For a limited time only, the “Consolidated Appropriations Act, 2021” (CCA) signed into law on December 27, 2020 amends Bankruptcy Code Section 547 to shield certain deferred supplier and rent payments from avoidance as preferential transfers.

Key Notes:

On December 27, 2020, the Consolidated Appropriation Act ("CAA") was signed into law. The nearly 5,600-page bill is reportedly the longest bill ever passed by Congress. In addition to funding the federal government in 2021 and providing COVID-related relief to individuals and businesses, the new law amends the Bankruptcy Code in at least nine respects. Most of the amendments sunset in either one or two years. One of the amendments will become effective only if the Small Business Administration signs off on it.

A brief description of the amendments follows.

n December 21, 2020, Congress passed the Consolidated Appropriations Act of 2021 (the Act), which was just signed by President Donald Trump. The Act makes certain amendments to the United States Bankruptcy Code (the Bankruptcy Code) relating to small business bankruptcies commenced under Subchapter V of Chapter 11, as well as to individual bankruptcies under Chapters 7, 11, 12, and 13 of the Bankruptcy Code. This article highlights those changes to the Bankruptcy Code that small businesses should consider utilizing in weighing the benefits and potential costs of filing for bankruptcy.

The week of Christmas, Congressional leaders released the text of the new $900 billion COVID-19 relief package. After a week of push-back, President Trump signed the bill on Sunday evening. In addition to the $600 per adult stimulus payment, additional PPP funding, rental assistance, and school/college aid, the bill also provides additional updates on certain bankruptcy provisions. Those changes, which are spelled out in Division FF of the bill “Title X-Bankruptcy Relief,” include the following:

In a recent decision, Twiford Enters. v. Rolling Hills Bank & Trust (In re Twiford Enters.), 2020 Bankr. LEXIS 2964, 2020 WL 6075691 (10th Cir. BAP 2020), the Tenth Circuit Bankruptcy Appellate Panel affirmed the lower court’s decision awarding postpetition interest pursuant to section 506(b). The disputed issue was whether a reference in the variable rate promissory notes to an internal rate index maintained by the bank was sufficiently clear and specific to support a claim for postpetition interest. The court held that it was.

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.

In June of 2020, Miller Canfield reportedthat the Fifth Circuit held that a Texas bankruptcy court had exceeded its authority when it ordered the SBA Administrator to make a Paycheck Protection Program (PPP) loan available to a debtor in bankruptcy.

The year 2020 in bankruptcy law started with an eye on increasing the ability of small businesses to utilize the Chapter 11 process in a more efficient and less expensive way, which lead to a record number of commercial filings, a reduction in consumer filings, and a test of the bankruptcy system.

SBRA aka Subchapter V

In a small victory for landlords of bankrupt tenants, the Bankruptcy Court for the Southern District of Texas has ruled that the Chuck E. Cheese parent company may not use its bankruptcy filing to avoid paying its rent.