Illinois follows the common law of assignments for benefit of creditors (“ABC”): a non-judicial, trust-like process for liquidating a failed business.
That ABC process can work, hand-in-hand, with the Bankruptcy Code. The case of In re Computer World Solutions, Inc., Case No. 07-21123, Northern Illinois Bankruptcy Court, shows us how.
FACTS
Debtor is an importer and distributor of computer monitors, televisions and other electronic products, owing $20 million to Bank, which holds a first-lien on virtually all of Debtor’s assets.
Many years ago, back when mediation is a rarity in bankruptcy disputes, I asked an old-timer this question:
Why is the bankruptcy system a lagging adopter of mediation?”
A Surprising Answer
The old-timer gave this surprising answer:
“At the time of the Bankruptcy Code’s enactment, the bankruptcy judge was viewed as a mediator in the judge’s own court.”
The old-timer added this. When the Bankruptcy Code was enacted:
Many years ago, back when mediation is a rarity in bankruptcy disputes, I asked an old-timer this question:
Why is the bankruptcy system a lagging adopter of mediation?”
A Surprising Answer
The old-timer gave this surprising answer:
“At the time of the Bankruptcy Code’s enactment, the bankruptcy judge was viewed as a mediator in the judge’s own court.”
The old-timer added this. When the Bankruptcy Code was enacted:
You’ve gotta admire the Debtor in In re Deirdre Ventura.
Debtor has been fighting to save a Bed and Breakfast business through bankruptcy: beginning in 2018 with a regular Chapter 11, and then struggling to get into Subchapter V.
Debtor’s is a you-can’t-make-this-stuff-up story of persistence through adversity.
Debtor has survived, for example, an inexplicably-bad appellate opinion refusing to allow Debtor’s Subchapter V election. The appellate opinion declares:
The interrelationship between an assignment for benefit of creditors (“ABC”) proceeding and an involuntary bankruptcy filing, for the same debtor, is governed by various portions of the Bankruptcy Code.
But that relationship remains ill-defined, nonetheless.
What follows is an attempt to summarize a bankruptcy court opinion dealing with that relationship. And here is two of its main conclusions:
On June 21, 2022, Congress and the President (i) extend the $7.5 million debt limit for Subchapter V eligibility, and (ii) adjust other Subchapter V rules.[Fn. 1]
One of the adjustments is this:
“Without these [mediated] settlements, there is no Plan.”
- From Opinion on Plan confirmation, In re Boy Scouts of America, Case No. 20-10343, Delaware Bankruptcy Court, Doc. 10136, at 80 (issued July 29, 2022).
The Boy Scouts of America bankruptcy has achieved a milestone: on July 29, 2022, the Bankruptcy Court issues a 281-page Opinion on confirmation of Debtor’s Plan of Reorganization. The Opinion is generally favorable toward Plan confirmation but identifies a number of issues remaining to be resolved.
On August 15, 2022, the Tenth Circuit Court of Appeals reinstates its prior In re Hammons opinion, which deals with remedies for unconstitutionally lower quarterly fees charged to bankruptcy debtors in Alabama and North Carolina.[Fn. 1]
Opinion Points
Check out these points from the Hammons opinion: