The Supreme Court yesterday issued its decision in the long-running case concerning financial support directions (“FSDs”) issued by the UK Pensions Regulator to various companies in the Nortel and Lehman groups. The case considered where a company's obligations under an FSD should rank in relation to its other debts if the company was insolvent when the FSD was issued.

Snapshot

The Supreme Court handed down its long-awaited judgment today in the Nortel/Lehman case on where a contribution notice (CN) or financial support direction (FSD) issued by the Pensions Regulator (TPR) on a company that is already in insolvency proceedings (eg administration) ranks in the order of priority of payment.

The Supreme Court handed down its decision yesterday on the combined appeals of Nortel GmbH (In Administration) ("Nortel") and Lehman Brothers International (Europe) (In Administration) ("Lehman Brothers") (together, the "Appellants") against the Pensions Regulator ("tPR").

Almost five years after the enactment of the Bankruptcy Abuse and Consumer Protection Act, the Supreme Court recently ruled in Milavetz, Gallop & Milavetz, P.A., et al v. United States that attorneys are “debt relief agencies” who are limited in their ability to provide pre-bankruptcy planning advice to consumers and obligating them to provide additional disclosures in their advertisements.

Attorneys Are Debt Relief Agencies Under BAPCPA

Many bankruptcy practitioners are familiar with the general tenet that an obligation secured only by a mortgage on the Debtor’s principal residence is immune from modification or avoidance by the Debtor. Sections 1123(b)(5) and 1322(b)(2) of the Bankruptcy Code protect residential mortgages from being “stripped-down” to the value of the subject real estate or subjecting the terms of the underlying obligation to modification.

On May 18th, the Second Circuit, applying the Supreme Court's holding in Milavetz, Gallop & Milavetz, P.A. v. U.S., 130 S.Ct. 1324 (2010), reversed a trial court order finding that provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act that prohibit debt relief agencies from advising clients to incur more debt were overbroad and unconstitutional when applied to attorneys.

On June 2, 2010, the Third Circuit overruled longstanding precedent interpreting the definition of a “claim” under the Bankruptcy Code. In JELD-WEN, Inc. v. Van Brunt (In re Grossman’s Inc.), No. 09-1563, slip op., (3d Cir. June 2, 2010) an en banc panel rejected the state law accrual theory of claims recognition established in Avellino & Bienes v. M. Frenville Co. (Matter of M. Frenville Co.), 744 F.2d 332 (3d Cir. 1984), in favor of the more widely followed conduct test theory.

Under BAPCPA, enacted in 2005, a Bankruptcy Court may not approve a Chapter 13 plan which does not provide for the payment of all unsecured claims in full if the plan does not devote all of the debtor’s projected disposable income over the life of the plan to repayment of the unsecured creditors.

On June 7th, the US Supreme Court addressed the calculation of a Chapter 13 debtor's projected "disposable income" under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. When a bankruptcy court calculates a debtor's projected disposable income, the court may account for changes in the debtor's income or expenses that are known or virtually certain at the time of confirmation. Hamilton v. Lanning.  

In Schwab v. Reilly, the United States Supreme Court recently reversed a decision from the 3rd Circuit Court of Appeals regarding the need for a bankruptcy trustee to lodge an objection to an exemption where the property is actually worth more than the amount claimed by the exemption. The Supreme Court took the opportunity in this case to also clarify its prior ruling in Taylor v.