Four decades and several years ago, Congress repeals the Federal Bankruptcy Act of 1898 and replaces it with the Bankruptcy Reform Act of 1978, aka the “Bankruptcy Code.”[Fn. 1]

A decade later, Justices on the U.S. Supreme Court are still disparaging the new Bankruptcy Code as the “sweeping changes Congress instituted in 1978” and “the radical reforms of 1978.”[Fn. 2]

Every now and then we get an example of how a process should work.

That’s exactly what we have, regarding confirmation of a contested Subchapter V plan, in the case of In re Lapeer Aviation, Inc., Case No. 21-31500 in the Eastern Michigan Bankruptcy Court.

In an opinion issued October 12, 2022, (Doc. 264), the Lapeer Court declares that, (i) most of the plan confirmation standards are satisfied, but (ii) the plan is deficient under two confirmation standards and, therefore, cannot be confirmed.

During a November 9, 2022, hearing on summary judgment motions in the Hertz bankruptcy, Delaware Bankruptcy Judge Mary F. Walrath issues the following oral ruling:

The case is Wells v. McCallister, Case No. 21-1448 in the United States Supreme Court.

The question presented is:

• whether a debtor’s homestead exemption, existing on the date of bankruptcy filing, can vanish if the debtor sells the homestead during the bankruptcy and does not promptly reinvest the proceeds in another homestead.

The Petition for writ of certiorari explains:

In October 2022, the English High Court delivered a long-awaited judgment¹ relating to whether or not certain Bankruptcy Events of Default can be cured under the ISDA 2002 and 1992 Master Agreements ("ISDA Master Agreements") - resolving an issue relating to the suspensory effect of conditions precedent to payments and performance under ISDA Master Agreements raised in the English Court of Appeal earlier in the Lehman administration.

For some reason, there is a fascination out there (not sure where, exactly) with having every assignment for benefit of creditors (“ABC”) supervised by a court from the get-go. 

This fascination suggests that every ABC effort requires court action and judicial approvals, from the beginning and throughout the assignment, to assure that everything about the ABC and its administration is on the up-and-up.

Startling and Puzzling

This fascination is both startling and puzzling.  Here are some reasons why.

In its Siegel v. Fitzgerald opinion, the U.S. Supreme Court declares that disparate quarterly fee amounts between U.S. Trustee and Bankruptcy Administrator districts are unconstitutional, under the uniformity requirement of the U.S. Constitution’s bankruptcy clause.

The most recent fallout from that opinion is the following docket entry by the U.S. Supreme Court in a different case with the same issues:

Illinois follows the common law of assignments for benefit of creditors (“ABC”): a non-judicial, trust-like process for liquidating a failed business.

That ABC process can work, hand-in-hand, with the Bankruptcy Code. The case of In re Computer World Solutions, Inc., Case No. 07-21123, Northern Illinois Bankruptcy Court, shows us how.

FACTS

Debtor is an importer and distributor of computer monitors, televisions and other electronic products, owing $20 million to Bank, which holds a first-lien on virtually all of Debtor’s assets.

As the UK teeters on the brink of what would appear to be an inevitable recession, new restructuring tools introduced in the UK in 2020 pursuant to the Corporate Insolvency & Governance Act 2020 (“CIGA”) will ensure that issuers and other distressed borrowers can execute more creative and aggressive restructuring strategies than were possible during previous market downturns. A brief summary of the new UK restructuring plan is set out below, together with some examples as to how the restructuring plan is being used in practice.

Many years ago, back when mediation is a rarity in bankruptcy disputes, I asked an old-timer this question:

Why is the bankruptcy system a lagging adopter of mediation?”

A Surprising Answer

The old-timer gave this surprising answer:

“At the time of the Bankruptcy Code’s enactment, the bankruptcy judge was viewed as a mediator in the judge’s own court.”

The old-timer added this.  When the Bankruptcy Code was enacted: