The Bottom Line

The Third Circuit, in Artesanias Hacienda Real S.A. de C.V. v. N. Mill Capital, LLC (In re Wilton Armetale, Inc.), 968 F.3d 273 (3d Cir. 2020), issued a decision with potential implications for creditors who wish to pursue causes of action after a bankruptcy trustee refuses to act on such claims. The Third Circuit held that if a bankruptcy trustee clearly abandons a cause of action, the right of creditors to pursue that cause of action “spring[s] back to life.”

What Happened?

IN BRIEF

The Ninth Circuit, in Blixseth v. Credit Suisse, 961 F.3d 1074, 1078 (9th Cir. 2020), issued a significant decision on the issue of whether nonconsensual third-party releases are ever permitted in Chapter 11 plans. Distinguishing its prior decisions on the topic, the Ninth Circuit permitted a nonconsensual third-party release that was limited to the exculpation of participants in the reorganization from claims based on actions taken during the case.

Statutory Background

The Bottom Line

In a case of first impression on the issue of “whether a lease assumption can survive discharge even though it is not reaffirmed[,]” the U.S. Court of Appeals for the Ninth Circuit recently held that a creditor’s post-discharge attempt to collect the balance owed under an automobile lease assumed by the debtor post-petition but prior to discharge in a Chapter 7 case did not violate the discharge injunction.

The Bottom Line

The Bottom Line

Recently, in In re Dura Automotive Systems, No. 19-12378 (Bankr. D. Del. June 9, 2020), the Bankruptcy Court for the District of Delaware held that granting the Official Committee of Unsecured Creditors (the Committee) derivative standing on behalf of the debtors – a Delaware limited liability company – was precluded by the Delaware Limited Liability Company Act (the Delaware LLC Act).

What Happened?

The U.S. Court of Appeals for the Sixth Circuit recently held that wages withheld as a voluntary 401(k) contribution prior to filing bankruptcy were not considered “disposable income” under a Chapter 13 bankruptcy plan.

A copy of the opinion in In re Camille Davis is available at: Link to Opinion.

An individual debtor (“consumer”) filed a Chapter 13 bankruptcy with more than $200,000 in debt ($189,000 unsecured debt) and fewer than $39,000 in assets.

The U.S. Court of Appeals for the Ninth Circuit recently held that bankruptcy courts could confirm Chapter 13 plans proposing estimated time periods to complete the plan if unsecured creditors and the trustee did not object, reversing a contrary ruling from its Bankruptcy Appellate Panel.

A copy of the opinion in In re Nanette Sisk is available at: Link to Opinion.

The U.S. Bankruptcy Appellate Panel for the Eighth Circuit recently held managing members of a limited liability company that filed a Chapter 11 bankruptcy were equitably estopped from asserting ownership of equipment where the members previously verified documents in the bankruptcy showing ownership of the equipment by the company.

A copy of the opinion in Richards v. Rabo ArgiFinance, LLC is available at: Link to Opinion.