You've been appointed as chapter 7 trustee in a case involving a well-known, high-flying debtor whose schedules reflect substantial unsecured liabilities, nominal non-exempt assets, and potential avoidance claims.
They say every man needs protection, they say that every man must fall.1
Hellard & others -v- OJSC Rossiysky Kredit Bank (in liquidation) & others [202] EWHC 1783 (Ch)
In dealing with whether trustees in bankruptcy might potentially be breaching UK sanctions legislation by allowing Russian creditors to participate in UK liquidation proceedings, the Court has considered recent authorities on whether a designated person can be said to directly or indirectly own or control an entity and has offered its own perspective on how the relevant wording in the legislation should be construed.
The background facts
Can non-compete and confidentiality protections in a rejected franchise agreement be discharged in bankruptcy?
The answer is, “No,” according to In re Empower Central Michigan, Inc.[Fn. 1]
Facts
Debtor is an automotive repair shop.
Debtor operates under a Franchise Agreement with Autolab Franchising, LLC. The Franchise Agreement has a non-compete provision, and there is a separate-but-related confidentiality agreement.
The U.S. Court of Appeals for the Seventh Circuit recently upheld a trial court’s rejection of a borrower’s allegations that a mortgagee and its servicer violated the federal Fair Credit Reporting Act and the federal Fair Debt Collection Practices Act by allegedly inaccurately reporting her loan as delinquent following the borrower’s successful completion of her bankruptcy plan, allegedly rejecting her subsequent monthly payments, and filing a foreclosure action based on the supposed post-bankruptcy defaults.
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:
Here are a couple discharge-related bankruptcy questions I’ve heard of late, along with an answer.
Question 1. Why are individuals, but not corporations, eligible for a Chapter 7 discharge?
- §727(a)(1) says, “the court shall grant the debtor a discharge, unless—(1) the debtor is not an individual” (emphasis added).
Question 2. Why are individuals, but not corporations, subject to § 523(a) discharge exceptions in Chapter 11?
Resumen Ejecutivo:
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:
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.