The Situation: In Homaidan v. Sallie Mae, Inc., et al., the U.S. Court of Appeals for the Second Circuit recently affirmed that certain types of private student loans are not "obligation[s] to repay funds received as an educational benefit, scholarship, or stipend" that are exempt from discharge in bankruptcy absent an undue hardship.
In cases under both chapter 15 of the Bankruptcy Code and its repealed predecessor, section 304, U.S. bankruptcy courts have routinely recognized and enforced orders of foreign bankruptcy and insolvency courts as a matter of international comity. However, U.S. bankruptcy courts sometimes disagree over the precise statutory authority for granting such relief, because the provisions of chapter 15 are not particularly clear on this point in all cases.
What is a pre-pack?
Pre-pack is the term used to describe an arrangement whereby the sale of all or part of a company’s business and/or assets is negotiated and agreed before an insolvency practitioner (IP) is appointed, with the relevant documentation being signed and implemented immediately or shortly after the appointment is made.
Following the demise of receiverships, administration is the insolvency process most commonly used to achieve a pre-pack sale.
Why are pre-packs used?
On January 14, 2021, the U.S. Supreme Court held in City of Chicago v. Fulton, 592 U.S. __ (2021), that a creditor in possession of a debtor's property does not violate the automatic stay, specifically section 362(a)(3) of the Bankruptcy Code, by retaining the property after the filing of a bankruptcy petition. The Court's decision provides important guidance to bankruptcy courts, practitioners, and parties on the scope of the automatic stay's requirements.
Introduction
Good-Faith Defense to Avoidance of Fraudulent Transfers
Stockbroker Liquidations Under SIPA
Madoff
The Second Circuit's Ruling
Outlook
On January 14, 2021, the U.S. Supreme Court held in City of Chicago v. Fulton, 592 U.S. __ (2021), that a creditor in possession of a debtor's property does not violate the automatic stay, specifically section 362(a)(3) of the Bankruptcy Code, by retaining the property after the filing of a bankruptcy petition. The Court's decision provides important guidance to bankruptcy courts, practitioners, and parties on the scope of the automatic stay's requirements.
In the latest chapter of more than a decade of litigation involving efforts to recover fictitious profits paid to certain customers of Bernard Madoff's defunct brokerage firm as part of the largest Ponzi scheme in history, the U.S. Court of Appeals for the Second Circuit held in In re Bernard L. Madoff Investment Securities LLC, 976 F.3d 184 (2d Cir.
In Short
The Situation: Circuit courts were split on whether mere retention by a creditor of estate property violates the Bankruptcy Code's automatic stay, under 11 U.S.C. § 362(a)(3). The U.S. Supreme Court considered the question inCity of Chicago v. Fulton, in which the City of Chicago had refused to return debtors' vehicles after they filed Chapter 13 bankruptcy petitions.
The ability of a bankruptcy trustee to avoid certain transfers of a debtor's property and to recover the property or its value from the transferees is an essential tool in maximizing the value of a bankruptcy estate for the benefit of all stakeholders. However, a ruling recently handed down by the U.S. Court of Appeals for the Tenth Circuit could, if followed by other courts, curtail a trustee's avoidance and recovery powers. In Rajala v. Spencer Fane LLP (In re Generation Resources Holding Co.), 964 F.3d 958 (10th Cir. 2020), reh'g denied, No.
Significant changes will come into force after 31 December if no agreement is reached (or is not finalised and ratified) before the end of the transition period for cross-border insolvency proceedings. Importantly, the changes will alter the grounds for jurisdiction to open insolvency proceedings in the UK and impact the recognition of those UK insolvency proceedings in the EU.