Puerto Rico is in the midst of a financial crisis. Over the past few years, its public debt skyrocketed while its government revenue sharply declined. In order to address its economic problems and to avoid mass public-worker layoffs and cuts in public services, the unincorporated U.S. territory issued billions of dollars in face value of municipal bonds. These bonds were readily saleable to investors in the United States due to their tax-exempt status and comparatively high yields.
Businesses need to have written protocols in place to deal with bankruptcy filings by their employees and independent contractors, or they risk serious sanctions and, potentially, punitive damages for violations of the bankruptcy laws. Consider two examples.
The Board of Governors of the Federal Reserve System (the "Federal Reserve") recently issued a proposed rule (the "Proposed Rule") that would significantly limit derivative counterparty remedies upon the insolvency of US global systematically important banking organizations ("GSIB") and their affiliates and the US operations of foreign GSIBs (collectively, "Covered Entities").
Since April, two bankruptcy courts have refused to enforce limited liability company ("LLC") agreement provisions requiring the respective LLCs to obtain the unanimous consent of their members in order to seek bankruptcy relief.1 On June 3, 2016, the Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court") relied on federal public policy to invalidate an LLC agreement provision requiring unanimous member consent to file bankruptcy where the member at issue owed no fiduciary duties to the LLC and the member's primary relationship to the
Earlier this month, teen clothing retailer Aéropostale filed for Chapter 11 bankruptcy protection, seeking to immediately close 154 of its over 800 stores located throughout the United States and Canada. Many of these stores are located in smaller shopping malls, which have been hit the hardest by the shift to online shopping.
The continued march of retail bankruptcies since 2015 includes Sports Authority, Vestis Retail Group, Inc. (the operator of Sports Chalet, Eastern Mountain Sports, and Bob’s Stores), Radio Shack, American Apparel, Quicksilver, Wet Seal, Delia’s and PacSun.
On May 16, 2016, the Supreme Court of the United States handed down its opinion in Husky International Electronics, Inc. v. Ritz, Case No. 15-145.
The United States Bankruptcy Court for the Southern District of Ohio, Eastern Division, (“the Court”) held in In re John Joseph Louis Johnson, III, Case No. 14-57104, 2016 WL 1719149, that a creditor violated the automatic stay by seeking to enforce an arbitration award against nondebtor co-defendants. The automatic stay applies not only to stay actions against the debtor personally but also prohibits “any act to … exercise control over property of the [debtor’s bankruptcy] estate.” 11 U.S.C.
Adding to the unsettled body of case law on the enforceability of prepetition waivers of the automatic stay, on April 27, 2016, the U.S.
In In re Zair, 2016 U.S. Dist. LEXIS 49032 (E.D.N.Y. Apr. 12, 2016), the U.S. District Court for the Eastern District of New York became the latest to take sides on the emerging issue of “forced vesting” through a chapter 13 plan. After analyzing Bankruptcy Code §§ 1322(b)(9) and 1325(a)(5), the court concluded that a chapter 13 debtor could not, through a chapter 13 plan, force a mortgagee to take title to the mortgage collateral.
Background
The failure of debtors to accurately list and value assets in their bankruptcy schedules is certainly not a new phenomenon. Recently, however, we are witnessing an increase in bankruptcy cases where debtors are using clever and deliberate means to omit assets or disguise the true value of their assets in an attempt to thwart recovery by creditors. While the U.S. trustee's or a creditor's remedy for such bad acts is to seek a denial of the debtor's discharge under 11 U.S.C.