The Bankruptcy Judges and Chapter 13 Trustees for the United States Bankruptcy Court for the Southern District of Ohio have reviewed and approved a proposed District Wide Mandatory Form Chapter 13 Plan and proposed form Order Confirming Chapter 13 Plan and Awarding Attorney Fees. Currently, the Dayton, Cincinnati, and Columbus Bankruptcy Courts use different Chapter 13 form plans. The use of these different form plans makes it difficult for practitioners and creditors to keep track of the particular requirements for each court location.

A recent decision out of a New Jersey Bankruptcy Court highlights a loophole in the Bankruptcy Code which may allow Chapter 7 debtors to keep significant assets out of the hands of trustees and creditors.

Chapter 15 of the U.S. Bankruptcy Code, 11 U.S.C. §§ 1501 et seq., provides the legal framework by which U.S. bankruptcy courts recognize foreign insolvency proceedings of companies that have assets and operations in more than one country. Congress added Chapter 15 to the Bankruptcy Code with the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Like any new law, the application and limits of Chapter 15 are developing through jurisprudence.

Creditors are often compelled to commence expensive and time consuming litigation to first prosecute their claims and then locate and seize a debtor's assets. During this lengthy and costly process, the debtor's assets are dissipated and the creditor may realize only a fraction of its claim. The Bankruptcy Code¹ allows a trustee to liquidate a debtor's assets in a cost-effective, expeditious manner. Because of this, involuntary bankruptcy is a powerful tool that can expedite and maximize payments to affected creditors.

Freight brokers are well-accustomed to bankruptcy preference actions. Those actions, which are permitted under the Bankruptcy Code, allow a debtor, trustee or other bankruptcy estate representative to claw back payments made on account of antecedent debt in the 90 days prior to a bankruptcy filing. Trade creditors, especially those in the transportation industry, are often faced with significant preference claims because they provide service to debtors up until (and sometimes after) the debtor’s bankruptcy filing.

(E.D. Ky. June 7, 2016)

(Bankr. E.D. Ky. June 6, 2016)

(6th Cir. June 6, 2016)

The Sixth Circuit affirms the B.A.P. and dismisses the appeal for lack of jurisdiction. Following the principal creditor’s objection, the bankruptcy court denied the trustee and debtors’ motion to approve a settlement of a legal malpractice claim held by the estate. The debtors appealed. The court finds that the appealed order was not a final order that could be appealed because the debtors were free to propose a new settlement for approval. Opinion below.

Judge: Kethledge

Key Notes:

Creditors seeking to file an involuntary petition against a debtor may want to consider doing their due diligence before using it as a tool in their ongoing disputes with a debtor.