When it comes to offsets, bankruptcy law provides for two distinct remedies: (1) setoff and (2) recoupment.
Setoff allows a creditor to reduce the amount of prepetition debt it owes a debtor with a corresponding reduction of that creditor’s prepetition claim against the debtor. The remedy of setoff is subject to the automatic stay, as well as various conditions under § 553 of the Bankruptcy Code — including that it does not apply if the debts arise on opposite sides of the date on which the debtor’s case was commenced.
The legalization of marijuana and the Bankruptcy Code continue to proceed on a crash course. A majority of states have legalized marijuana for medical use, and a growing number have legalized recreational use as well. As a result, the industry is rapidly expanding – national sales in legal markets have increased 34 percent in 2018 to $10.8 billion.
Healthcare bankruptcies present unique challenges in addition to financial restructuring. An immediate concern that must be addressed in these cases is the ability of the debtor to provide, and continue to provide, adequate services to existing and future patients. Having been involved in numerous healthcare matters filed under both Chapter 7 and Chapter 11, I know first-hand how important this issue is. Debtors are generally required to employ, at their cost, a specialized professional, i.e., an ombudsman, who will monitor the quality of patient care being provided during the case.
The Bankruptcy Appellate Panel for the U.S. Court of Appeals for the Sixth Circuit recently affirmed a lower bankruptcy court’s ruling that a refinanced mortgage was enforceable as to the interests of both husband and wife, where the wife did not execute the note and was not defined as a “borrower” in the body of the mortgage, but nonetheless initialed and signed the mortgage document as a “borrower” in the signature block.
Should the laws of the United States have effect outside of the United States? For that matter, should the laws of other countries have effect outside of their borders, and inside the United States? These are pretty fundamental questions about what should be the world order. A recent decision of the Second Circuit Court of Appeals, a bankruptcy case with a high likelihood of reaching the U.S. Supreme Court, takes on that issue. It is a case to watch.
In certain states, including Minnesota, a resident may file a bankruptcy case and elect to protect certain assets under the Bankruptcy Code. The Bankruptcy Code provides that these exemption amounts are automatically adjusted for inflation every three years. In short, the adjustments are based on changes to the Consumer Price Index for All Urban Consumers published by the Department of Labor, rounded to the nearest $25.
As commonly understood amongst bankruptcy professionals, when a creditor violates the discharge injunction in a bankruptcy case, courts have the authority to levy civil contempt violations against the violating creditor. However, a more difficult question for those professionals, and one that presiding courts have occasionally struggled to answer, is under which circumstances a creditor’s abusive action actually rises to the level of civil contempt.
In a recent post, we discussed the ongoing personal bankruptcy case In Re Adair, in which a a United States Trustee is seeking to have the court dismiss a Chapter 13 plan of an individual that is employed by a “non-plant-touching” ancillary marijuana business.
In an earlier update, we told you about an appeal pending in the U.S. Court of Appeals for the Ninth Circuit that would decide whether a landlord receiving rent from someone involved in the state-legal cannabis industry could ever confirm a plan of reorganization under chapter 11 of the Bankruptcy Code.
Creditors’ recoveries often hinge on claw-back lawsuits that trustees bring under bankruptcy law and non-bankruptcy law.[1] Trustees can file claims based on non-bankruptcy law because Bankruptcy Code section 544(b) allows them to assert claims that creditors have standing to file outside of bankruptcy.