The Bankruptcy Code confers upon debtors or trustees, as the case may be, the power to avoid certain preferential or fraudulent transfers made to creditors within prescribed guidelines and limitations. The U.S. Bankruptcy Court for the District of New Mexico recently addressed the contours of these powers through a recent decision inU.S. Glove v. Jacobs, Adv. No. 21-1009, (Bankr. D.N.M.

On December 27, 2020, the Consolidated Appropriation Act of 2021 (the “CAA”) was enacted to provide additional coronavirus stimulus and relief for businesses challenged by the ongoing COVID-19 Pandemic. In doing so, the CAA includes several targeted, but temporary, changes to the Bankruptcy Code (the “Code”) designed to provide certain debtors with greater flexibility with respect to their leases (which may negatively affect landlords) while ensuring that creditors are not penalized under the preference law for renegotiating their lease terms (which should benefit landlords).

On December 27, 2020, the Consolidated Appropriation Act of 2021 (the “CAA“) was enacted to provide additional coronavirus stimulus relief for businesses challenged by the ongoing Covid-19 Pandemic. In doing so, the CAA includes several targeted, but temporary, changes to the Bankruptcy Code (the “Code”) which will have implications for lenders, landlords, vendors and other creditors. Absent further legislation, these changes will sunset on December 27, 2022, but will continue thereafter to affect cases filed prior to that date.

In In re Smith, (B.A.P. 10th Cir., Aug. 18, 2020), the U.S. Bankruptcy Appellate Panel for the U.S. Court of Appeals for the Tenth Circuit recently joined the majority of circuit courts of appeals in finding that a creditor seeking a judgment of nondischargeability must demonstrate that the injury caused by the prepetition debtor was both willful and malicious under Section 523(a)(6) of the Bankruptcy Code.

Factual Background

In a recent decision, the U.S. Bankruptcy Court for the Southern District of New York held that claim disallowance issues under Section 502(d) of the Bankruptcy Code "travel with" the claim, and not with the claimant. Declining to follow a published district court decision from the same federal district, the bankruptcy court found that section 502(d) applies to disallow a transferred claim regardless of whether the transferee acquired its claim through an assignment or an outright sale. See In re Firestar Diamond, 615 B.R. 161 (Bankr. S.D.N.Y. 2020).

InIn re Juarez, 603 B.R. 610 (9th Cir. BAP 2019), the Bankruptcy Appellate Panel of the U.S. Court of Appeals for the Ninth Circuit addressed a question of first impression in the circuit with respect to property that is exempt from creditor reach: it adopted the view that, under the "new value exception" to the "absolute priority rule," an individual Chapter 11 debtor intending to retain such property need not make a "new value" contribution covering the value of the exemption.

Background

In In re Palladino, 942 F.3d 55 (1st Cir. 2019), the U.S. Court of Appeals for the First Circuit addressed whether a debtor receives “reasonably equivalent value” in exchange for paying his adult child’s college tuition. The Palladino court answered this question in the negative, thereby contributing to the growing circuit split regarding the avoidability of debtors’ college tuition payments for their adult children as constructively fraudulent transfers.

Background

In our latest installment of our series “Bankruptcy On Ice”, we tackle temporary suspension of bankruptcy proceedings in response to the closure of “non-essential businesses” and other critical protective measures being imposed to fight the spread of COVID-19.

The Paycheck Protection Program (PPP) is one of two business loan programs created under the Coronavirus Aid, Relief and Economic Security (CARES) Act to assist companies by extending potentially forgivable credit to small business employers. The PPP is designed to help cover employee-related expenses and help employers avoid layoffs. The prospect of forgivable debt, coupled with relatively favorable terms, have put PPP loans in high demand and many businesses, including some which had already sought chapter 11 bankruptcy protection, have sought PPP loans.

This article was originally published on Law360.

The COVID-19 pandemic has caused, and continues to cause, massive humanitarian and economic upheaval with no clear end in sight. Borrowers are already scrambling to increase liquidity from their banks. Some will continue to operate openly, honestly, and in the best interests of the company and its stakeholders. Others will not.