As discussed in previousposts, the Consolidated Appropriations Act of 2021 (the “Act”) was signed into law on December 27, 2020, largely to address the harsh economic impact of the COVID-19 pandemic.

Part 2: Amendments Affecting Mortgage Lenders and Landlords

As discussed in a previous post, the Consolidated Appropriations Act of 2021 (the “Act”), which was enacted on December 27, 2020 in response to the economic distress caused by the COVID-19 pandemic, amended numerous provisions of the Bankruptcy Code. This post discusses amendments specifically affecting landlords.

On December 27, 2020, in response to the economic distress caused by the COVID-19 pandemic and to supplement the CARES Act enacted in March 2020, the Consolidated Appropriations Act of 2021 (the “Act”) was enacted. In addition to providing $900 billion in pandemic relief, the Act benefits both debtors and creditors by temporarily modifying the following sections of the Bankruptcy Code, which may be of particular interest to creditors:

On 11 September 2020, the Insolvency Act 1986 (HMRC Debts: Priority on Insolvency) Regulations 2020 were made. The Regulations will come into force on 1 December 2020.

The Regulations set out the debts due to HMRC that will have ‘secondary’ preferential status in insolvencies from 1 December 2020. They are debts in respect of PAYE income tax, employee NICs, construction industry scheme deductions and student loan repayments. VAT debts are to be treated in the same way, though are not covered by these Regulations.

On 4 June 2020, a draft of The Insolvency Act 1986 (HMRC Debts: Priority on Insolvency) Regulations 2020 was provided to the Public Bill Committee. The Regulations are due to come into force on 1 December 2020.

The draft Regulations set out the debts due to HMRC that will have ‘secondary’ preferential status in insolvencies from 1 December 2020. They are debts in respect of PAYE income tax, employee NICs, construction industry scheme deductions and student loan repayments. VAT debts are to be treated in the same way, though are not covered by these draft Regulations.

On 26 February 2019, HMRC launched a consultation entitled “Protecting your tax in insolvency”, on the government’s proposal to make HMRC a secondary preferential creditor for taxes paid by employees and customers (the new powers are contained in the proposed Finance Bill 2019-20).

(Bankr. S.D. Ind. Dec. 4, 2017)

The bankruptcy court grants the motion to dismiss, finding the defendant’s security interest in the debtor’s assets, including its inventory, has priority over the plaintiff’s reclamation rights. The plaintiff sold goods to the debtor up to the petition date and sought either return of the goods delivered within the reclamation period or recovery of the proceeds from the sale of such goods. Pursuant to 11 U.S.C. § 546(c), the Court finds the reclamation rights are subordinate and the complaint should be dismissed. Opinion below.

(Bankr. E.D. Ky. Nov. 22, 2017)

(B.A.P. 6th Cir. Nov. 28, 2017)

The Sixth Circuit B.A.P. affirms the bankruptcy court’s dismissal of the Chapter 12 bankruptcy case. The court finds that the bankruptcy court failed to give the debtor proper notice and opportunity to be heard prior to the dismissal. However, the violation of due process was harmless error. The delay in filing a confirmable plan and continuing loss to the estate warranted the dismissal. Opinion below.

Judge: Preston

Attorney for Appellant: Heather McKeever

(6th Cir. Nov. 14, 2017)