This week, in a 2-1 decision affirming the District Court’s reversal of a ruling of the Bankruptcy Court for the Eastern District of Pennsylvania, the United States Court of Appeals for the Third Circuit held that secured creditors do not have a right as a matter of law to credit bid their claim at an auction pursuant to a plan of reorganization where the debtor intends to impose the plan on its secured creditors through a “cramdown” under section 1129(b)(2)(A)(iii) of the Bankruptcy Code; i.e., a plan providing the secured creditors with the “indubitable equivalent” of their secured claim.

On March 1st, the Seventh Circuit held that negative equity is included in a creditor's purchase money security interest and is not subject to a bankruptcy court's cramdown authority under Chapter 13 of the Bankruptcy Code. In re Aubrey Howard.

No Respite for Distressed Companies in Hong Kong

In Hong Kong, a company that is financially distressed may generally only avoid being liquidated or wound up if it:

In a recent holding that a creditor may collect, on an unsecured basis, post-petition attorneys’ fees under an otherwise enforceable pre-petition contract, the Second Circuit Court of Appeals followed a similar ruling by the Ninth Circuit earlier this year, adding to a conflict among the circuits on this issue.

In the wake of the recent economic downturn caused by the COVID-19 pandemic, there will likely be a sharp rise in bankruptcy filings by businesses seeking to obtain relief from the burdens of excessive debt.1 1 Winston & Strawn’s Tax Controversy and Litigation Group litigates tax disputes in the bankruptcy courts and works in conjunction with the firm’s Bankruptcy Practice Group. Portions of this article were originally published by the author in 2008.

In the wake of the recent economic downturn caused by the COVID-19 pandemic, there will likely be a sharp rise in bankruptcy filings by businesses seeking to obtain relief from the burdens of excessive debt.[1] The bankruptcy code is designed to provide debtors relief and protection from creditors, which includes the Internal Revenue Service (“IRS”).  One of the benefits of bankruptcy court protection is the automatic stay, which will prevent the IR

TAX CONTROVERSY AND LITIGATION NEWSLETTER

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Focus on Tax Controversy

NOVEMBER 2020\\VOLUME 4\\ISSUE 3

IN THIS ISSUE

ARTICLES AND UPDATES Bankruptcy Court's Jurisdiction To Resolve Tax Claims2 FAQs Issued Under The CARES Act Invalid Under The APA8 Tax Court Concludes IRS Failed to Satisfy 675111

Penalty For Failure To File Form 5471 Is Not Divisible 14 Sixth Circuit Rejects Taxpayer's Judicial Estoppel Claim17

ABOUT US Winston & Strawn's Tax Controversy and Litigation Practice 20

Editors 20

The impact of COVID-19 is yet to be fully realized, and many companies are yet to consider restructuring as a means to survive the pandemic, but all companies and all creditors can benefit now from learning how employee matters are treated in a bankruptcy proceeding under chapter 11 of the U.S. Bankruptcy Code (as amended, the Bankruptcy Code). This blog provides a high-level overview of some of the most material matters affecting an employee workforce in the context of a chapter 11 restructuring.

California’s AB 506 process was intended to help a municipality in restructuring its debt obligations and avoid bankruptcy. However, the lessons of the bankruptcies of the City of Stockton, the Town of Mammoth Lakes and the City of San Bernardino support the reality that a meaningful restructure requires material involvement by the major stakeholders. California’s recent wave of municipal bankruptcies tend to show that the AB 506 process has not changed this reality, but rather made a difficult process longer and more arduous.

On May 29, 2012, the U.S. Supreme Court, in a unanimous decision, resolved a high-profile circuit split regarding the right of secured creditors to credit bid in an asset sale under a chapter 11 plan. In RadLAX Gateway Hotel, LLC v. Amalgamated Bank,¹ the Court held that a debtor cannot deny a secured creditor the right to credit bid as part of a chapter 11 plan providing for the sale of assets free and clear of the secured creditor’s liens on those assets.