A foreign (non-U.S.) company can be dragged unwillingly into a U.S. bankruptcy case if the bankruptcy court has “personal jurisdiction” over the company.

In a decision approved for publication, addressing the intersection of New Jersey Court Rule 4:5-4 and 11 U.S.C. 524(a), the New Jersey Appellate Division recently held that a bankruptcy discharge precluded a creditor from obtaining a judgment of personal liability and debtor’s failure to plead that defense did not waive it. Vadim Chepovetsky and Svetlana Nashtatik v. Louis Civello, Jr. , No. A-0476-21 (App. Div. Jun. 16, 2022).

The Bankruptcy Protector

As inflation and interest rates rise, a recession is likely coming. A recession means more bankruptcy filings. Providers of goods and services often unknowingly find themselves embroiled in bankruptcy litigation if the provider received payment within 90 days of the customer’s bankruptcy filing. Such payments, called a preferential transfer, may later be challenged by the debtor customer or trustee. If successful, the provider of goods and services may be forced to return such payments to the bankruptcy estate.

As the venture capital sector slows down, valuations and deal sizes are pulling back from the recent record highs. Seemingly, “investor friendly” deal terms are once again making an appearance in term sheets.

In large, complex bankruptcy cases:

• The mediator must have a plan;
• Otherwise, the mediator is going to get run over;
• These are tough cases with very experienced lawyers who often have significant resources to put into the fight; and
• The mediator has to be just as resourceful, just as strong, just as ready to engage as the lawyers.

That’s the view expressed by Judge Gerald Rosen (Chief Judicial Mediator in City of Detroit bankruptcy) [fn.1] in a May 2021 interview on the mediation process in the Detroit bankruptcy [fn. 2].

Congress and the President finally extend the $7.5 million debt limit for Subchapter V eligibility:

• by “unanimous consent” in the Senate;
• by a vote of 392 – 21 in the House; and

A legislative history of the new law is at this link.

The new law is bi-partisan and uncontroversial. But there are some bells and whistles, as discussed below.

“SUNSET” – Again!

Shortly before midnight on June 15, 2022, cosmetic giant Revlon, Inc., along with several subsidiaries, filed a petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the Southern District of New York (Lead Case No. 22-10760).

The Delaware Court of Chancery took the old maxim “justice delayed is justice denied” to heart recently when it denied a request for a stay of proceedings hours after the request had been filed. The ruling from Vice Chancellor Paul A. Fioravanti, Jr. in In re Kidbox.com, Inc., Case No. 2022-0379-PAF, is the latest in a series of rulings from the Delaware Court of Chancery requiring litigants in bankruptcy-alternative proceedings in Delaware to support their petitions for relief with sufficient disclosures and to avoid bare-boned pleadings.

Given the recent media coverage and growing concerns among investors over the risks associated with a bankruptcy filing of a cryptocurrency exchange, it feels timely to highlight some issues that arose in the Chapter 11 cases of Cred Inc. and certain of its affiliates (collectively, “Cred”).