The opinion is In re Packet Construction, LLC, Case No. 23-10860 in the Western Texas Bankruptcy Court (issued April 30, 2024, Doc. 103).

Subchapter V Issue & Ruling

Here’s the issue raised by the Subchapter V Trustee’s plan objection and the Bankruptcy Court’s ruling thereon.

–Issue

When a liquidating debtor seeks to assume a lease, one of the lessor’s immediate questions is who will be the assignee. But what happens when a liquidating debtor seeks to assume a lease and waits up to two years thereafter to determine who the assignee will be? Although peculiar, the analysis of whether to grant the assumption rests on evaluating the three basic requirements under section 365 of the Bankruptcy Code.

On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.

This article is the fourth in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject of this article is:

The New York State Legislature recently proposed a bill, entitled the Sovereign Debt Stability Act, [1] intended to facilitate sovereign debt restructuring.

The US appears likely to enter a default cycle in the near future, according to senior fund managers and economists. A recent bout of M&A transactions involving chapter 11 cases point in the same direction. Taking deals involving bankruptcy cases as a proxy for distressed M&A, 16 such transactions were announced in the US in Q1, up 14.3 percent year on year, according to Dealogic. The aggregate value of those deals reached US$1.8 billion, a gain of 76 percent from the same period in 2023.

In Arab v Pan, in the matter of Pan (No 3) [2024] FCA 563, the Federal Court of Australia addressed critical issues concerning the scope and compliance of summonses for production in bankruptcy, which will also impact corporate insolvency proceedings and such proceedings in other common law jurisdictions.

“Subchapter V relieves small business debtors from the absolute priority rule.”[Fn. 1]

• This was the excuse for a contorted grammatical interpretation, against the debtor, of a Subchapter V statute by the Fifth Circuit Court of Appeals.

The Fourth Circuit Court of Appeals gives the same excuse for the same contorted grammatical interpretation — like this:

Section 363(m) of the Bankruptcy Code offers powerful protection for good-faith purchasers in bankruptcy sales because it limits appellate review of an approved sale, irrespective of the legal merits of the appeal. Specifically, it provides that the reversal or modification of an order approving the sale of assets in bankruptcy does not affect the validity of the sale to a good-faith purchaser unless the party challenging the sale obtains a stay pending its appeal of the order. That is, section 363(m) renders an appeal "statutorily moot" absent a stay of the sale order.

On May 16th, the DOL released interim final rules (the “Final Rules”) and an amendment to Prohibited Transaction Exemption 2006-06 (the “Amendment to PTE”), effective July 16, 2024, amending the DOL’s Abandoned Plan Program (the “APP”) to allow Chapter 7 bankruptcy trustees to use the APP to terminate, wind up, and distribute assets from a bankrupt company’s retirement plan.