Posts Tagged ‘chapter 7’
Chapter 7 debtor dissolved under State law held responsible for ERISA plan
A company liquidated in bankruptcy and dissolved under state law maintains responsibility for an ERISA plan if it continues to make pay-outs in the company name The 11th Circuit has interpreted ERISA to require such defunct company’s affiliates to back-stop such plan. A timely PBGC take-over would have mitigated this result.
Read MoreAn Individual Chapter 11 Plan must be funded by more than Business Income
In re Patel, a recent CA bankruptcy decision, held that chapter 11’s requirement for individual debtors to pay unsecured creditors from “disposable income,” encompasses income from all sources. Note that this would equally apply in Subchapter V. The Patel Chapter 11 plan listed only motel income which was insufficient to fund a payout to unsecured creditors. While…
Read MoreIs a PA Gaming License property that can be clawed back in bankruptcy?
The Commonwealth of PA was recently permitted to sustain revocation of a debtor’s gaming license and keep the $50M paid per state forfeiture laws, as a license is considered a privilege versus reclaimable property. This is yet another example of the intricacies of pre-bankruptcy planning, as lawyers and debtors collaborate to re-tool with minimal friction.
Read MoreAverting Bankruptcy: PPP loan forgiveness to be launched
The SBA is thankfully beginning to forgive PPP loans, staving off the backlog blocking new loans, as well as averting bankruptcy filings in the face of mounting debt. Legislation is also being drafted to streamline the paperwork for forgiving small loans, by permitting borrowers to self-verify to the proper use of funds.
Read MoreDemystifying Bankruptcy: More on tenant tips
Filing for bankruptcy can help a tenant break a long-term above-market lease, as bankruptcy law provides the tenant with a special cap on damages at three years rent. Planning ahead is key, and on the flip side, a landlord can head off a potential major loss by keeping tabs on its tenants’ financial portfolios as…
Read MoreDemystifying Bankruptcy: Filing for bankruptcy can never cause a contract default
For example, a typical clause in leases states that a tenant’s filing for bankruptcy causes a default, allowing the collection of remedies. This is merely a scare-tactic and is known as an ipso facto clause that has zero legal effect. In fact, a bankrupt tenant can even make the unilateral decision to continue the lease.
Read MoreDemystifying bankruptcy: Start your prep 3+ months ahead
Planning is key. Payment by an insolvent entity for old debt is known as a “preference,” and the creditor may have to disgorge in bankruptcy if it received a greater payout than it would in Chapter 7. As the key to bankruptcy is equitable distribution, the creditor will be paid only its pro rata share. To…
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