Bankruptcy benefits for individual debtors are a tough sell—always have been.  That’s because no one likes bankruptcy—unless they need it.

But relieving people from debts in unfortunate circumstances is essential to our collective way of life in these United States.  That’s always been true.

What follows is the first of three installments on some history of bankruptcy laws through the ages, beginning with ancient times—and to the present in these United States.

Ancient Days

Preference avoidance provisions are a crucial part of the Bankruptcy Code—contained, primarily, in § 547 & § 550.

States also have a preference avoidance statute—for insiders. It’s in the Uniform Voidable Transactions Act (“UVTA)” or in its predecessor, the Uniform Fraudulent Transfer Act (“UFTA)).

The insider preference statute appears to be rarely-used and, apparently, little-known. It reads like this:

2022 has been a bad year for the Carolina Panthers of the National Football League:

“The [Subchapter V] Trustee shall— . . . facilitate the development of a consensual plan of reorganization.” 11 U.S.C. § 1183(b)(7).

That’s what we Subchapter V trustees are supposed to do.

Ok, fine. But how are we supposed to do that?

A facilitation tool that many Subchapter V trustees are using is this: Zoom facilitation meetings.

What follows is an explanation of how such meetings can work.

Initial Meeting

A bankruptcy discharge “does not discharge an individual debtor from any debt– . . . for fraud or defalcation while acting in a fiduciary capacity.” 11 U.S.C. § 523(a)(4).

The effect of this “fiduciary capacity” statute is newly before the U.S. Supreme Court on a petition for certiorari in Spring Valley Produce, Inc. v. Forrest, Case No. 22-502.

The question presented in Spring Valley is this:

Assignments for benefit of creditors (“ABC”) are rarely used in these United States. That’s for two reasons: (i) some states have no ABC statute and do not recognize the common law of ABCs, and (ii) other states have onerous ABC statutes that no one wants to use.

The State of Illinois is an exception: ABCs are regularly and frequently used there, under the common law of trusts, because the ABC process is an efficient and effective tool for liquidating a failed or failing business. There is no ABC statute in Illinois.

Every now and then we get a bankruptcy opinion declaring a rule with broad application that, (i) may make sense is specific situations, but (ii) is a terrible result for others.

Here’s an Exhibit A opinion for such a proposition: Reinhart Foodservice LLC v. Schlundt, Case No. 21-cv-1027 in the U.S. District Court for Eastern Wisconsin, (Doc. 12, issued October 27, 2022).

The Facts

Poor Chicago. 

Unlike the result for Chicago’s traffic ticket income in Fulton v. Chicago, the U.S. Supreme Court refuses to rescue Chicago in City of Chicago v. Mance (Case No. 22-268; Cert. denied, 11/21/2022).[Fn. 1]

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]

中伦观点

在系列上篇中，我们梳理了地产项目债务重组相关政策，结合经验总结债务重组的原则、项目与项目公司尽职调查实务重点。在下篇中，我们着重梳理困境项目重组方案经验，并分享对行政赋能的一些思考，供读者参考。

房地产行业高速发展10余年，在“房住不炒”的宏观背景以及2020年8月“三道红线”政策后，因房地产行业的发展模式及市场发展规律、政策执行力度、国家宏观调控等多方面的原因，房地产市场从2021年9月开始经历行业“缩表”的阵痛，不少大型房地产企业先后出现债务风险，面临诸多的困难处境，继而影响资金方、施工方、材料设备供应方及购房业主等多方主体。房地产市场影响国民经济及民生多个方面，在行业困境下，政府亦在监管、维稳、施救等多方面遇到难题。表面上看，各方主体皆可按政策与法律处理，但实操中，商业诉求与法律的平衡，经济效果与社会效果、法律效果的协调，社会资源的调度与节约，仍需探索最佳路径。

本文仅就困境项目的成因、市场常见盘活方案等问题，从法律角度予以整理，请勿以此作为法律意见在实践中套用。

一、困境项目重组方案