Adding to the unsettled body of case law on the enforceability of prepetition waivers of the automatic stay, on April 27, 2016, the U.S.
Law360, New York (May 5, 2016, 12:02 PM ET) -- A core principle of bankruptcy tax litigation holds that “bankruptcy courts have universally recognized their jurisdiction to consider tax issues brought by the debtor, limited only by their discretion to abstain.” IRS v. Luongo, 259 F.3d 323, 329-330 (5th Cir. 2001) (citing In re Hunt, 95 B.R. 442, 445 (Bankr. N.D. Tex. 1989). The Second Circuit recently departed from that generally accepted principle in United States v. Bond, 762 F.3d 255 (2d Cir. 2014).
The U.S. Court of Appeals for the Fourth Circuit recently affirmed the dismissal of a borrower’s lawsuit against a bank, holding that the district court correctly found that sale orders entered in a prior bankruptcy case were res judicata and precluded the borrower’s new claims.
A copy of the opinion is available at: Link to Opinion.
What happens when the counterparties on both sides of a contract are debtors in separate bankruptcy cases and their estates have contrary views about whether to reject or assume a contract?
(Bankr. W.D. Ky. Apr. 26, 2016)
(Bankr. W.D. Ky. Apr. 22, 2016)
Frequently a debtor’s assets are sold out of bankruptcy “free and clear” of liens and claims under §363(f). While the Bankruptcy Code imposes limits on this ability to sell assets, it does allow the sale free and clear if “such interest is in bona fide dispute” or if the price is high enough or the holder of the adverse interest “could be compelled ... to accept a money satisfaction of such interest” or if nonbankruptcy law permits such sale free and clear of such interest.
On February 5, 2016 the IRS released Chief Counsel Advice Memorandum Number 201606027 (the IRS Memo) concluding that “bad boy guarantees” may cause nonrecourse financing to become, for tax purposes, the sole recourse debt of the guarantor. This can dramatically affect the tax basis and at-risk investment of the borrowing entity’s partners or members. Non-recourse liability generally increases the tax basis and at-risk investment of all parties but recourse liability increases only that of the guarantor.
In March 2016, the U.S. Court of Appeals for the Seventh Circuit ruled that a landlord may be liable to a debtor’s bankruptcy estate for the value of a lease the debtor terminated early, holding the termination may be an “avoidable transfer” under the Bankruptcy Code.1 The opinion in Official Comm. of Unsecured Creditors v. T.D. Invs. I, LLP (In re Great Lakes Quick Lube LP)2 reversed the Bankruptcy Court’s ruling, and in doing so perhaps expanded the definition of a “transfer” under the Bankruptcy Code.
Background