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Bankruptcy Update Blog provides current news and analysis of key bankruptcy cases and developments in US and cross-border matters. Patterson Belknap’s Business Reorganization and Creditors’ Rights attorneys represent creditors’ committees, trade creditors, indenture trustees, and bankruptcy trustees and examiners in US and international insolvency cases. Our team includes highly skilled and experienced attorneys who represent clients in some of the most complex cases in courts throughout the US and elsewhere.

Above-Board: Officers of a Corporation Not Entitled to Key Employee Retention Plan Payments

A key goal of the Bankruptcy Code is to prevent corporate insiders from profiting from their employer’s misfortune. Section 503(c) of the Code makes clear: “there shall neither be allowed, nor paid... a transfer made to, or an obligation incurred for the benefit of, an insider of the debtor for the purpose of inducing such person to remain with the debtor's business” absent certain court-approved circumstances.

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Executory Contracts: Third Circuit Does Not Recognize the Doctrine of Implied Assumption

A recent case before bankruptcy judge Karen B. Owens of the United States Bankruptcy Court for the District of Delaware, In re Dura Auto. Sys., LLC, No. 19-12378 (KBO), 2021 WL 2456944 (Bankr. D. Del. June 16, 2021), provides a cautionary reminder that the Third Circuit does not recognize the doctrine of implied assumption (i.e., assumptions implied through a course of conduct as opposed to those that are assumed pursuant to a motion and court order).

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The Crystal Anniversary: Chapter 15 Turns 15

In recognition of the 15th anniversary of the passage of chapter 15 of the Bankruptcy Code, the New York City Bar Association’s Bankruptcy & Corporate Reorganization Committee hosted a webinar on May 12, 2021 to discuss the current state of chapter 15 cases and potential, corresponding and significant future developments. Several dozen participants joined a panel of distinguished leaders in the field: the Honorable Allan Gropper, former United States Bankruptcy Judge for the Southern District of New York; Professor Jay L. Westbrook, Benno C. Schmidt Chair of Business Law, The University of Texas at Austin School of Law; Professor Edward Morrison, Charles Evans Gerber Professor of Law, Columbia Law School; and practitioners Rick Antonoff and Christine Okike.

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The Final Say: Conversion from Chapter 11 to Chapter 7 is Not a Given

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).

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Section 1126 of the Bankruptcy Code and the Dangers of Sleeping on Your Rights as a Creditor

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).

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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.

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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.

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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.

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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.
 

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Fraudulent Transfers and Constructive Fraud in the Contracts and Torts Contexts

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.

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Bankruptcy Considerations in Light of COVID-19 Pandemic

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.

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Clarity Of Drafting And Reliance On A Spouse For Bankruptcy Protection - A Cautionary Tale

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.

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