Bankruptcy & Creditors’ Rights Alert
Small businesses often struggle to reorganize in bankruptcy. To address this issue, Congress passed the Small Business Reorganization Act of 2019. The act took effect in February 2020 and makes small business bankruptcies faster and less expensive. At the time of enactment, the act only applied to business debtors with secured and unsecured debts less than $2,725,625.
In such turbulent times, financial institutions and their customers or borrowers may be facing significant challenges and stresses. There are signs suggesting that clients are facing financial distress and would benefit from assessing restructuring options, or that it would be time to consult with your intervention or special loans group.
The brick-and-mortar retail industry has been in a state of flux since online retailers such as Amazon started business in the mid-‘90s. Recent years have been particularly difficult for retailers: in 2018, retailers represented 5 of the 10 largest Chapter 11 bankruptcies. The pace of retail bankruptcies showed no signs of slowing in 2019, with retailers such as Payless Holding LLC, Forever 21, Gymboree, Z Gallerie, and many others all filing Chapter 11 petitions.
The CFPB announced that it settled with Think Finance, LLC and six subsidiaries on February 5.
On January 23, 2020, the Supreme Court of Canada unanimously allowed the appeal from the Québec Court of Appeal’s decision in 9354-9186 Québec Inc. et al. v. Callidus Capital Corporation, et al., opening the doors to third-party litigation funding in insolvency proceedings in Canada.
Background
In a unanimous opinion released last week, the Supreme Court provided guidance as to how to determine the finality of an order in a bankruptcy case for purposes of an appeal under 28 U.S.C. § 158(a). The Court held that the adjudication of a creditor’s motion for relief from stay is properly considered a discrete and independent proceeding within a bankruptcy case and is immediately appealable.
When a commercial tenant goes bankrupt, the respective rights of landlords and trustees can be complex to sort out. Yet, as illustrated by recent Ontario Superior Court decision 7636156 Canada Inc. v. OMERS Realty Corporation, 2019 ONSC 6106, this determination can have important ramifications on the assets available for distribution to creditors.
Recently, the First Circuit held that a parent’s tuition payments on behalf of an adult child do not benefit the parent’s bankruptcy estate, and a Chapter 7 trustee may therefore claw the payments back as fraudulent transfers.
On November 1, 2019, amendments to the Bankruptcy and Insolvency Act,R.S.C. 1985, c. B-3 (BIA) and the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 (CCAA) came into force. Among other changes described in our previous publication, these amendments expand the protection offered to intellectual property (IP) licensees in the event that the licensor enters insolvency.
The Fifth Circuit’s recent decision in Crocker v. Navient Solutions is a stark reminder to for-profit student lenders and servicers that bankruptcy caselaw continues to evolve relating to discharge. In Crocker, the Fifth Circuit joined the trend of cases holding that private student loans are dischargeable in bankruptcy.