The U.S. Supreme Court’s opinion is Truck Insurance Exchange v. Kaiser Gypsum Co., Inc., Case No. 22-1079, Decided June 6, 2024.
Opinion’s Q & A
The Truck Insurance question is this:
- Whether an insurer with financial responsibility for a bankruptcy claim is a “party in interest” under § 1109(b)?
The Supreme Court’s answer is this:
On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.
This article is the eighth in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject of this article is:
- whether the Subchapter V trustee or other party in interest should be allowed to file a plan after debtor’s removal from possession.[Fn. 1]
Recommendation
We have a direct statutory conflict:
- one statute requires an ERISA dispute to be resolved in arbitration; but
- a bankruptcy statute requires the same dispute to be resolved in bankruptcy.
Which statute should prevail? The bankruptcy statute, of course.
- That’s the conclusion of In re Yellow Corp.[Fn. 1]
Statutory Conflict
The In re Yellow Corp. case presents a direct conflict between these two federal statutes (emphases added):
On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.
This article is the seventh in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject of this article is:
- whether the $7,500,000 debt cap for Subchapter V eligibility should remain or revert to an interest-adjusted $3,024,725.
Recommendation
In a bankruptcy case, a preference action1 is often asserted pursuant to Section 547 of the Bankruptcy Code against a creditor to claw back funds paid to the creditor in the 90 days prior to the bankruptcy. While the most common defenses to a preference action are the ordinary course of business defense2, the new value defense3, and the contemporaneous exchange for new value defense4, there are other defenses that a savvy creditor should consider to reduce or even eliminate preference liability.
Key Issues
On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.
This article is the sixth in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject of this article is:
- whether a Subchapter V trustee should act as a mediator.[Fn. 1]
Recommendation
Sales pursuant to Section 363 of the Bankruptcy Code have become commonplace in bankruptcy cases as a mechanism to liquidate a debtor's assets and maximize value for creditors. Selling the debtor's assets to a third party provides a new go-forward business partner for the debtor's vendors and customers, and likely provides continuity of jobs for the debtor's former employees. Due to the benefits associated with a sale of the debtor's assets, creditors or parties-in-interest may be under the misconception that they need not pay attention to the sale process.
“Subchapter V relieves small business debtors from the absolute priority rule.”[Fn. 1]
- This was the excuse for a contorted grammatical interpretation, against the debtor, of a Subchapter V statute by the Fifth Circuit Court of Appeals.
The Fourth Circuit Court of Appeals gives the same excuse for the same contorted grammatical interpretation — like this:
On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.
This article is the fourth in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject of this article is:
The opinion is In re Packet Construction, LLC, Case No. 23-10860 in the Western Texas Bankruptcy Court (issued April 30, 2024, Doc. 103).
Subchapter V Issue & Ruling
Here’s the issue raised by the Subchapter V Trustee’s plan objection and the Bankruptcy Court’s ruling thereon.
–Issue