The President signed legislation on August 23, 2019 modifying the Bankruptcy Code in several respects. Here are the four biggest takeaways.

Help for the preference recipient

Almost all businesses have either received a letter from a bankruptcy trustee or have been sued by the trustee for the repayment of sums they received from their customer within 90 days of the customer’s bankruptcy filing. The recipient has several affirmative defenses to return of these so-called “preference” payments that may reduce, or even eliminate, the amount that must be repaid.

On Friday, August 23, President Trump signed into law the “Small Business Reorganization Act of 2019.” The SBRA will take effect in February 2020 and, at long last, may provide some (although probably minimal) relief to businesses, large and small, from the threat of questionable and small dollar bankruptcy preference claims.

On August 26, 2019, President Trump signed the Small Business Reorganization Act (“SBRA”) into law. The SBRA is scheduled to take effect on February 22, 2020.

The Bottom Line

This article first appeared in Law360.

We have blogged several times about mass tort plaintiffs who failed to list their tort claims in prior bankruptcy proceedings, thereby stiffing their creditors. See here, for example. Do they get away with it? Usually not. Courts have routinely sent those tort plaintiffs packing, and two different theories call for that result: (1) lack of standing, and (2) judicial estoppel.

Military veterans often pay a heavy toll for their service from a physical, emotional and even financial standpoint. A new federal law— the Honoring American Veterans in Extreme Need Act of 2019 or the HAVEN Act— aims to address the latter hardship, providing disabled military veterans with greater protections in bankruptcy proceedings.

Defendants Honeywell and Ford Motor appealed the District Court’s decision affirming the denial of “unconditional access” to numerous exhibits submitted in connection with “administering nine asbestos bankruptcies.” The court had previously permitted review of the documents for three months with certain limitations.

The Bottom Line

In CMH Liquidating Trust v. National Union Fire Insurance Company of Pittsburgh, PA, Case No. 16-cv-14434 (E.D. Mich. 2019) (“CMH”), the District Court for the Eastern District of Michigan held that an insurance policy that was renewed post-petition was still an executory contract, and thus, a provision denying coverage for acts leading to bankruptcy was a prohibited ipso facto clause.

What Happened?

The Bottom Line

In In re PT Bakrie Telecom Tbk, Ch. 11 Case No. 18-10200 (SHL) (Bankr. S.D.N.Y. May 30, 2019), the Bankruptcy Court for the Southern District of New York denied a noteholder group’s request for summary judgment seeking denial of recognition of a foreign proceeding under Chapter 15 of the Bankruptcy Code because the debtor had sufficient property in the United States, the appointment of the foreign representative was effective and the Indonesian proceeding was a collective one.

What Happened?