The Barton doctrine provides that a court-appointed receiver cannot be sued absent “leave of court by which he was appointed.” Barton v. Barbour, 104 U.S. 126, 127 (1881).
Section 548 of the bankruptcy code authorizes a trustee, debtor, or other appropriate party to avoid actual and constructive fraudulent transfers that occurred prepetition. In order to prove that a transfer was an actual fraudulent transfer, the trustee (or another appropriate plaintiff) must prove that the debtor made the transfer “with actual intent to hinder, delay or defraud any entity to which to debtor was or became…indebted.” 11 U.S.C. §548(a)(1)(A).
An appeals court has issued an insightful decision on the availability of damages when an involuntary bankruptcy petition is filed in bad faith. See Stursberg v. Morrison Sund PLLC, No. 23-1186, 2024 U.S. App. LEXIS 20286 (8th Cir. Aug. 13, 2024).
The decision addresses both the interplay between Bankruptcy Code sections 303 and 305 and federal preemption of state law.
Under federal law, a debtor may be criminally prosecuted for various kinds of misconduct in connection with a bankruptcy case, including concealing assets, falsifying information, embezzlement, or bribery. See 18 U.S.C. §§ 152, 157. The U.S. Trustee, which serves as a watchdog over the bankruptcy process, will refer such cases to the U.S. Attorney’s Office for investigation and prosecution.
As practitioners we pour over notices of intention to appoint (NOIA) and notices of appointment of administrators (NOA) to make sure every detail is accurate. Why? Because no one wants to risk an invalid appointment because there was a minor mistake or error that was overlooked. Understandably errors occur, particularly when the appointment of administrators often happens at speed, with all parties inevitably juggling many balls. Prescribed information may have been missed, or incorrectly stated and procedural steps may have been inadvertently forgotten.
11 U.S.C. § 1191(c)(2) provides (emphasis added):
- “(c) . . . the condition that a plan be fair and equitable . . . includes . . . (2) . . . all of the projected disposable income of the debtor to be received in the 3-year period, or such longer period not to exceed 5 years as the court may fix, . . . will be applied to make payments under the plan.”
There is little-to-no guidance in the Bankruptcy Code on what “as the court may fix” might mean. So, that meaning is left to the courts to decide.
The bankruptcy court presiding over the FTX Trading bankruptcy last month issued a memorandum opinion addressing valuation of cryptocurrency-based claims and how to “calculate a reasonable discount to be applied to the Petition Date market price” for certain cryptocurrency tokens.
Under 11 U.S.C. § 727(a)(2), an individual debtor may be denied a discharge, in its entirely, for making a transfer “with intent to hinder, delay, or defraud” a creditor or the trustee.
On April 17, 2023, the Bankruptcy Court for Eastern Michigan ruled:
For those that are that way inclined (which includes us at #SPBRestructuring!), the 500 plus page Wright v Chappell judgment which sets out the BHS wrongful trading claim against its former directors makes for an interesting read. It paints a colourful picture of the downfall of the BHS group, from the point that it was sold for £1 to its eventual demise into administration and then liquidation. You can make your own mind up about the characters involved, but the story is a sorry one, with creditors ultimately suffering the most.
A “silent” creditor in Subchapter V is one who does not vote on the debtor’s plan and does not object to that plan. The “silent” creditor is a problem for Subchapter V cases.
The Problem
Here’s the problem: