On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act of 2021 (CAA), the omnibus funding bill that makes consolidated appropriations for the fiscal year ending September 30, 2021. The CAA also provides various forms of economic relief to address the effects of the COVID-19 pandemic.
As part of its coronavirus response, the CAA includes a number of amendments to the Bankruptcy Code. The key amendments are addressed below.
Temporary statutory protection of certain arrearage repayments under forbearance arrangements
The Consolidated Appropriations Act of 2021 (the CAA), which President Trump signed into law on December 27, 2020, amends several provisions of the Bankruptcy Code. While a number of the amendments are applicable only to small businesses (e.g., businesses eligible to file under the new small-business subchapter of the Bankruptcy Code and/or businesses eligible to receive PPP loans), several others have more general application, as discussed below.
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Amendments of More General Application
Commercial bankruptcy practice in the United States is governed by Chapter 11 of title 11 of the United States Code. The focus of Chapter 11 is assisting a distressed company to reorganize its debts to emerge as a going concern or liquidate its assets as part of an orderly wind-down. In this article, we highlight the key benefits available to a Chapter 11 debtor and describe the various stages of a case, including statutory requirements, and types of plans.
In the United States, in a typical plain vanilla lending arrangement, if a counterparty files for bankruptcy, an automatic stay of enforcement actions is imposed that would prevent a lender from (i) foreclosing on the property of the debtor, (ii) terminating contracts with the debtor, (iii) commencing or continuing certain enforcement actions against the debtor or its property and/or (iv) setting off amounts owed under such arrangements (in each case unless a motion is filed and granted in the related bankruptcy case).
The economic value of IP rights in US bankruptcy proceedings has risen rapidly. Due to Congress's unique view of trademark licenses, appellate courts are increasingly divided on the ability both of debtor-owners to freely reject them, and of licensees to continue to use them. In In re Tempnology LLC,1 the Supreme Court has been asked to provide much-needed certainty on these issues.
In In re KB Toys Inc.,1 the US Court of Appeals for the Third Circuit affirmed the holdings of the lower courts that claims subject to disallowance under Section 502(d) of the Bankruptcy Code are “similarly disallowable in the hands of the subsequent transferee.” According to the Third Circuit, when a creditor owes property to the estate, until that property is returned to the estate, that creditor’s claim, regardless of who holds it, is impaired, and the subsequent sale of that c
Introduction
Introduction