Assignment for benefit of creditors (“ABC”) laws are, historically, a debtor remedy. ABC laws are a voluntary debtor tool for shutting down and winding up the debtor’s failed business.
Ancient History
ABC laws began under the common law, back in merrie olde England, arising out of the law of trusts. Under trust law, any person can, without restriction, transfer assets into a trust for the benefit of one or more people.
“Under the long-standing ‘solvent-debtor exception,’ plaintiffs [unsecured trade creditors] possess an equitable right to receive post-petition interest at the contractual or default state law rate, subject to any other equitable considerations, before [the debtor] collects surplus value from the bankruptcy estate,” held the Ninth Circuit on Aug. 29, 2022. In re PG&E Corporation, 2022 WL 3712498, *4 (9th Cir. Aug. 29, 2022) (2-1).
As has been widely reported, Congress recently reauthorized the $7.5 million debt threshold for subchapter V small business debtors, making subchapter V available to a significantly larger number of struggling businesses. With this change, the other requirements for a debtor to be eligible to elect subchapter V, takes on new importance.
The Bankruptcy Protector
The interface between federal bankruptcy law and similar state laws has a long history, going back to at least 1819, when the U.S. Supreme Court rules that a state insolvency law:
The interface between federal bankruptcy law and similar state laws has a long history, going back to at least 1819, when the U.S. Supreme Court rules that a state insolvency law:
It seems like a small thing: Chapter 11 debtors in two states paying lower quarterly fees than Chapter 11 debtors in the other 48 states.
What’s the big deal?
Alabama and North Carolina throw a political hissy fit, three or four decades ago. They want their own Bankruptcy Administrator system (not the U.S. Trustee system established everywhere else). And they are rewarded. The reward includes lower quarterly fees.
Where’s the harm in lower quarterly fees? What follows is an attempt to:
On June 6, 2022, the U.S. Supreme Court issued its opinion in Siegel v. Fitzgerald, in which the Court held that the Bankruptcy Judgeship Act of 2017, Pub. L. 115-72, Div. B, 131 Stat. 1229 (the “2017 Act”) was unconstitutional.
Deepening a split of circuits, the First Circuit Court of Appeals held that the Bankruptcy Code waived the sovereign immunity of Native American Tribes. The May 6, 2022 opinion by Judge Sandra L.
A discharge in bankruptcy usually discharges a debtor from the debtor’s liabilities. Section 523 of the Bankruptcy Code, however, sets forth certain exceptions to this policy, including for “any debt . . . for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a false representation, or actual fraud. . . .” 11 U.S.C. § 523(a)(2)(A).