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.

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

The government's response to the recent Insolvency and Corporate Governance Consultation has increased the emphasis on flexibility and the restructure and rescue of businesses. However, along with the recent October Budget, there are proposed reforms which are set to increase the focus and accountability for directors of companies.

Preliminary Moratorium

One of the key new proposals to be introduced with the aim of rescuing companies is a "Preliminary Moratorium".

Restructuring & Insolvency analysis: Following the decision in Wagner v White, Connor Pierce, solicitor at Ashfords LLP, looks at how the courts have been dealing with bankruptcy petitions which lenders have presented against guarantors when the principal borrower fails to repay the loan. Pierce also considers the ways in which guarantors have tried to have the lender’s statutory demand set aside. Wagner v White [2018] EWHC 2882 (Ch), [2018] All ER (D) 16 (Nov)

Restructuring & Insolvency analysis: Connor Pierce, solicitor at Ashfords LLP, examines a High Court judge’s dismissal of an appeal against a deputy registrar’s refusal to set aside a statutory demand made on the appellant, which was based on a personal guarantee he had given the respondent.

Wagner v White [2018] EWHC 2882 (Ch), [2018] All ER (D) 16 (Nov)

What are the practical implications of this case?

The case is a useful authority for statutory demands founded on personal guarantees.

In a matter of first impression, the U.S. Bankruptcy Court for the Northern District of New York recently analyzed whether a debtor may exempt from her bankruptcy estate a retirement account that was bequeathed to her upon the death of her parent. In In re Todd, 585 B.R. 297 (Bankr. N.D.N.Y 2018), the court addressed an objection to a debtor’s claim of exemption in an inherited retirement account, and held that the property was not exempt under New York and federal law.

In Kaye v. Blue Bell Creameries (In re BFW Liquidation), 899 F.3d 1178 (11th Cir. 2018), the U.S. Court of Appeals for the Eleventh Circuit found that a liability for an allegedly preferential transfer may be reduced by the amount of new value given, regardless of whether that new value has already been repaid by the debtor before its bankruptcy filing.