Courts May Create Trust Accounts to Pay Sub V Trustees and Other Admin Expenses
The court can’t require a debtor to give a ‘retainer’ to a Subchapter V trustee, Judge Pearson says.
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Bankruptcy Code
Party Fowl Owners Seek Bankruptcy Protection
The owners of Nashville hot chicken restaurant chain Party Fowl have filed a petition seeking bankruptcy protection — noting the timing of their expansion and other factors have “started a snowball of debt,” the Nashville Post reported. Via six LLCs, Austin Smith and Nick Jacobson own Party Fowl, having begun operations in 2014 with their Gulch location at the intersection of Eighth Avenue South and Division Street. Other outposts are found in Murfreesboro, Donelson, Franklin (Cool Springs), Chattanooga and Destin, Fla. The concept has licensed presences at both Nashville International Airport and Nissan Stadium. According to a document filed with the U.S. Bankruptcy Court for the Middle District of Tennessee, Smith and Jacobson, after opening in Cool Springs in 2020, decided to open sister businesses in Chattanooga and Destin. However, the document notes, those two locations have not generated sufficient revenue, thus creating financial stress on the owners and their other locations. COVID-19 is cited as a contributing factor. Via the LLCs, Smith and Jacobson own the six Party Fowl restaurant businesses, with chef Bart Pickens overseeing the menu of each. Smith and Jacobson intend for the six businesses to file a joint plan of reorganization prior to the chapter 11, subchapter V, filing deadline of 90 days after the petition date (Jan. 9), the court document notes.
For ‘Sub V’ Eligibility, Count the Debt of Affiliates Liquidating in Chapter 7
Bankruptcy court disregards SEC regulations defining ‘voting securities’ in deciding whether a Subchapter V debtor has ‘affiliates’ in bankruptcy.
No Vote, No Problem — Right? Novel Ethical Implications of a Subchapter V Bankruptcy Nonconsensual Plan
The Small Business Reorganization Act of 2019, also known as SBRA (Pub. L. No. 116-54), became effective on Feb. 19, 2020. This legislation allows a small business debtor to choose, during the filing process, to proceed under subchapter V within chapter 11.
Session Description
During the Covid Pandemic, the Federal , State and Local governments make billions of dollars in loans to all sizes of business. These programs were rolled out very quickly and the potential for fraud was huge. Now as things shake out, various of the entities that provided the funds are discovering fraud, of all shapes and sizes and bringing suits to recover wrongfully made or fraudulently obtained loans. This session will discuss the various programs, the litigation that is now being pursued by the various "lending sources" and how and when Bankruptcy is being used or implicated by this litigation. This session should address loans made to all size businesses - from the mom and pop business to the multi-million or billion businesses and the various frauds that have been discovered .
Suggested Categories
Learning Outcomes
Attendees will understand the various types of frauds and other issues that have arisen as a result of these "lending" programs being used improperly.
Attendees will understand the various ways in which Bankruptcy can or may be used to either pursue recovery or avoid recovery as a result of the fraud and other improper ways in which these programs were used and abused.
Attendees will understand the various ways in which Bankruptcy can or may be used to either pursue recovery or avoid recovery as a result of the fraud and other improper ways in which these programs were used and abused.
Target Audience
Debtor
First Name
Janet
Last Name
Baer
Email
janet_baer@ilnb.uscourts.gov
Firm
US Bankruptcy Court, ND IL
Session Description
I'm on the Uniform Law Commission's Drafting Committee for a uniform law on assignments for benefit of creditors. I'll discuss the uniform law process and provide information on assignment for benefit of creditors issues, how those issues relate to bankruptcy, and the potential for a uniform law thereon.
Suggested Categories
Learning Outcomes
Under the laws of most states, assignment for benefit of creditors ("ABC") is an unutilized, or under-utilized, tool. That's because most states either, (i) have no ABC statute, or (ii) have ABC statutes with poison-pill provisions that no one wants to use. I'll discuss how a uniform law will make the ABC tool available and usable and its connection with bankruptcy.
Target Audience
Business
Donald
Swanson
don.swanson@koleyjessen.com
First Name
Donald
Last Name
Swanson
Email
don.swanson@koleyjessen.com
Firm
Koley Jessen P.C., L.L.O.
ABI Releases Preliminary Report Recommending Congress Maintain the $7.5 Million Debt Eligibility Limit for Small Businesses Looking to Reorganize Under Subchapter V
The American Bankruptcy Institute (ABI) Subchapter V Task Force today released its “Preliminary Report of ABI’s Subchapter V Task Force on Maintaining the $7,500,000 Debt Cap for Subchapter V Eligibility” with findings to support permanently maintaining the eligibility limit of $7.5 million in aggregate noncontingent, liquidated debt for small businesses looking to reorganize under subchapter V. The Task Force’s Preliminary Report, which was also transmitted today to key members of Congress, is the result of nine months of public hearings, roundtable discussions and an industry survey inviting comment on Subchapter V. Read more.
ABI Releases Preliminary Report Recommending Congress Maintain the $7.5 Million Debt Eligibility Limit for Small Businesses Looking to Reorganize Under Subchapter V
Alexandria, Va. — The American Bankruptcy Institute (ABI) Subchapter V Task Force today released its “Preliminary Report of ABI’s Subchapter V Task Force on Maintaining the $7,500,000 Debt Cap for Subchapter V Eligibility” with findings to support permanently maintaining the eligibility limit of $7.5 million in aggregate noncontingent, liquidated debt for small businesses looking to reorganize under subchapter V. The Task Force’s Preliminary Report, which was also transmitted today to key members of Congress, is the result of nine months of public hearings, roundtable discussions and an industry survey inviting comment on Subchapter V.
“As the Preliminary Report notes, subchapter V is imperative for this category of debtors that cannot reorganize in a regular chapter 11 case and would otherwise liquidate and close, thus harming owners, employees, and creditors,” ABI President Soneet Kapila of Kapila Mukamal (Ft. Lauderdale, Fla.) writes in the letter to Senate Judiciary Chairman Richard Durbin (D-Ill.), Ranking Member Sen. Lindsay Graham (R-S.C.), Rep. Thomas Massie (R-Ky.), chair of the House Judiciary Subcommittee on the Administrative State, Regulatory Reform, and Antitrust, and Rep. Luis Correa (D-Calif.), the ranking member of the subcommittee. “Had the $7.5 million debt cap not been in place, given the cost of restructuring alternatives, these businesses would likely have been extinguished, thereby leading to the loss of jobs and harm to the economy.”
The Small Business Reorganization Act of 2019 (SBRA) went into effect on February 19, 2020, with a debt eligibility limit of $2,725,625 for struggling small businesses looking for a more economical and efficient way to reorganize their debts within chapter 11 of the Bankruptcy Code. In March 2020, the eligibility limit was expanded to $7.5 million through the CARES Act of 2020, and it received subsequent legislative extensions that are scheduled to sunset in June 2024.
The Task Force’s Preliminary Report found that nearly 30% of all chapter 11 bankruptcy cases filed since the enactment of the SBRA have been subchapter V cases. Significantly, the Task Force found that more than 25% of these subchapter V debtors would have been ineligible for subchapter V relief under the lower cap.
“Most subchapter V debtors have filed bankruptcy while the $7.5 million debt cap has been in place,” Kapila noted in the letter. “Reverting to the lower debt cap would make reorganization inaccessible to many smaller businesses.”
To access the Preliminary Report and find out more about the work of ABI’s Subchapter V Task Force, please visit https://subvtaskforce.abi.org/.
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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 10,000 attorneys, financial advisors, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org.