective immediately upon filing the petition” and requires the creditor to return property seized pre-petition: “[it] is not dependent on the debtor first bringing a turnover action.” In December, the Supreme Court granted certiorari and on Thursday adopted the minority view.
We have blogged previously about section 546(e), the Bankruptcy Code’s safe harbor for certain transfers otherwise subject to avoidance as preferences or fraudulent transfers. See 11 U.S.C. § 546(e). Among the transfers protected by the section 546(e) safe harbor are transfers by or to a “financial participant” made “in connection with a securities contract.” Id. The Bankruptcy Code in turn defines “financial participant” to mean an entity that has certain financial agreements or transactions of “total gross dollar value of not less than $1,000,000,000 in notional or actual principal amount outstanding” or “gross mark-to-market positions of not less than $100,000,000 . . . in one or more such agreements or transactions.” 11 U.S.C. § 101(22A)(A). In both cases, the “agreements or transactions” must be “with the debtor or any other entity.” Id. Since an entity cannot engage in an agreement or transaction with itself, does the language providing that such agreements and transactions must be “with the debtor or any other entity” mean that the debtor cannot be a financial participant”? On December 23, 2020, Judge Shannon of the United States Bankruptcy Court for the District of Delaware ruled that debtors could be financial participants, disagreeing with a previous decision from the Southern District of New York.
Proofs of Claim: Don’t Rely on the Mailbox Presumption – Be Sure Claims are Filed by the Bar Date with the Court Clerk or the Claims Agent
The Importance of Loan Underwriting When Restrictions on Bankruptcy Cannot Singlehandedly Save the Day: Sutton 58 Associates LLC v. Phillip Pivelsky, et al.
In sophisticated real estate financing transactions, most prudent lenders attempt to deter borrowers from filing for bankruptcy before loans are paid in full by providing in loan documents that such a filing constitutes an event of default. Many lenders will insist that their borrowers remain “bankruptcy remote” in the form of a so-called “single asset real estate” entity during the term of the loan.
Cuker Interactive, LLC filed a Chapter 11 bankruptcy petition on December 13, 2018, in the United States Bankruptcy Court for the Southern District of California. Because it was solvent at confirmation, the debtor proposed to pay secured creditors in full, with interest at the contract rate, and general unsecured creditors in full, with postpetition interest at the “legal rate,” or a rate determined by the Court that leaves the creditors unimpaired. But what rate is that?
Third Time’s the Charm? Ultra Petroleum Make-Whole Dispute is Once Again Headed to the Fifth Circuit.
On Monday, November 30, Bankruptcy Judge Marvin Isgur approved a request by Ultra Petroleum and its affiliated debtors that he certify his October 26, 2020 memorandum opinion for direct review by the United States Court of Appeals for the Fifth Circuit. That decision, which we recently summarized here, held that certain creditors are entitled to allowance and payment of make-whole claims, and that post-petition interest is calculated at the contractual default rate. No creditor or other party in interest opposed the request for direct appeal.
On Wednesday, November 18, two customers of Cred Inc., a cryptocurrency investment platform currently in Chapter 11, asked Delaware Bankruptcy Judge John T. Dorsey to convert the Chapter 11 case to a Chapter 7 liquidation (or, in the alternative, to appoint a Chapter 11 Trustee “with expertise in hunting down . . . stolen cryptocurrency”). Prior to its Chapter 11 filing, Cred received investor-cryptocurrency, typically in the form of loans, and then purportedly used those funds across a variety of investments to generate favorable returns.
The Bankruptcy Code enables a trustee to set aside certain transfers made by debtors before bankruptcy. See 11 U.S.C. §§ 544, 547, 548. These avoidance powers are subject to certain limitations, including a safe harbor in section 546(e) exempting certain transfers. Among other things, section 546(e) bars avoidance of a “settlement payment . . . made by or to (or for the benefit of) . . . a financial institution [or] a transfer made by or to (or for the benefit of) a . . . financial institution . . . in connection with a securities contract.” The Bankruptcy Code in turn defines a “financial institution” to include not only financial institutions as conventionally understood, such as “a Federal reserve bank, or an entity that is a commercial or savings bank, industrial savings bank, savings and loan association, trust company, federally-insured credit union, or receiver, liquidating agent, or conservator for such entity,” but also a customer of such institutions when such institutions are “acting as agent or custodian for [such] customer . . . in connection with a securities contract.” 11 U.S.C. § 101(22)(A). Because a transfer to a “financial institution” in connection with a securities contract is shielded by section 546(e) from avoidance, the question of which “customers” of financial institutions qualify as financial institutions under this definition has become highly litigated. On October 22, the United States Bankruptcy Court for the Eastern District of Michigan issued a new decision on this question, ruling that the recipients of an alleged fraudulent transfer did not qualify as “financial institutions” under the Bankruptcy Code because the bank that transmitted the payments was not acting as an “agent or custodian” for the recipients.
Losing Momentum: Houston Bankruptcy Court Holds that Make-Whole Claims are Not the Economic Equivalent of Unmatured Interest Subject to Disallowance; Solvent-Debtor Exception Lives
In December of last year, we wrote about the Fifth Circuit’s two decisions – Ultra I, from January 2019, and Ultra II, from December, which replaced Ultra I – regarding make-whole claims in the Ultra Petroleum bankruptcy cases. That blog post provides important background for this one.
The Best Laid Plans: How a Proposed Sale of NYC Real Estate Under Section 363 of the Bankruptcy Code Went Awry
There are several ways in which property owners can advantageously use the Bankruptcy Code to effectuate strategic dispositions of assets. But the bankruptcy process can be fraught with uncertainty that can upend the best laid plans. The matter of In re Wansdown Properties Corp. N.V., No. 19-13223 (SMB), 2020 WL 5887542 (Bankr. S.D.N.Y. Oct. 5, 2020) provides an instructive and cautionary example.
Fox News: New Mexico Bankruptcy Court Reaffirms Committee Eligibility for Derivative Standing Despite Contrary Tenth Circuit B.A.P. Precedent
In an important affirmation of the rights and duties of a creditors’ committee, Bankruptcy Judge David T. Thuma of the United States Bankruptcy Court for the District of New Mexico has confirmed that a bankruptcy court may confer derivative standing on a committee to assert estate claims if a debtor in possession declines to assert them.
It seems to be a common misunderstanding, even among lawyers who are not bankruptcy lawyers, that litigation in federal bankruptcy court consists largely or even exclusively of disputes about the avoidance of transactions as preferential or fraudulent, the allowance of claims and the confirmation of plans of reorganization. However, with a jurisdictional reach that encompasses “all civil proceedings . . . related to [bankruptcy] cases," bankruptcy courts see “related to” civil litigation of almost every type and flavor.
On September 29, 2020, the House Judiciary Committee advanced H.R. 7370, Protecting Employees and Retirees in Business Bankruptcies Act of 2020, a Democrat-sponsored bill, to the full chamber. If enacted into law, the bill would usher in considerable changes in commercial bankruptcy cases, including in the areas of executive compensation, employee and retiree benefits, and confirmation of a Chapter 11 plan. Some of the more salient provisions of the bill are listed below; for the complete text of H.R. 7370, click here.
Last February, we blogged about the Third Circuit’s decision in In re Energy Future Holdings Corp, No. 19-1430, 2020 U.S. App. LEXIS 4947 (Feb. 18, 2020). The Third Circuit approved a process for resolving asbestos claims in which a bar date was imposed on filing the claims, but late claimants who were unaware of their asbestos claims would be allowed to have the bar date excused through Bankruptcy Rule 3003(c)(3). (A bar date is a date set by the court by which all claims against the debtor must be filed. Rule 3003(c)(3) permits such time for filing to be extended “for cause shown,” and has been held, based on Rule 9006(b), to permit late filing upon a showing of “excusable neglect” by a claimant.) In a recent decision, the United States Bankruptcy Court for the District of Delaware rejected an effort by two late claimants to make use of this process, reasoning that the claimants had failed to meet Rule 3003(c)(3)’s “excusable neglect” standard because they had participated in the bankruptcy case for years without seeking to file claims.
This post concerns computation of time under Bankruptcy Rule 9006. The specific issue addressed is whether a bankruptcy court — when computing a filing deadline — should count a day when its clerk’s office is closed, even if the electronic filing system is available. In a recent case, a federal district judge explained why in his view the day shouldn’t be counted. Labbadia v. Martin (In re Martin), No. 3:20-cv-939, 2020 WL 5300932, (SRU) (D. Conn. Sept. 4, 2020).
“Unfair discrimination is rough justice. It exemplifies the Code’s tendency to replace stringent requirements with more flexible tests that increase the likelihood that a plan can be negotiated and confirmed,” announced Judge Thomas Ambro of the United States Court of Appeals for the Third Circuit on August 26, 2020. Though limited to an explication of Section 1129(b)(1)’s prohibition on unfair discrimination against a class of dissenting creditors, Judge Ambro’s “rough justice” remark will echo in all areas of bankruptcy law among practitioners who prioritize pragmatism over perfectionism.
I don’t know if Congress foresaw, when it enacted new Subchapter V of Chapter 11 of the Code in the Small Business Reorganization Act of 2019 (“SBRA”), that debtors in pending cases would seek to convert or redesignate their cases as Subchapter V cases when SBRA became effective on February 19, 2020, but it was foreseeable. The benefits and advantages of Subchapter V to the debtors entitled to use it were certain to attract not just new filings but pending cases, especially cases commenced during SBRA’s long “180-day runway to effectiveness.”
Proposed Amendments to the CARES Act Would Expand Access to PPP Loans to Small Businesses in Chapter 11
The paycheck protection program (“PPP”) has been one of the most popular aspects of the CARES Act (i.e., the initial legislation responding to the COVID-19 pandemic). Yet, as has been widely reported, debtors in chapter 11 cases are not allowed to receive PPP loans. But Congress might remedy that if it agrees on another round of COVID-19 related stimulus.
On Friday August 7th, the NAACP filed a motion to intervene in the chapter 11 bankruptcy cases of Purdue Pharma L.P. and its affiliated debtors (collectively, “Debtors”). The Motion argues that “[i]ntervention is warranted because the NAACP has an interest to ensure that the settlement allocates appropriate relief to communities of color adversely affected by the Opioid Crisis. Attention has been disproportionately focused on white suburban and rural communities with little consideration for the communities of color that have similarly experienced harm by the [c]risis, including dramatic increases in opioid misuse, addiction, and death.” These concerns are only exacerbated by the COVID-19 pandemic, the NAACP contends, which has led to economic contraction that has decreased states’ tax revenue, leading to concerns that the settlement fund may have a “disproportionate allocation and distribution” and “may be diverted for other use.” By intervening in the bankruptcy case, the NAACP hopes to protect communities of color from the repetition of “the long-storied history of [the] government’s disproportionate treatment of communities of color.”
In an appeal of a bankruptcy court’s decision, a district court judge recently addressed the treatment of the “straddle year” for federal income tax under the Bankruptcy Code, which “does not appear to have been decided by any appellate court.” In re Affirmative Ins. Holdings Inc. United States v. Beskrone, No. 15-12136-CSS, 2020 WL 4287375, at *1 (D. Del. July 27, 2020).
Our February 26 post reported on the first case dealing with the question whether a debtor in a pending Chapter 11 case may redesignate it as a case under Subchapter V, the new subchapter of Chapter 11 adopted by the Small Business Reorganization Act of 2019 (“SBRA”), which became effective on February 19. Our May 15 post reported on three more cases, two of which permitted such an amendment and one that did not.
Section 550 of the Bankruptcy Code provides that, when a transfer is avoided under one of several other sections of the Code, a trustee may recover “the property transferred, or, if the court so orders, the value of such property” from “the initial transferee of such transfer,” “the entity for whose benefit such transfer was made,” or “any immediate or mediate transferee of such initial transferee.” 11 U.S.C. § 550(a). (Transferees in the last category are known as subsequent transferees.) For example, if an entity receives a fraudulent transfer of cash, and then passes on the cash to a third party, the third party can be liable under section 550. But what if the transfer is of a non-cash asset? To qualify as an “immediate or mediate transferee” under section 550, is it necessary to receive the actual asset, or does it suffice to receive funds derived from the asset? The Tenth Circuit addressed this question in its recent decision in Rajala v. Spencer Fane LLP (Generation Resources Holding Company, LLC), 2020 WL 3887850 (10th Cir. July 10, 2020). The Tenth Circuit held that, to qualify as a “transferee” under section 550, a party must have received the actual “property transferred."
This post provides a quick primer on administrative expense claims. These claims are entitled to priority for actual and necessary goods and services supplied to a debtor in bankruptcy. For a claim to qualify for administrative expense status, a debtor must request that the claimant provide goods and services post-petition or induce the claimant to do so. The goods or services must result in a benefit to the bankruptcy estate. And the claimant bears the burden of proof that a claim qualifies for priority treatment under 11 U.S.C. § 503(b)(1)(A).
Tenants in Bankruptcy: Landlord’s Ability to Draw on Letter of Credit May Turn on Notice Requirements in Lease
The economic fallout from the COVID-19 pandemic has been particularly acute for commercial landlords. As retail and other tenants fall further behind on rent and other obligations, lessors are finding themselves drawn into more and more Chapter 11 bankruptcy cases. Yet, while it may not always feel that way to them, landlords actually have it better than most creditors in bankruptcy. Section 365 offers an array of protections to lessors of non-residential real property that other stakeholders do not enjoy, and most commercial leases are backed by some form of cash or other security deposit.
Hertz Global Holdings Inc. and most of its affiliates filed for bankruptcy on May 22, 2020. This was just one corporate failure among many in the midst of the COVID-19 pandemic; but, a novel strategy by Hertz to raise capital to fund its bankruptcy has raised eyebrows instead.
We’ve reported here and here on the January 2019 bankruptcy filing by Pacific Gas and Electric (“PG&E”), which was primarily the result of potential liability stemming from catastrophic California wildfires. Since then, PG&E has proposed an approximately $58 billion-dollar reorganization plan that includes settlements exceeding $25 billion to resolve claims by wildfire victims and regulatory agencies.
Bankruptcy Sales Under Section 363: The Business Judgment Test That Judges Often Cite Isn’t Always the One They Use
This post originally appeared in Norton Journal of Bankruptcy Law and Practice.
Bankruptcy court approval is required when a debtor wants to sell property outside the ordinary course of its business. Courts will allow transactions that reﬂect a debtor’s informed business judgment. When courts consider the rationale and evidence a debtor submits, they will sometimes cite the business judgment test as it has been articulated by the Delaware Supreme Court in cases involving consideration of corporate ofﬁcers’ ﬁduciary duties. But, in practice, bankruptcy courts apply a different bankruptcy law business judgment standard when reviewing a debtor’s proposed sale of estate property. In the corporate law context, judges will not question a board’s decision if there is no evidence of ﬂaws in the decision making process. But in the bankruptcy context, judges will make sure a debtor has a valid business reason for the proposed sale of estate property.
The Impact of the CARES Act on US Consumers, Small Businesses, Bankruptcy and Insolvency Laws and Procedures
This post originally appeared in International Corporate Rescue, published by Chase Cambria Company (Publishing) Ltd.
COVID-19 is taking an alarming and unfortunate toll on the world’s population. In the United States, the number of COVID-19-related deaths will soon approach 75,000. Billions of dollars of economic output will be lost. As a consequence, on 27 March 2020, US lawmakers signed the Coronavirus Aid, Relief, and Economic Security Act (the ‘CARES Act’) into law. It provides USD 2.2 trillion in economic stimulus to various sectors of the American economy. This article explains three aspects of the CARES Act: a consumer economic stimulus, a small business payment protection program, and the impact of the CARES Act on US bankruptcy laws and procedures in several of the nation’s busiest bankruptcy courts.
Our February 26 post entitled “SBRA Springs to Life” reported on the first case known to me that dealt with the issue whether a debtor in a pending Chapter 11 case should be permitted to amend its petition to designate it as a case under Subchapter V, the new subchapter of Chapter 11 adopted by the Small Business Reorganization Act of 2019 (“SBRA”), which became effective on February 19, 2020. Since then, three more cases have considered the issue, and two of them permitted the amendment and one did not.
Courts reviewing a bankruptcy court’s decision to approve a chapter 11 reorganization plan over the objections of an interested party must consider not only the merits, but also (if implementation of the plan was not stayed) potential injury to the reliance interests of other parties relying on the plan. These issues are confronted in Drivetrain, LLC v. Kozel (In re Abengoa Bioenergy Biomass of Kansas), 2020 WL 2121449 (10th Cir. May 5, 2020), a recent Tenth Circuit decision holding, based on circuit precedent, that an objector’s challenge to a chapter 11 plan that had already been implemented was barred under the doctrine of equitable mootness. Nonetheless, the decision noted that the doctrine is controversial and open to question.
A recent decision, In re: Grandparents.com, Inc.., et al., Debtors. Joshua Rizack, as Liquidating Tr., Plaintiff, v. Starr Indemnity & Liability Company, Defendant, Additional Party Names: Grand Card LLC, provides insight on the intersection between and among contract, tort, and fraudulent transfer theories of recovery.
Retail Apocalypse 2.0: The Fallout from the Coronavirus Will Present New Challenges to an Already Reeling Sector of the Economy
Changes in culture and technology have been reshaping the way Americans acquire and consume goods and services for a generation. Indeed, long before the coronavirus, insolvency professionals and industry experts understood that the retail landscape was experiencing a dramatic transformation. Reduced foot traffic, online competition from Amazon and others, and changing shopping patterns all combined to place enormous strain on traditional retailers. To keep up, and to match the tastes of consumers in the age of social media, retailers and shopping centers have placed a renewed focus on strategies that will create a more valuable and enriching in-store experience for consumers. It has to be modern, it has to be fun, and – above all – it has to look cool on Instagram: no one takes a selfie at Sears.
COVID-19 has sent the price of oil per barrel in a downward spiral. The plummet in business travel, cruises, vacations, weekend getaways, and non-essential travel have all led to a decreased demand for oil.
COVID-19 is taking an alarming and unfortunate toll on our country’s population. Each day, we collectively face daunting health risks, and the economic cost to individuals and businesses alike has already been, and will continue to be, staggering. Accordingly, more than at any point in the past decade, both debtors and creditors should consider the potential benefits of the bankruptcy process. This post discusses four basic bankruptcy concepts that always merit consideration, especially in these trying times.
State governments can be creditors of individuals, businesses and institutions that are debtors in bankruptcy in a variety of ways, most notably as tax and fine collectors but also as lenders. They can also be debtors of debtors, in their role, for example, as the purchasers of vast quantities of goods and services on credit. And they can also be transferees of a debtor’s property in (at least) every role in which they can be creditors.
Commercial Division Holds that Imposition of Direct Liability on Directors Who Oversaw Fraudulent Conveyance Requires Piercing the Corporate Veil
Do the directors who oversaw the fraudulent conveyance of a corporation’s assets face direct liability for it? Not unless the entities were shams and the directors exerted total dominion and control, according to Commercial Division Justice Andrew Borrok’s recent decision in Acacia Investments, B.S.C.(c) v. West End Equity I, Ltd.[i] In Acacia, Justice Borrok allowed fraudulent conveyance claims to proceed against the entities involved in an alleged transfer of judgment-debtors’ assets to a new family of companies, but did not allow direct claims against the directors of the entities. He held that Delaware law does not create a claim for director liability, and that there was no factual basis for piercing the entities’ corporate veils to hold the directors liable for the alleged fraud.
In what will come as a surprise to absolutely no one, we are already beginning to see the nascent signs of what may become significant distress in one of the industries likely to be most drastically impacted by the coronavirus outbreak: cruise lines.
Bankruptcy Court Closes Chapter 11 Cases Even with an Appeal Pending and Over the Objection of the U.S. Trustee.
Debtors in chapter 11 cases are required to make quarterly payments to the United States Trustee’s Office. These fees support the UST Program that serves in all districts but those in two states. Quarterly fees must be paid until cases are closed. And cases are closed when they are “fully administered,” a term that isn’t defined in the Bankruptcy Code or Rules.
The importance of clarity in drafting agreements can never be understated. And while there are strategies available to spouses of business owners to help protect a family in bankruptcy, it is imperative to properly plan and draft to receive such protection from the Courts. In re Somerset Regional Water Resources, LLC, _____________ F.3d ________________ (3rd Cir. 2020) (“Somerset”), recently decided by the Third Circuit Court of Appeals, offers a prime example of both cautionary concepts.
We reported on the adoption of the Small Business Reorganization Act of 2019 (“SBRA”), with its 180-day runway to effectiveness, at the time of its adoption last year. The wait is over, and SBRA is springing to life.
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