The Second Circuit released a new decision this week in Sears regarding bankruptcy valuation methodologies and the entitlement of second lien debt holders to adequate protection. Among other interesting aspects of the ruling, the Second Circuit affirmed the Bankruptcy Court’s adoption of a "net orderly liquidation value" for the debtors’ inventory as of the petition date (rather than looking to the actual values obtained by the debtors during the case).

For a decade or more, restructuring professionals have predicted the coming of a bankruptcy boom. This may be the year those predictions finally come true. Inflation, interest rates, supply chain issues, global conflict and domestic politics have created a challenging macro environment. At the same time, dry powder abounds, with new distressed debt funds cropping up daily. Will this result in a bankruptcy tidal wave, or an increase in workouts and distressed M&A? Perhaps all of the above.

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 spring 2020, the Czech Republic, like the rest of the world, was severely affected by the coronavirus pandemic. The spread of COVID-19 outbreaks led to drastic shutdowns and reduced operations in almost all sectors of the economy. The loss of income and suspension of payments threatened to lead to the insolvency of thousands of businesses. So in spring 2020 the Czech Parliament approved temporary statutory measures to prevent the collapse of the business sector due to formal insolvency proceedings (the so-called Lex COVID).

On 3 December 2020, the UK Government (HM Treasury) issued a consultation paper (the Consultation) setting out a proposal to implement a new “special administration regime” (the SAR) which it is proposed would apply to any insolvency of an authorised payment institution (a PI) or electronic money institution (an EMI).

On 3 December 2020, HM Treasury published the Government's proposal to implement a new special administration regime for PIs and EMIs (PI and EMI SAR), a copy of which can be seen here.

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