“Subchapter V relieves small business debtors from the absolute priority rule.”[Fn. 1]
- This was the excuse for a contorted grammatical interpretation, against the debtor, of a Subchapter V statute by the Fifth Circuit Court of Appeals.
The Fourth Circuit Court of Appeals gives the same excuse for the same contorted grammatical interpretation — like this:
On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.
This article is the fourth in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject of this article is:
The opinion is In re Packet Construction, LLC, Case No. 23-10860 in the Western Texas Bankruptcy Court (issued April 30, 2024, Doc. 103).
Subchapter V Issue & Ruling
Here’s the issue raised by the Subchapter V Trustee’s plan objection and the Bankruptcy Court’s ruling thereon.
–Issue
On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.
This article is the third in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject in this article is:
- whether debtor’s attorney can be compensated for services performed after removal of debtor from possession. [Fn. 1]
Task Force Proposal
There is a lesson for all debtor attorneys in the Chapter 7 case of In re Aquilino.[Fn. 1]
The moral of the In re Aquilino story is this:
- a little carelessness in describing and disclosing bankruptcy fees in a Chapter 7 case can create big problems.
Fee Agreements & Disclosures
Here is the winding path of fee agreement descriptions and disclosures, between the Debtors and their attorneys, in the In re Aquilino Chapter 7 case:
On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.
This article is the second in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject of this article is:
- whether future rents should be included in the debt cap calculation for Subchapter V eligibility.[Fn. 1]
Recommendation
Delaware’s Court of Chancery has no subject matter jurisdiction over an assignment for benefit of creditors proceeding when the debtor/assignor is an Illinois corporation with no assets or operations in Delaware, even when its ABC assignee/trustee is from Delaware.
That’s the decision of Delaware’s Court of Chancery in In re Vernon Hills Serv. Co., 2024 Del. Ch., C.A. No. 2021-0783 (issued March 28, 2024).
Facts
On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.
This article is the first in a series that summarizes and condenses the Task Force’s Final Report into “a nutshell.” This article:
- provides background information and data on Subchapter V.[Fn. 1]
Overall
Debtor’s Chapter 11 counsel cannot be compensated for services performed after a trustee is appointed and the debtor removed from possession.
- That’s the rule of law in the Fifth Circuit and in a not-for-publication decision of the Ninth Circuit’s Bankruptcy Appellate Panel, based on a U.S. Supreme Court ruling.
So . . . the question is, what about Subchapter V? Does that same no-compensation rule apply in Subchapter V when the debtor is removed from possession?
Ninth Circuit BAP Opinion
Bankruptcies with large tort claims are common:
- some involve a limited number of claimants (e.g., a drunk driver hits a bus or a restaurant serves bad food one evening); and
- others have large numbers of claimants, some of whom won’t even be known for at least another decade (e.g., asbestos cases).
Often in tort bankruptcies, the total amount of claims overwhelms the debtor’s ability to pay: i.e., existing assets, insurance coverages and projected future income streams are, simply, insufficient.