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
The New Bankruptcy Law (Federal Law Decree No 51 of 2023) came into effect in UAE on 1 May 2024, replacing the previous law (Federal Decree-Law No 9 of 2016). While maintaining much of the old law's structure, it introduces significant changes for creditors and debtors, including the recognition of both natural and legal persons as 'debtors'. The law retains emergency financial crisis provisions from the old law and is expected to impact restructuring and insolvency cases in the UAE.
Introduction
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.
The opinion is Bruce v. Citigroup Inc., Case No. 22-1000, decided August 2, 2023, by the U.S. Second Circuit Court of Appeals.
The opinion addresses this question:
You don’t see this very often: a dispute over the confidentiality of mediation communications.
But such a dispute recently happened in In re Barretts Minerals, Inc., Case No. 23-90794, Southern Texas Bankruptcy Court. And the result is this: mediation confidentiality remains alive and well.
In re Barretts Minerals is a mass-tort asbestos case. And Debtor is pursuing confirmation of a bankruptcy plan under § 524(6). Mediation efforts are in progress.