Section 523(a)(2) of the Bankruptcy Code is clear that a debtor can discharge a debt for money obtained by a false statement respecting the debtor's financial condition unless that statement is in writing. What has not been clear is whether a debtor's false oral statement regarding a single asset is a "statement respecting the debtor's financial condition" that falls within the ambit of 523(a)(2)(A). If so, debts obtained by such a false oral statement would be dischargeable. If not, then creditors could seek to have such fraudulently obtained debts excepted from discharge.

In March 2016, the U.S. Court of Appeals for the Seventh Circuit ruled that a landlord may be liable to a debtor’s bankruptcy estate for the value of a lease the debtor terminated early, holding the termination may be an “avoidable transfer” under the Bankruptcy Code.¹ The opinion in Official Comm. of Unsecured Creditors v. T.D. Invs. I, LLP (In re Great Lakes Quick Lube LP)² reversed the Bankruptcy Court’s ruling, and in doing so perhaps expanded the definition of a “transfer” under the Bankruptcy Code.

Background 

The good news is that public works construction projects for municipalities are projected to remain a major sector of construction activity for the foreseeable future. The not-so-good news is that municipal bankruptcy filings are on the rise, and they are likely to increase. The issues facing parties under contract with a municipality when it files for bankruptcy protection are playing out nationally in places like Stockton, California, and Detroit, Michigan.

Introduction

Introduction

Introduction

Introduction

Introduction

Introduction

Introduction