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.

The Supreme Court issued its much-anticipated ruling yesterday in the First Circuit case of Mission Product Holdings, Inc. v. Tempnology, LLC, resolving a circuit split that had developed on “whether [a] debtor‑licensor’s rejection of an [executory trademark licensing agreement] deprives the licensee of its rights to use the trademark.” And it answered that question in the negative; i.e., in favor of licensees.

When it comes to offsets, bankruptcy law provides for two distinct remedies: (1) setoff and (2) recoupment.

Setoff allows a creditor to reduce the amount of prepetition debt it owes a debtor with a corresponding reduction of that creditor’s prepetition claim against the debtor. The remedy of setoff is subject to the automatic stay, as well as various conditions under § 553 of the Bankruptcy Code — including that it does not apply if the debts arise on opposite sides of the date on which the debtor’s case was commenced.