The High Court (Court) has found that it was not appropriate to make a winding up order in respect of a company under section 760(2) of the Companies Act 2014 (Act), where no party was nominated or consented to act as liquidator.
The hits keep coming for student loans in bankruptcy.
This time the hit is this:
- student loans for attending medical school do not qualify as “commercial or business” loans for Subchapter V eligibility.
The central finding, for a medical student who worked as an employee for ten years before becoming an entrepreneur, is this:
- “the gap between incurring the debt and actually engaging in . . . commercial or business activity as an owner is simply too great.”
Background
Is a debtor “engaged in commercial or business activities” for Subchapter V eligibility?
Such question has been addressed on many occasions and by many courts.
The trend seems to be toward a conclusion that the nature and quantity of “commercial or business activities” required for Subchapter V eligibility is this:
- Nature = “easily met”; and
- Quantity = “not much.”
The latest opinion to confirm the trend is In re Robinson, Case No. 22-2414, Southern Mississippi Bankruptcy Court (issued April 17, 2023; Doc. 90).
Oral arguments occur on April 24, 2023, before the U.S. Supreme Court in Lac Du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin, Case No 22-227. Here is a link to the oral arguments transcript.
What follows is an attempt to, (i) summarize the facts and issue in the case, and (ii) provide a sampling of questions and comments from the justices during oral arguments.
Facts
Here’s what happened:
“within three (3) business days of termination of the mediation, the Debtors shall publicly disclose the terms of the last offers extended by each of the Mediation Parties, respectively.”[Fn. 1]
Say what!?
Whoever heard of such a thing—a requirement that the “last offers” of the mediating parties be publicly disclosed?
And this requirement is in a “consensual” mediation order entered in the Genesis Global Holdco, LLC, bankruptcy.[Fn. 2]
Context
Here’s the context.[Fn. 3]
Dismissal of a bankruptcy—for bad faith filing—is a rarity.
So, how a bankruptcy court grapples with the bad faith issue . . . and ends up dismissing the bankruptcy . . . can provide a lesson for us all.
What follows is a summary of how a Chapter 11 bankruptcy is dismissed when the Court is convinced that the bankruptcy is intended for the benefit of a non-debtor . . . and not for the benefit of the debtor or its creditors.
It’s a defense v. offense distinction:
- Defense—An objection and counterclaim designed to diminish or zero-out a proof of claim in bankruptcy is not subject to arbitration; but
- Offense—An objection or counterclaim designed to do anything more . . . can be compelled to arbitrate.
That’s the essence of a recent opinion in Johnson v. S.A.I.L. LLC (In re Johnson), Adv. No. 22 -172, Northern Illinois Bankruptcy Court (issued March 28, 2023; Doc. 18). What follows is a summary of that opinion.
Facts
Johnson & Johnson filed bankruptcy back in 2021 (In re LTL Management, Case No. 21-30589, New Jersey Bankruptcy Court).
That bankruptcy is now dismissed—on order of the U.S. Third Circuit Court of Appeals.
So, Johnson & Johnson refiles its bankruptcy (In re LTL Management, Case No. 23-12825, New Jersey Bankruptcy Court).
New and Improved
Here’s what’s new and improved about the second bankruptcy[fn. 1]:
A recent Court of Appeal decision held that receivers are statutorily obliged to discharge preferential costs from assets available after deducting costs and expenses of a receiverirst line
The issue
“The trustee may avoid . . . any obligation . . . incurred by the debtor, that was madeor incurred“ with actual fraudulent intent or as constructive fraud.
–From § 548 of Bankruptcy Code (emphasis added).
Similar language is contained in the Uniform Voidable Transactions Act—and in its predecessor acts—for 100+ years. [Fn. 1]
But actions to avoid debts as fraudulent transfers are rare—and largely unknown, it seems.
A Bad Experience