“(b) Duties.—The [Subchapter V] trustee shall— . . . (7)facilitatethe development of a consensual plan of reorganization.”

• From 11 U.S.C § 1183(b)(7)(emphasis added).

Facilitation is, by statute, a duty of every Subchapter V trustee—something a Subchapter V trustee must do. But the nature and boundaries of the facilitation role have always been fuzzy and, therefore, misunderstood.

My purpose in this multi-part series is to provide observations on the facilitation role.

“Notwithstanding the court of appeals’ error, this case does not warrant this Court’s review.”

“(b) Duties.—The [Subchapter V] trustee shall— . . . (7)facilitatethe development of a consensual plan of reorganization.”

• From 11 U.S.C § 1183(b)(7)(emphasis added).

Facilitation is, by statute, a duty of every Subchapter V trustee—something a Subchapter V trustee must do. But the nature and boundaries of the facilitation role have always been fuzzy and, therefore, misunderstood.

My purpose in this multi-part series is to provide observations on the facilitation role.

“(b) Duties.—The [Subchapter V] trustee shall— . . . (7)facilitatethe development of a consensual plan of reorganization.”

• From 11 U.S.C § 1183(b)(7)(emphasis added).

Facilitation is, by statute, a duty of every Subchapter V trustee—something a Subchapter V trustee must do. But the nature and boundaries of the facilitation role have always been fuzzy and, therefore, misunderstood.

My purpose in this multi-part series is to provide observations on the facilitation role.

“Learn something new every day,” is a well-worn adage.

And it’s mostly true (I only question giving a literal meaning to the “every day” part).

Nevertheless, I’m embarrassed to acknowledge learning only recently of the existence of a noteworthy, bankruptcy-related statute: 28 U.S.C. § 959(a). Such statute reads in part (emphasis added):

The BVI is a leading international financial centre, and BVI companies play a significant role in the flow of capital across the global economy. As global economic conditions become more challenging, lenders are increasingly reliant on formal insolvency procedures to realise value from distressed assets. As a result, the past year has seen a marked increase in the use of statutory demands against BVI companies as a precursor to an application to appoint liquidators. That trend is set to continue with the ongoing uncertainty in global markets.

Excluded from Subchapter V eligibility is a “single asset real estate” debtor.

We have a recent opinion on a Subchapter V debtor who beats that exclusion: In re Evergreen Site Holdings, Inc., [Fn. 1]

What follows is a summary of that opinion.

Eligibility Issue & Standards

The Evergreen issue is this:

In a mass-tort bankruptcy, when 95% of 120,000 creditors vote to accept a mediated plan paying over $7 billion to creditors, shouldn’t the plan be confirmed?

Subchapter V eligibility requires a debtor to be “engaged in” commercial/business activities.

Case Law Consensus

Case law consensus is that such activities must exist on the petition filing date. That means a debtor cannot utilize Subchapter V when:

• business assets are fully-liquidated;
• unpaid debts are the only remnant of the failed business; and
• prospects for resuming such activities are nil.

So . . . here’s the question: Is that the right eligibility standard?

I say, “No.”

A Hypothetical

Contrasting opinions from any court, issued a month apart, are always instructive.

And we have a new such thing—from the U.S. Supreme Court, no less, and from May and June of this year. The contrast is on this subject: whether sovereign immunities of Puerto Rico and of a federally recognized tribe are abrogated in bankruptcy.