Bankruptcy Law Commons^™

Courts Are Divided On Whether Electric Energy Is A "Good" Under Section 503(B)(9) Of The Bankruptcy Code, Mari Bijimenian

Bankruptcy Research Library

(Excerpt)

Under Section 503(b)(9) of title 11 of the United States Code (the "Bankruptcy Code"), the value of goods received by a debtor in the ordinary course of business, within 20 days before the date of commencement of a case, can be granted administrative priority status. Bankruptcy courts have grappled with settling on a definition of "goods" because neither Section 503(b)(9) nor the Bankruptcy Code at large define "goods." While the definition of "goods" is a matter of federal interpretation because Section 503(b)(9) of the Bankruptcy Code is federal law, "bankruptcy courts have almost without exception looked to the Uniform …

Section 363(M) Is Not A Jurisdictional Constraint On Appellate Review Of Property Transfers, Agustin Bujanda

Bankruptcy Research Library

(Excerpt)

Under section 363(b) of title 11 of the United States Code ("the Bankruptcy Code"), the trustee "may use, sell, or lease, other than in the ordinary course of business, property of the estate." Under section 363(m), once a transfer of property has been authorized, the "reversal or modification on appeal of an authorization under subsection (b) . . . of a sale or lease of property does not affect the validity of a sale or lease . . . unless such authorization and such sale or lease were stayed pending appeal."

Until recently, various circuit courts were split on …

Insider May Be An Alter-Ego When It Exercises Control Over A Debtor, Delanie Fico

Bankruptcy Research Library

(Excerpt)

Section 101(31) of title 11 of the United States Code (the "Bankruptcy Code") defines an "insider." This definition, however, is not exhaustive. Courts have concluded that certain persons or entities not mentioned in the statute can be "non-statutory" insiders. In certain circumstances, a statutory or non-statutory insider may be the alter-ego of a debtor. As an alter-ego, an insider may be liable for a debtor’s debt. Alter-ego liability may be imposed on an insider who significantly controls the debtor and has committed some form of injustice.

This memorandum discusses an insider’s possible liability for a debtor’s debt in the …

Creditors Have Standing To Bring Derivative Actions Against Delaware Llcs In Bankruptcy, John D. Hayes Jr.

Bankruptcy Research Library

(Excerpt)

Delaware limited liability companies ("LLCs") are "creatures of contract" and their corporate structure may vary to resemble corporations, partnerships, or a mix of both. Managers of LLCs—like a director or officer of a corporation—owe fiduciary duties to the entity and its members. Generally, the entity has standing to pursue breach of fiduciary duty claims. It is well established that creditors of a corporate debtor may have standing to pursue breach of fiduciary duty claims against directors through derivative actions. Under Delaware law, the applicable statute does not confer standing for creditors of Delaware LLCs to bring derivative actions on …

Equitable Mootness Doctrine Seems To Be Restricted In Application To Complex Reorganizations, Jenna Marshiano

Bankruptcy Research Library

(Excerpt)

The issue in this article is when an appeal from a bankruptcy court order is equitably moot. As to be discussed further infra, generally, courts seem to apply equitable mootness only in complex reorganizations, and there seems to be a trend of restricting the application of the doctrine.

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Equitable mootness is similar to the concepts of waiver, forfeiture, or even estoppel. The underlying principle of this doctrine is that after time has passed since the implementation of an equitable judgment, the relief that an appellant seeks on appeal becomes "impractical, imprudent, and therefore inequitable." Further, courts aim …

Section 546(E) Safe Harbor Provision Applies To Transactions Involving Private Securities, Nino Aspanadze

Bankruptcy Research Library

(Excerpt)

A bankruptcy trustee may not avoid a margin or settlement payment made by, to, or for the benefit of a financial institution (or another covered entity) when the payment is made in connection with a securities contract as defined in section 741(7) of title 11 of the United States Code (the "Bankruptcy Code"). "A transfer is ‘in connection with' a securities contract if it is 'related to' or 'associated with’ the securities contract.' A bankruptcy trustee may avoid a covered transaction only if it was made with actual intent to hinder, delay, or defraud creditors. The purpose of Section …

U.S. Bankruptcy Courts Balance The Statutory Protections Of Stakeholders With The Needs Of Discovery In Foreign Bankruptcy Proceedings, Conor Carman

Bankruptcy Research Library

(Excerpt)

Chapter 15 of title 11 of the United States Code (the "Bankruptcy Code") establishes methods for managing insolvency cases that encompass debtors, assets, claimants, and other parties across multiple nations. Section 1521(a)(4) allows courts to grant discovery relief. To determine whether to grant discovery relief, courts balance the right to discovery relief with stakeholder interests. As part of a U.S. courts’ analysis, it considers principles of comity to support a foreign bankruptcy proceeding.

This memorandum discusses the statutory availability for discovery relief under chapter 15, limitations on discovery imposed by courts to protect stakeholder interests, comity, and how courts …

A Prepetition Security Interest In Accounts Does Not Extend To The Post-Petition Sale Proceeds Of Real Property, Gabriel Eckstein

Bankruptcy Research Library

(Excerpt)

Section 552(a) of title 11 of the United States Code (the "Bankruptcy Code") states that "property acquired by the estate" after the commencement of the case is not subject to any secured lien possessed by a secured creditor that was created before the commencement of the case. A secured lien is a "legal right or interest of a creditor in a debtor’s property, which lasts until the debt it secures is satisfied." Section 552(b)(1) provides limited exceptions to the general rule in Section 552(a). If a debtor and a creditor entered into a security agreement before the commencement of …

Service Of A Subpoena Through Alternative Means: Social Media, Tayler Eynon

Bankruptcy Research Library

(Excerpt)

Service of a subpoena via a means besides personal service, i.e., "alternative service," has been "routinely authorized" under Rule 45 of the Federal Rules. The functional purpose of requiring delivery is to "ensure receipt," which then allows the enforcement of a subpoena to be consistent with due process. With the development of new means of communication, however, an emerging issue has become whether service of a subpoena via social media may provide similar "evidence of actual receipt." Many courts have read Rule 45 broadly to allow for service of a subpoena through social media if certain fundamental requirements are …

The Regulatory Power Exception To The Automatic Stay, Kathleen Gatti

Bankruptcy Research Library

(Excerpt)

Upon a filing a petition under title 11 of the United States Code (the "Bankruptcy Code"), all actions against a debtor are generally automatically stayed. While the automatic stay is broad, there are exceptions. Under the regulatory power or police power exception, a governmental unit or organization is not stayed from taking any action "to enforce such governmental unit's or organization's police and regulatory power." Not all actions by a government are immune from the automatic stay. Courts have generally held that an action to effectuate a "public policy" is not stayed, but an action to advance the government’s …

Date For Determining Subchapter V Eligibility, Frederick Giovanelli

Bankruptcy Research Library

(Excerpt)

The Small Business Reorganization Act of 2019 ("SBRA") created Subchapter V of title 11 of the United States Code (the "Bankruptcy Code"). Subchapter V provides an "expedited process for small business debtors to reorganize quickly, inexpensively, and efficiently." To be eligible under Subchapter V, a debtor must satisfy the four requirements listed in section 1182(1) of the Bankruptcy Code. However, even if all four requirements are met, there are four exceptions that exclude a debtor from Subchapter V eligibility. In several instances, creditors have argued that these requirements are continuing obligations, so the debtor’s post-petition actions can revoke their …

Ability To Assume A Contract Over The Objections Of Third Party Beneficiaries Or Counterparty That Is Not Subject To U.S. Personal Jurisdiction., Matthew Hanauer

Bankruptcy Research Library

(Excerpt)

Under Title 11 of the United States Code (the "Bankruptcy Code"), a trustee or a debtor in possession may assume or reject any executory contract and unexpired leases subject to court approval. If a debtor rejects a contract, they breach the agreement. After rejection, neither party is obligated to continue performance, and the counterparty has a general unsecured claim against the debtor. If a debtor assumes an executory contract, then the parties continue to act in accordance with the terms of the contract. To assume a contract, a debtor must cure any defaults, compensate the counterparty for any pecuniary …

Whether Electricity Is A "Good" Under 11 U.S.C. § 503(B)(9), Zhiqian Ke

Bankruptcy Research Library

(Excerpt)

Under section 503(b)(9) of title 11 of the United States Code (the "Bankruptcy Code"), administrative expenses should be allowed for "the value of any goods received by the debtor within 20 days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtor’s business." Courts uniformly analyzed the Uniform Commercial Code’s (the "UCC") definition of “goods” in the absence of a definition in the Bankruptcy Code. However, courts are split on whether electricity is a good.

This memorandum will explore the courts' …

Interest Rate Determination Methods In Bankruptcy Chapters 11, 12, And 13, Michael Kleinman

Bankruptcy Research Library

(Excerpt)

The United States Supreme Court's decision in Till v. SCS Credit Corp. established a formula approach for determining interest rates in cases filed under chapter 13 of title 11 of the United States Code (the "Bankruptcy Code"). The Till decision implemented the formula approach, requiring the national prime rate to be augmented by a risk premium to account for the debtor's heightened nonpayment risk. Till is limited to chapter 13 cases, however, courts have applied the Till test in chapter 11 and 12 cases.

This memorandum examines the different methods utilized in bankruptcy to determine appropriate interest rates. Section …

How Courts Differ In Applying The Countryman Test To Determine If Settlement Agreements With Sequential Performance Are Executory Contracts Under Section 365 Of The Bankruptcy Code, Shannon Mcgarr

Bankruptcy Research Library

(Excerpt)

Settlement agreements will often contain sequential responsibilities, meaning that one party’s obligations are not due until the other party’s obligations are fulfilled. While such settlement agreements are contractual in nature, this does not automatically entitle them to be considered executory contracts under section 365 of title 11 of the United States Code (the "Bankruptcy Code").

Section 365 of the Bankruptcy Code does not define "executory contract." Many courts employ the "Countryman test" which states that "a contract is executory if 'the obligations of both parties are so underperformed that the failure of either party to complete performance would constitute …

Amended Proofs Of Claims That Present A New Request For Relief Could Be Disallowed, Lianna Meehan

Bankruptcy Research Library

(Excerpt)

When a creditor seeks to amend a proof of claim after the bar date has passed with an amount different to that provided in the original proof of claim, courts engage in an equitable analysis of multiple factors to determine whether to grant or deny the motion to amend. Under certain circumstances, Bankruptcy Rule 9006(b)(1) gives creditors an opportunity to file a proof of claim after the bar date has passed.

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This memorandum examines whether a creditor can amend a timely-filed proof of claim after the bar date has passed with an amount that is unrelated to the …

The Timing Of A Debtor's Petition For Bankruptcy Can Determine If A Pending Title Pawn Contract Becomes Property Of A Debtor's Estate, Jack Reilly

Bankruptcy Research Library

(Excerpt)

Section 541 of title 11 of the United States Code (the "Bankruptcy Code") determines whether property comes into a debtor's bankruptcy estate falling under the protection of the automatic stay afforded by section 362 of the Bankruptcy Code. Bankruptcy Code section 541 defines property of the estate as "all legal or equitable interests of the debtor in property as of the commencement of the case[.]" What constitutes a debtor's "legal or equitable interest" in property is determined by state property law, making state law the determining factor in whether a debtor's interest in a specific property constitutes property of …

Good Faith Chapter 11 Filings Require The Debtor To Show Valid Reorganization Purpose And Financial Need For Bankruptcy, Daniella Sesto

Bankruptcy Research Library

(Excerpt)

Section 1112 of title 11 of the United States Code (the "Bankruptcy Code") enumerates a non-exhaustive list of sixteen factors justifying dismissal of a bankruptcy case for lack of good cause, but bankruptcy courts have the authority to consider other factors as they arise and use equitable powers to reach appropriate results in individual cases. Bankruptcy courts have determined that "good faith" is a requirement to remain in bankruptcy, and "bad faith" is among the reasons to dismiss. To date, no court has adopted a universally accepted definition of good faith.

In recent cases, courts have used their discretionary …

Innocent-Spouse Relief And Other Tax Remedies In Bankruptcy, Panayiotis Xenakis

Bankruptcy Research Library

(Excerpt)

Innocent-spouse relief is an equitable remedy provided by Internal Revenue Code section 6015(f), where the Secretary of the Treasury may "relieve [an] individual of . . . liability" if "taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency . . . ." Essentially, it provides a joint-filer who normally is jointly and severally liable for the tax liabilities of his or her spouse relief from liability if it would be inequitable to do otherwise.

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This memorandum addresses: (1) the limits of a bankruptcy court’s …

The Periphery Of Bankruptcy Law: The Importance Of Non-Bankruptcy Issues In Consumer Bankruptcy, Pamela Foohey

Scholarly Works

One in eleven Americans have filed bankruptcy at some point during their lives. Based on the number of consumer bankruptcy cases initiated during the past several decades, about one million individuals will file every year. This makes bankruptcy courts the leading federal courts with which people have contact. Embedded in people’s cases are a host of legal issues that do not directly implicate bankruptcy law, such as the interpretation of states’ exemptions laws and Article 9 of the Uniform Commercial Code, the avoidance of liens, and defenses to contract claims. Consumer bankruptcy law, via its process, is intertwined with the …