In 2020, Congress enacted the Small Business Reorganization Act (SBA), which codified Subchapter V within Chapter 11 of the Bankruptcy Code. The newly added subchapter is remarkably powerful, and with the new additions from Congress, creates a streamlined process for small businesses to reorganize. After passing the SBA, Congress subsequently increased the applicable debt limits for businesses eligible for Subchapter V, from approximately $2.7 million to $7.5 million, which qualified many more businesses for Subchapter V relief.
A crash in the cryptocurrency industry started this past spring, causing a significant number of cryptocurrency exchanges and related entities to seek bankruptcy protection, including the recent filing of one of the largest cryptocurrency exchanges, FTX. The volatility in the industry continues, with the subsequent filing of the cryptocurrency firm BlockFi and the crypto-mining company Core Scientific.
Crypto Basics
Unless the owner of a limited liability company elects to be treated as a corporation for tax purposes, the IRS will treat a single-member LLC as a “disregarded entity” for tax purposes. As a disregarded entity, an LLC’s assets, liabilities, income and deductions are reported as belonging to the owner for tax purposes. Markell Co. v.
As financial distress grows due to the pandemic, charitable organizations are faced with two immovable forces–increased demand from hard hit communities and decreased funding due to both the economic hardships facing many donors and the cancellation of most live fundraising events. The increased demand and decreased resources of many nonprofit and charitable organizations have caused such organizations to consider filing for chapter 11 protection.
Faced with the unprecedented challenge of responding to the COVID-19 crisis and its impact on the nation’s economy, Congress passed the Coronavirus Aid, Relief and Economic Security Act, commonly referred to as the CARES Act. The CARES Act includes several provisions designed to assist individuals and businesses dealing with this emerging economic catastrophe.
Congress recently sent two different bills to the President’s desk that are designed to provide an easier path for family farming operations and small businesses to reorganize under the Bankruptcy Code: the Family Farmer Relief Act of 2019 and the Small Business Reorganization Act of 2019.
The national and local publications have been full of articles recently on the emerging agricultural crisis confronting producers. By some measures, sectors of the ag economy are in the third year of declining net farm incomes, and some dairy producers in particular appear to be in dire straits. In light of these events, now might be a good time for lenders to brush up on the most significant laws affecting their loan remedies in the event it becomes necessary to seek enforcement of their loans. Below are short summaries of two important laws affecting loan enforcement:
Under the Bankruptcy Code, a preference payment is commonly defined as a transfer of property of the debtor within 90 days before the bankruptcy filing to or for the benefit of a creditor on account of an existing debt while the debtor was insolvent, allowing the creditor to receive more than it would otherwise receive in a chapter 7 liquidation.
In a normal chapter 11 bankruptcy case, the automatic stay and the provisions of 11 U.S.C. § 365 provide a trustee or debtor in possession with substantial tools and power concerning executory contracts and unexpired leases. A trustee or debtor in possession may override certain rights of the counterparties to those agreements, such as invalidating ipso facto clauses that purport to give the counterparty the right to terminate the contract upon the filing of a bankruptcy case.
On March 22, 2017, the Supreme Court decided Czyzewski v. Jevic Holding Corp., holding that a bankruptcy court may not approve a structured dismissal of a Chapter 11 bankruptcy case if the order does not comply with the priority rules of the Bankruptcy Code. 580 U.S. __ (2017).