A powerful tool afforded to a bankruptcy trustee or a chapter 11 debtor-in-possession ("DIP") is the power to recover pre-bankruptcy transfers that are avoidable under federal bankruptcy law (or sometimes state law) because they were either made with the intent to defraud creditors or are constructively fraudulent because the debtor-transferor received less than reasonably equivalent value in exchange and was insolvent at the time, or was rendered insolvent as a consequence of the transfer.

Here’s the latest opinion on a controversial question: In re Franco’s Paving LLC, Case No. 23-20069, Southern Texas Bankruptcy Court, (decided 10/5/2023; Doc. 74).

The Question & Answer

Voter apathy is a problem in Subchapter V cases. That apathy is in the form of creditors failing or refusing to vote on a Subchapter V plan. The In re Franco’s opinion addresses this apathy problem head-on.

Bankruptcy trustees and chapter 11 debtors-in-possession ("DIPs") frequently seek to avoid fraudulent transfers and obligations under section 544(b) of the Bankruptcy Code and state fraudulent transfer or other applicable nonbankruptcy laws because the statutory "look-back" period for avoidance under many nonbankruptcy laws exceeds the two-year period governing avoidance actions under section 548.

On June 30, the Supreme Court ruled that the Biden administration did not have authority to forgive student loans under the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act). Despite this defeat, the Biden administration is still working to reduce the burden of student loans. Advocates for student loan relief argue that student loans can be a crushing form of debt in part because of their treatment in bankruptcy. It is the common belief that student loans, unlike other forms of unsecured debt, are not dischargeable in bankruptcy.

On June 30, the Supreme Court ruled that the Biden administration did not have authority to forgive student loans under the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act). Despite this defeat, the Biden administration is still working to reduce the burden of student loans. Advocates for student loan relief argue that student loans can be a crushing form of debt in part because of their treatment in bankruptcy. It is the common belief that student loans, unlike other forms of unsecured debt, are not dischargeable in bankruptcy.

On May 5, 2023, the SEC filed a civil complaint in the U.S. District Court for the Northern District of New York against a mutual fund’s adviser for aiding and abetting violations of Rule 22e-4 (the “Liquidity Rule”) by the mutual fund it advised (the “Fund”) and whose Liquidity Risk Management Program (“LRMP”) it administered.

As the economy continues to face challenges and the threat of bankruptcy becomes more prevalent among businesses, landlords must be more vigilant in protecting their interests in commercial leases. One area of particular concern is leases that fall under Section 467 of the Internal Revenue Code (“Section 467 Leases”).

Although it’s inaccurate to say that the Chinese character for “crisis” combines the characters for danger and opportunity, the thought has resonated since President Kennedy repeatedly used this trope in his presidential campaign speeches.

On December 27, 2022, the IRS issued two notices providing key initial guidance for the new excise tax on corporate stock buybacks and the new corporate alternative minimum tax (CAMT). Both the excise tax and the CAMT were enacted as part of the Inflation Reduction Act that Congress passed in August 2022.¹

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.