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Subchapter V Eligibility: Recent Trends
The Small Business Reorganization Act (SBRA) became effective in February 2020.[1] The SBRA, or subchapter V, is intended to encourage small businesses to use the Bankruptcy Code to reorganize by reducing the costs and administrative burdens associated with a typical chapter 11 case.
Circuit Courts Divided over Whether U.S. Trustee Fee Increase Is Constitutional
The U.S. Trustee Program (USTP), an arm of the Department of Justice that provides oversight for bankruptcies in all but two states, is funded by fees charged to debtors (U.S. Trustee fees). In Alabama and North Carolina, a Bankruptcy Administrator program, run by the Judicial Conference of the United States, provides a similar function and charges its own fees (Bankruptcy Administrator fees). Congress initially provided that the Bankruptcy Administrator districts would eventually become U.S. Trustee districts, but the division is now permanent.
Third Circuit Holds that Setoff Rights Under § 553 Require “Strict Bilateral Mutuality” and Finds that “Triangular Setoffs” Are Unenforceable
In a recent decision in “a matter of first impression,” the U.S. Court of Appeals for the Third Circuit squarely rejected the view that “triangular setoffs” fall within the protective circle of § 553 of the Bankruptcy Code. In so ruling, the court, in its decision in In re Orexigen Therapeutics Inc.,[1] adopted the view that “strict bilateral mutuality” is required for § 553 to apply and that parties “cannot transform a triangular set of obligations into bilateral mutuality” with contractual provisions.
CARES Act Modifications to Bankruptcy Provisions Extended to March 27, 2022
On March 27, President Joseph Biden signed the COVID-19 Relief Extension Act into law. The Act extends for another full year the provisions of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) that temporarily modified the Bankruptcy Code and the Small Business Reorganization Act of 2019 (SBRA), or subchapter V of chapter 11. The SBRA was enacted to make chapter 11 more accessible and affordable for small businesses.
Interplay Between the New York State Eviction Moratorium and a Bankruptcy Judge’s Authority to Enter a Dispossess Order
In 2020, New York State passed the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020[1] (“moratorium”). With some exceptions, it suspends eviction and foreclosure proceedings for nonpayment of rent or mortgage against tenants or property owners facing financial hardship.[2] Courts have generally held that state laws imposing eviction moratoriums during the COVID-19 pandemic are constitutional exercises of the state’s police powers. For example, in Elmsford Apartments Associates LLC v.
A Note from Your Young and New Members Co-Chairs: A Look Back on 2020
Although COVID-19 forced many in our legal community to adapt to working remotely, the Young and New Members Committee remained incredibly productive this year. Below are some highlights — both past and future — since our update earlier this year.
Quarterly Newsletters
Affirmative Misrepresentations and Failures to Disclose Are Different Animals
On April 10, 2020, a panel of the Eleventh Circuit Court of Appeals unanimously held in Lawson-Ross v. Great Lakes Higher Ed. Corp. that the Higher Education Act’s (HEA) disclosure requirements do not preempt misrepresentation claims furnished by applicable state law.[1] Ultimately, the court’s holding rests on a common-sense conclusion: An affirmative misrepresentation is not the same thing as a failure to disclose.
Background and Procedural History