(S.D. Ind. Feb. 3, 2016)

In April 2005, the Bankruptcy Abuse Prevention Consumer Protection Act (“BAPCPA”) was signed into law, representing the most extensive revisions to the bankruptcy code in 35 years. The BAPCPA was the product of more than a decade of legislative efforts. Its stated purpose was to curb perceived consumer abuse of the bankruptcy system. At the time of its enactment, many bankruptcy practitioners, judges and others questioned whether such a drastic change to the law was necessary and expressed concern about the impact the BAPCPA would have on consumers and the system as a whole.

When it comes to releases, plan proponents generally agree the broader the better.  But when plan proponents include far reaching and all-encompassing language in hopes of securing a release for every possible claim under the sun, they sometimes overlook the very claims for which they may actual want a release.  This was the case in a recent decision, 

Section 547(c)(2) of the Bankruptcy Code excepts from the trustee’s power to avoid preferential transfers any transaction in which the debtor transfers property to a creditor in the “ordinary course of business.” Exactly what constitutes “ordinary course of business,” however, is not a settled question of law. In Jubber v. SMC Electrical Products (In re C.W. Mining Co.), 798 F.3d 983 (10th Cir. 2015), the U.S. Court of Appeals for the Tenth Circuit considered whether a first-time transaction between a debtor and a creditor can satisfy the ordinary course exception.

A federal “secured tax claim takes priority over [a professional’s] claim to fees” in an aborted Chapter 11 case, held the U.S. Court of Appeals for the Fourth Circuit on Jan. 26, 2016. In re Anderson, 2016 WL 308590, at *1 (4th Cir. Jan. 26, 2016).

On January 1, 2016, the Uniform Voidable Transactions Act (UVTA) was enacted in Kentucky and can be found at KRS 378A.005 e seq.  The UVTA replaces KRS 378, which contained KRS 378.010, the Kentucky fraudulent conveyance statute, and KRS 378.060, the Kentucky preference statute.  Nationally, the UVTA will replace the Uniform Fraudulent Transfer Act (“UFTA”).  According to the Conference of Commissioners on Uniform State Laws, California, Georgia, Idaho, Minnesota, New Mexico, North Carolina, and North Dakota have joined Kentucky in enacting the UVTA. 

The U.S. Court of Appeals for the Seventh Circuit recently held that a lender that is on inquiry notice that its security interest in the collateral had been fraudulently conveyed may lose its secured status.

However, the Court also held that the lender's negligence here did not amount to "purposeful avoidance of the truth" sufficient to justify application of the doctrine of equitable subordination, which allows a bankruptcy court to reduce the priority of a claim in bankruptcy.

In December 2013, the U.S. Court of Appeals for the Second Circuit held as a matter of first impression in Drawbridge Special Opportunities Fund LP v. Barnet (In re Barnet), 737 F.3d 238 (2d Cir. 2013), that section 109(a) of the Bankruptcy Code, which requires a debtor “under this title” to have a domicile, a place of business, or property in the U.S., applies in cases under chapter 15 of the Bankruptcy Code.

In In re Energy Future Holdings Corp., 540 B.R. 109 (Bankr. D. Del. 2015), the bankruptcy court ruled that, although a chapter 11 plan proposed by solvent debtors need not provide for the payment of postpetition interest on unsecured claims to render the claims unimpaired, the plan must provide that the court has the discretion to award such interest at an appropriate rate “under equitable principles.” The ruling highlights the important distinction between the allowance of a claim in bankruptcy and the permissible treatment of the claim under a chapter 11 plan.

It is a familiar scenario: a company is on the verge of bankruptcy, bound by the terms of a collective bargaining agreement (CBA), and unable to negotiate a new agreement.  However, this time, an analysis of this distressed scenario prompted a new question: does it matter if the CBA is already expired, i.e., does the Bankruptcy Code distinguish between a CBA that expires pre-petition versus one that has not lapsed?