A bankruptcy case in Illinois highlights the need for the amendments to Uniform Commercial Code Article 9 which will be effective in Indiana and many other states.

(Bankr. S.D. Ind. Aug. 21, 2017)

(Bankr. W.D. Ky. Aug. 16, 2017)

(7th Cir. Aug. 14, 2017)

The Seventh Circuit reverses the district court and holds that certain funds held by the debtor were held in trust for the appellant and other creditors in the same customer class. The funds therefore were not property of the estate that should be distributed pro rata to all creditors. Opinion below.

Judge: Hamilton

Attorneys for Appellant: Foley & Lardner LLP, Stephen Bedell, Robert Seth Bressler, Geoffrey S. Goodman, David B. Goroff, Thomas P. Krebs, William J. McKenna, Jr.

(Bankr. W.D. Ky. Aug. 10, 2017)

The bankruptcy court denies the U.S. Trustee’s motion to enter an order for sanctions and requiring disgorgement of fees. The attorney had provided advice to the debtor about the petition and schedules that the debtor had drafted. The attorney was not aware that a bankruptcy was filed until he received the U.S. Trustee’s motion. The court declines to grant the relief requested under these circumstances. Opinion below.

Judge: Lloyd

(Bankr. E.D. Ky. Aug. 4, 2017)

(Bankr. W.D. Ky. July 28, 2017)

Some bankruptcy experts predict an increase in business failures for government contractors in the coming years. Increased demands and constraints on government spending will stress both prime contractors and subcontractors. As federal regulations generally place the burden of compliance on prime contractors, a financially distressed subcontractor is a concern not only for the sub, but also for the prime contractor.

A sub’s financial problems jeopardize the sub’s ability to perform its subcontract and, thus, pose serious threats to a prime contractor, including:

(Bankr. E.D. Ky. July 17, 2017)

The bankruptcy court dismisses the debtor’s complaint seeking to avoid a transfer to the bank defendant. The transfer consisted of the Bank exercising its contractual setoff right and applying funds in the debtor’s bank account to the Bank’s claim. The transfer occurred while the bankruptcy case was dismissed. The debtor fails to state a claim that is plausible on its face. Opinion below.

Judge: Schaaf

(7th Cir. July 18, 2017)

The Seventh Circuit affirms the bankruptcy court’s order sustaining the trustee’s objection to the debtors’ $30,000 exemption in trust assets. The debtors argued the spendthrift provisions in the trust prevented the interest from becoming property of the estate. The court holds that the trust interest fully vested before the debtors filed bankruptcy. An exemption was inappropriate and the interest was property of the estate. Opinion below.

Judge: Sykes

Attorney for Debtors: Julia D. Mannix

Attorney for Trustee: Zane Zielinski