There is no way to approach the topic of personal bankruptcy without first addressing the basics. If you are considering bankruptcy as a solution to your financial problems, it can be helpful to understand what it involves and how it works. Bankruptcy is the process of paying off your debts under Chapter 7 or Chapter 13 of the US Bankruptcy Code, but not all debts qualify for relief under these chapters. The following sections explain the basics of bankruptcy to know what it is and how it works.

Most people cringe at the mere mention of bankruptcy, and it can be a scary concept. However, debt relief under Chapter 7 or Chapter 13 of the US Bankruptcy Code is one way to get protection from paying your debts in full. This is an option of last resort, but it can help get you back on track.

Chapter 7 Bankruptcy

If you deposit for Chapter 7 Bankruptcy protection, you surrender most of your assets to creditors. However, you must also prove that you cannot pay your bills and that your creditors are unlikely to be reimbursed in full. This can be difficult to prove, so most people seeking bankruptcy protection use Chapter 13 bankruptcy instead.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is often preferable to Chapter 7 because you don’t have to give your assets to creditors, but you do have to pay at least some of your bills. Under Chapter 13 bankruptcy, the court will create a plan to pay off your debts over the next three to five years. After that, the court will determine how much you can afford to pay and whether creditors should receive all or none of what you owe.

who declares bankruptcy

So you got a notice from the bank that your house was foreclosed, and now you’re wondering who filed for bankruptcy. There’s a lot of confusion surrounding this question, but it’s not as confusing as it seems. If a bank repossesses your home because you haven’t repaid your mortgage payments, this action is called a “power of sale” foreclosure. A foreclosure with power of sale is different from a court foreclosure because, in a court foreclosure, the bank must go through the legal process to foreclose on your home. With power of sale, the bank can follow its pre-established guidelines and seize immediately.

However, with a power of sale, the bank must still file a notice of default with the court. Before reacting to this notice, you should know that some owners go through a voluntary bankruptcy procedure. So before you jump to the conclusion that you can’t expect free legal representation if your home is seized by a power of foreclosure, remember that there are other ways out of this situation. If a person declares bankruptcy, they officially declare bankruptcy. If you were to go to court and declare bankruptcy yourself, you would be considered the “petitioner” in the proceedings. The applicant cannot file for bankruptcy on their behalf, but they can always choose to authorize someone else to do so on their behalf. In these procedures, a person who declares bankruptcy is called a “debtor”.

When should I declare bankruptcy?

There are many professions that cater to people living in America. One of them is the field of law, where lawyers fight for their clients, usually in criminal and civil cases. In these situations, lawyers are remunerated. But some people cannot afford a lawyer.

So what are they doing? In these cases, they declare bankruptcy to fulfill (pay their debts) these obligations. Bankruptcy can be a lifesaver for some people, but it’s not something anyone should take lightly. Although it’s rarely the best choice for people in financial difficulty (and there are times when bankruptcy may not be appropriate even if debts don’t need to be discharged), everyone should know how to file for bankruptcy. Here’s why:

• It’s usually not the best option for people with big debts, but it’s always good to know what to do. Spotting financial problems early on can save you thousands of dollars. Unfortunately, many people don’t know what to do when they run into a problem and file for bankruptcy. The first step is to talk to a knowledgeable advisor like an experienced attorney, CPA, or escrow agent.

• It is never too late for a bankruptcy discharge. Bankruptcy may not be the best idea for people in debt, but it’s a good option, especially if you’re having trouble paying off your loans or credit card bills.

• Not all bankruptcy petitions are accepted for filing and only some of the debts are discharged. It is important to understand that not all debts can be discharged through bankruptcy. The debtor must prove to the court that he has a good reason for filing the petition, and if he cannot pay his bills at that time, these obligations may not be discharged by the court.

Consequences of bankruptcy

Remember that old adage, “you can’t get something for nothing?” The same applies in the event of bankruptcy. Once you have declared bankruptcy and it has been discharged, your creditors will still be able to sue you for the unpaid debts they claim are owed. However, if a creditor comes after you before the discharge has taken place, there is a risk that this will trigger a reaffirmation agreement. This means that the creditor takes charge of collecting the debts on the account and only asks for payment of these debts without harassing you or contacting you again about it.

There are a few things you can do to avoid this. First, don’t act like you have a lot of money in front of the creditor; they may be able to use your statement against you later. It is best to act as if you have financial problems. Second, don’t do anything that could be construed as reaffirming a debt. This includes allowing credit card companies to increase your credit limit or to continue using a credit card after you file for bankruptcy.

Jacob Maslow

Legal Scoops editor Jacob Maslow founded several online journals, including Daily Forex Report and Conservative Free Press.

Press Releases

03/09/2022

Attorney General Tong’s Statement on Bankruptcy Court Approval of Purdue Pharma Settlement

(Hartford, CT) – Attorney General William Tong released the following statement after U.S. Bankruptcy Judge Robert Drain approved Purdue’s $6 billion bankruptcy plan.

“No settlement will ever come close to remedying the extent of the suffering and damage caused by Purdue and the Sackler family. But in reaching this $6 billion settlement, we recognized that we could not block this process indefinitely for the victims and our sister states. I thank the Bankruptcy Court for its approval and support for tomorrow’s hearing which will give victims and survivors the opportunity to speak directly to the Sacklers and share in the damage and destruction they have caused. We are not done fighting for justice against the addiction industry.

Attorney General Tong announced last week that he had negotiated an agreement that requires Purdue Pharma and the Sackler family to pay $6 billion to victims, survivors and states for their role in the opioid epidemic, i.e. 40% more than the previously overturned settlement Connecticut appealed. . This is a civil settlement. This plan does not relieve the Sacklers of any potential future criminal liability.

Attorney General Tong said he intends to use a portion of the settlement funds to establish an Opioid Survivors Trust to directly help survivors and victims of the opioid epidemic.

Twitter: @AGWilliamTong

Facebook: CT Attorney General

Media Contact:

Elizabeth Benton
[email protected]

Consumer requests:

860-808-5318
[email protected]

For most non-bankruptcy attorneys, their first experience in bankruptcy court could most likely begin with a call from an agitated and bewildered client asking for help in figuring out why he was being sued by a trustee in a bankruptcy case. bankruptcy filed by one of his clients. Worse still, the customer’s disbelief can only be exacerbated by the fact that this same customer still owes your client money! This is when a basic working knowledge of avoidance actions in bankruptcy cases would be extremely helpful.

For trustees in bankruptcy and debtors in possession of Chapter 11 (and for the purposes of this article we will only refer to trustees as the terms in this context are interchangeable) an important aspect of any bankruptcy case – indeed a primary source recovery for any bankruptcy estate – is the availability for the trustee of actions for annulment. These are legal actions to recover money or property that was transferred by the debtor before filing for bankruptcy. There are several types of annulment actions which are covered by the Bankruptcy Code and which can be brought by a trustee. The most common are preferences and fraudulent transfers. In this article, we will provide a high-level summary of the legal standards for recovering rescission actions, as well as the defenses and strategies available to businesses or individuals who are the unfortunate targets of such litigation.

STephanie and Troy Lubinski met when they were teenagers and they were married for three decades. Troy was big-hearted, kind, the best fisherman around, a devoted father who took care of the children during the day after long night shifts as a firefighter.

But he had back pain that started when he worked in construction and got worse over the years. His doctor prescribed him OxyContin, and that was the beginning of the end.

“Everything went downhill,” Stephanie said.

Troy endured a decades-long battle with opioid use disorder. The family lost everything – their home, possessions, even a son’s football championship rings – as Troy’s condition spiraled out of control.

Stephanie is one of more than 138,000 plaintiffs alleging the Sackler family and their company, Purdue Pharma, the maker of OxyContin, contributed to the ongoing opioid epidemic. The Sacklers deny wrongdoing.

Facing around 3,000 lawsuits, Purdue filed for bankruptcy in 2019, but not before members of the Sackler family took more than $10 billion from the company over a decade.

This case, brought by states and opioid victims, is currently being settled in bankruptcy court.

But this is proving difficult to resolve. A previous agreement had been blocked in December. After intense negotiations, the Sackler family is now offering $6 billion in settlement talks, paid over several years.

However, the family are insisting on civil liability protection, which would essentially mean they could never be sued in civil court for opioids again – an unusual step that caused the latest deal to fall through.

Such measures are typically used in bankruptcy courts to help restructure a business, but they are not used to protect owners from liability when they do not declare bankruptcy themselves, as in this case.

“That’s clearly the sticking point,” said Regina LaBelle, former acting director of the Office of National Drug Control Policy and current director of the Addiction and Public Policy Initiative at the O’Neill Institute of Medicine. Georgetown University, “to be able to sue the Sacklers personally in the future.

While most parties have agreed to these terms, some still hold. A federal bankruptcy judge, Shelley Chapman, who is negotiating the settlement, has asked for an extension until the end of the month. A stay on other claims during settlement negotiations is due to expire in early March.

Previously, the Sacklers had offered $4.55 billion, but eight states and the District of Columbia objected to that amount.

The family has now added almost a billion dollars, as well as proceeds from the sale of international pharmaceutical companies.

The extra funds would not go to victims, like Stephanie Lubinski, but to governments for law enforcement and health care costs associated with opioids. Victims are expected to receive a total of $750 million, or about $5,000 each.

More than 500,000 Americans have died from drug overdoses in the past two decades.

“None of these people who have lost their lives or been affected by addiction, no amount of money will compensate them. No amount of money,” LaBelle said.

“Absolutely not enough – the $750 million is a joke,” said Ryan Hampton, the former co-chairman of the creditors’ committee representing victims in the settlement, who is himself recovering. “It should have been double that, at a minimum.”

But if an agreement is not reached, it seems unlikely that these many victims will be able to form a new settlement before more claims are made. Those whose lives have been devastated by opioids “stand to lose the most in these negotiations if they fall apart,” he said.

“There is going to be a settlement or some kind of civil action that the Sacklers are going to have to bring. The underlying factor here is whether the victims are going to receive some sort of direct compensation from this settlement.

If that settlement dissolves, other states could bring their own claims, wiping out the victims altogether, he said.

“It’s possible for one state to get the whole bag of money back and not share it with the rest of the states and certainly not share it with victims who have claims,” ​​Hampton said.

“There must be a settlement and a conclusion to this bankruptcy which does not exclude the 750 million dollars for the victims. It would be a crime in itself if all this fell apart and the victims received nothing.

The bankruptcy process is “unfortunately not ideal for doing justice to people involved in this particular type of litigation, where you have real people with human stories who have been affected by the actions of this company,” said said LaBelle.

“I can’t believe we’re this far down the road and still trying to get justice for those affected,” she said. But “if we are able to fix this problem and get money for states, local governments and individuals so that we can start building the kind of dependency system that we need in this country, then we can start moving forward.”

In the settlement, Purdue would be restructured into a public benefit corporation that produces naloxone, a drug that reverses opioid overdoses with prices surging for harm reduction groups last year.

“Reducing the harms associated with opioid use disorder certainly has to be part of the calculation,” LaBelle said.

“It’s an ongoing saga that we haven’t come to the end of yet, and we need to start healing people. We need to start moving forward.”

As Troy Lubinski’s opioid use disorder continued over the years, it affected everything. He stopped making mortgage payments, unbeknownst to his wife, and they lost their house. He pawned all the valuables.

When he finally got treatment for drug addiction, Troy told the doctor he was taking 40 pills a day – a revelation that shocked his wife.

“I just fell to the ground, in the fetal position,” Stephanie said. “How did I not know?” How was I not there for him? How did I not know all of this was happening?

But the treatment didn’t stop him from using opioids for a long time, and after that he became paranoid and delusional, Stephanie said. “I felt so bad for him, because that was his reality. And you can’t defend yourself against things that aren’t real.

Troy moved out and Stephanie filed for divorce to protect what little he had left, even though she still calls him her husband. “I always felt like he was going to come back to us,” she said in tears.

Troy backed off, and for a brief moment of hope, it seemed like he had finally changed. But then something stirred inside him once again. Troy committed suicide in September 2020.

Stephanie had already joined the colony by then, but after Troy died, she needed her story told. “I needed to write the letter, you know, instead of just a claim number,” she said.

“I believe the Sackler family should know what their greed has caused. They should know the name, Troy Lubinksi, and the many, many others who lost their lives to OxyContin,” she wrote in a letter to the judge presiding over the settlement.

But she did not join the colony to commemorate Troy. She doesn’t do it for herself either.

In 2017, Stephanie was diagnosed with a rare stage 4 cancer. She had three to five years to live.

She pressured the Sacklers for restitution because she wanted to leave something for their children, who were now young adults.

“I filed for them,” Stephanie said. “My kids deserve it after all they’ve been through, all they’ve lost.

“I knew I wasn’t going to be there to see anything. But I wanted them to have something.

A bankruptcy court gave “unnecessary and probably incorrect” reasoning to support its “excessively broad proposition that free and clear sales under [Bankruptcy Code (“Code”)] Section 363 nullifies and essentially renders inoperative the lessee’s critical protections against a debtor-lessor under [Code] 365(h),” the United States Court of Appeals for the Fifth Circuit said on February 16, 2022. In re Royal Bistro, LLC, 2022 WL 499938, *1-*2 (5th Cir. 16 February 2022). The court still denied the tenants’ “writ of mandamus motion” to “compel the district court to stand pending appeal” of a bankruptcy court order authorizing the trustee’s sale of the ” real estate of the debtor… frank and clear” of the tenants. interests. Identifier. at 1. Essentially, the Fifth Circuit has signaled that it will not approve in subsequent cases a sale of real estate assets by the bankruptcy court that summarily severes the rights of debtor tenants.

The Court of Appeals pointed out that the lower courts “erred to rely on” the heavily criticized Seventh Circuit decision in Precision Indus Inc. v. Qualitech SBQ Steel, 327 F.3d 537, 547 (7th Cir. 2003) (Section 365(h) lessee’s debtor-lessor protections do not supersede Section 363(f)’s free and clear terms of sale). On the facts of the limited motion before it, the Fifth Circuit rejected the lower courts’ “overstatement of their reasoning” based on their “serious misapprehension of the law or the facts.” 2022 WL 499938, at *2. Because the “essential rights of state law of tenants in this matter [were] limited by the prior lien of the primary mortgagee on the “sold property”, however, “neither [Code] Offers under Sections 363(e) and 365(h)(A)(ii) [the lessee-appellants] protection.” Identifier. “[S]state law [was] everything the commercial court needed to decide this case” against the tenants. Identifier.

Relevance

The Third Circuit pointed out in another similar case that a trustee in bankruptcy or a debtor in possession of Chapter 11 cannot summarily use a free and clear sale under Code § 363(f) to sell property making the object of a free and quit lease and therefore extinguish the right of possession of a tenant. In re Revel AC, Inc., 802 F.3d 558, 564, 573 (3d Cir. 2015) (2-1) (the lessee requested the suspension pending the call of a sell order which would “annihilate” the interest of the lessee; reprieve granted because, among other things, “success has been assured to him on the merits”). He pointed out that Code § 365(h) protects the tenant’s interest after the trustee rejects the lease when the interest is not disputed in good faith. ID. Although the fifth circuit of royal bistro did not quote revel inhe noted the strong criticism of Qualitech by other courts and commentators. Dishi and son against Bay Condos LLC510 BR 696, 704 (SDNY 2014) (review Qualitech); In re Samaritan Alliance LLC2007 WL 4162918, *4 (Bankr. ED Ky. 21 Nov 2007); In re Haskell LP, 321 BR 1, 9 (Bankr. D. Mass. 2005); Michael S. Patrick Baxter, “Section 363 Free and Interest-Free Sales: Why the Seventh Circuit Got it Wrong in Qualitech», 59 Buses. Law. 475 (2004) (Qualitech had “the potential to have a profound impact on the world of bankruptcy”); Robert M. Zimman, “Precision in Legislative Drafting: The Qualitech Quagmire and the Sad History of § 365(h) of the Bankruptcy Code”, 38 John Marshall L. Rev. 97 (2004) (acknowledging the troubles created by Qualitech).

The Ninth Circuit followed Qualitechhowever, by judging that a debtor’s building leased to a third party could be sold free of the lessee’s interest, considering that a sale is not the termination of the debtor’s lease. In re Spanish Peaks Holdings II, LLC, 875 F.3d 892, 899, 900-01 (9th Cir. 2017) (“A sale…is not the same as…a ‘discharge’ contemplated by Section 365”). According to the Ninth Circuit, Code § 365(h), which protects a lessee of real property from rejection of its lease by the debtor-lessor, only applies when the debtor rejects the lease and remains in possession of the property. ID. (“Since the trustee did not reject the leases, Section 365 was not implicated.”) A tenant in this situation is entitled to adequate protection under Section 363(e) of the Code if the tenant requests such repair, but has failed to do so. so in Spanish Peaks. ID., at 900.

The nuanced analysis of the fifth circuit

The Fifth Circuit dictated in royal bistro focused on the particular facts of the case before it. Two tenants of the debtor’s property had objected to the sale of the property and had alternately requested “either adequate protection under Section 363(e) or rejection of the leases, which the bankruptcy court ruled refuse”. 2022 WL 499938, at *1. The tenants, “insiders of the debtor company”, have leases “inferior to the rights of the mortgagee” on the building. ID. “If there had been no bankruptcy,” the mortgagee “could have foreclosed under state law and wiped out the junior interests.” ID. The leases also lacked “non-disturbance clauses that would have protected tenants from” foreclosure. ID. For this reason, the bankruptcy court rejected the opposition of the tenants initiated to the sale. According to the Court of Appeals, “State law is all the bankruptcy court needed to decide” the case. ID.

§§ 363(f)(1) and 365(h)(1)(A)(ii) limit debtor options, subject to applicable state law. First, under section 363(f), the debtor may sell free and clear if “the applicable non-bankruptcy law permits”, subject to providing “adequate protection” to the lessee under section 363(f). 363(e). Since the tenants here had no residual value after paying off the lender’s previous mortgage debt, the trustee had no “duty to provide adequate protection.” ID.

The tenants might have had the right to remain on the debtor’s property during the term of their leases had the trustee rejected their leases “to the extent such rights are enforceable under applicable non-bankruptcy law. “, per § 365(h)(1)(A)(ii).

“Bankruptcy law, in other words, recognizes and defers to state law in these provisions.” ID., citing Butner v. United States440 US 48, 54-57 (1979) (except where the Code prevails over state law, the Code applies to applicable state law proprietary rights).

State law governed the first reason given by the bankruptcy court for denying assistance to tenants initiated into royal bistro. In addition to the leases subject to mortgagee rights, one of the tenants had “many months of unpaid rent…and was…in default”. 2022 WL 499938 to *1. Since state law determined the outcome, there was therefore no reason for lower courts to rely on Qualitech. ID. In the ninth circuit Spanish peaks Also in this case, the leases “were legally subordinated to a principal mortgage interest in the property”. ID., at 2 o’clock.

The lower courts overstated “their reasoning” in royal bistro but achieved the right result. ID. According to the Fifth Circuit, courts “must be cautioned…against blithely accepting Qualitech reasoning and textual exegesis. ID. State law therefore remains relevant in federal bankruptcy cases. It should be read in conjunction with the Code, particularly when the Code explicitly refers to it.

Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of occupational pensions.

This week we cover topics such as: Dashboards: draft rules for FCA-regulated pension providers; High Court: EU pensions are protected in case of bankruptcy; Court: no reasonable excuse for EA non-compliance; Final rule on changes to registration requirements for trusts.

• Dashboards: draft rules for FCA-regulated pension providers
• High Court: EU pensions protected in bankruptcy
• Tribunal: no reasonable excuse for EI non-compliance
• Final Rule on Changes to Registration Requirements for Trusts
• The dates in your diary

Dashboards: draft rules for FCA-regulated pension providers

The Financial Conduct Authority (FCA) has published a consultation on proposed rules for personal pension providers and stakeholders regarding the provision of information to pension dashboards. The consultation ends on April 8, 2022. It is taking place alongside a government consultation on draft regulation of occupational pension schemes launched earlier this month. The FCA aims to publish its policy statement and finalized handbook rules in the fall of 2022, alongside or shortly after parliament approves the government regulations.

Read the consultation.

High Court: EU pensions protected in bankruptcy

The High Court has ruled that, contrary to UK law, rights in pension schemes recognized for tax purposes in an EU member state are protected in UK bankruptcy proceedings: Wilson and another against McNamara and others. However, the court left this issue open to future challenges.

The case concerned an Irish citizen who went bankrupt in England, with rights in an Irish pension scheme. Under UK law, rights in pension schemes registered under the UK Finance Act 2004 are excluded from assets recoverable in bankruptcy. The case went to the European Court of Justice (ECJ) to decide whether the UK legislation was contrary to EU law (it was brought before the end of the Brexit transition period). The CJEU ruled in November 2021 that the exemption placed migrant workers at a particular disadvantage because, generally speaking, most migrant workers would have their pension rights in schemes established outside the UK which would generally not be approved. for UK tax purposes. Therefore, he concluded that UK law is indirectly discriminatory, unless it can be found to be objectively justified and proportionate. He did not rule on whether there was objective justification, but said that was a matter for the UK court.

The most recent judgment dealt with whether the UK court should consider the issue of justification. Lord Justice Nugee dismissed the request to consider this point as it was not one that had been raised previously and it was not procedurally appropriate to raise it at this stage. Therefore, it decided that the bankruptcy exemption provided by UK law should be interpreted as including assets of a scheme established in another Member State which was recognized for tax purposes. He, however, left the door open for a future case to examine whether there was an objective justification for the UK legislation being limited to UK-registered schemes.

Read the decision.

Tribunal: no reasonable excuse for EI non-compliance

The First Tier Court considered three cases in which employers claimed they had not received reminders from the Regulator of Pensions (TPR) about the automatic enrollment requirements and therefore should not have done so. subject to fixed fines for non-compliance with these requirements. In each case, the Tribunal found that there was no reasonable excuse for non-compliance.

The Tribunal noted that TPR did not have to prove that the documents were delivered; there is a legislative presumption that if a document has been sent to an appropriate address, it has been received. Nor did the employer have to prove that the documents had not been received; if there is strong evidence to the contrary, the presumption can be rebutted, but in these cases no supporting evidence has been provided. In all cases, employers have an obligation to comply with the self-registration requirements, and even if they did not receive the reminders, they were not relieved of this obligation.

Read the cases: Skewer House Taunton Ltd v TPR, Condor Estates Ltd v TPR and Total Industrial Machines Ltd v TPR

Regulations amending the requirements for registering trusts with HMRC’s Trust Registration Department have now been finalized and will come into force on 9 March 2022. The regulations amend the deadlines for registering relevant taxable trusts and exclude certain express trusts the obligation to register (registered pension plans are already excluded from the obligation to register). The exclusions now cover, for example, both a trust holding a life insurance policy and a trust for benefits payable under that policy, as well as a bank account trust holding funds for a minor.

Read the rules.

Dates to note: Pensions Academy Online, March 7-11, 2022, 9:30-10:30 a.m.

The curriculum for our forthcoming Pensions Academy Online (an update on issues relating to pension schemes and the people who run them) is now available. Please see the list below.

Dated Topic

March 7 Money Laundering and Proceeds of Crime – What Trustees Need to Know

March 8 Pension Schemes Act 2021: new offenses and reportable events – where do we stand?

March 9 Management of an investigation

March 10 legal update – including transfers, scorecards, unique code, superfunds and more

March 11 Governance and reporting on climate change – theory and practice

Click here for more information or to register.

In this article, the authors review the elements to be included in a non-consolidation opinion issued to the lender in the context of a structured finance transaction by the board of the special purpose entity.

Substantial consolidation is an equitable remedy under which a bankruptcy court disregards the separate legal existence of a debtor and pools the debtor’s assets and liabilities with one or more of its affiliates, in order to make distributions to creditors as part of a plan of reorganization or liquidation.

The Bankruptcy Code does not contain specific authorization for substantial consolidation. Instead, a bankruptcy court’s power to substantially consolidate affiliated entities derives from its general equitable powers.

When affiliated entities are substantially consolidated, intercompany claims between those entities are eliminated, the assets of the consolidated entities are pooled, and the claims of creditors on each entity are treated as against the common pool of assets. Substantial consolidation generally benefits creditors of one entity at the expense of creditors of another entity because each of the consolidated entities has a different debt ratio.

Lenders in structured finance transactions often require their borrowers to be special purpose entities (“SPEs”) in order to insulate the assets being financed and the cash flows from those assets from external factors, such as the performance other assets or financial condition. condition of SPE members. Substantial consolidation of an SPE with one or more of its affiliates goes against isolating the assets of the SPE, bringing them together in a common distribution pool.

HOW IT WORKS

To provide reassurance about the lender’s interest in the assets being financed and the cash flows from those assets, the lender in a structured finance transaction often requires that a non-consolidation notice be issued by the structure’s board. welcome at closing.

A notice of non-consolidation states that if one or more parent entities of the SPE file for bankruptcy, the bankruptcy court would respect the separate legal existence of the SPE and not order the substantial consolidation of the assets and liabilities of the SPE with those of one or more of its parent entities, guarantors or affiliated managers (such as an affiliated property manager).

The opinion confirms that the SPE structure required by the lender will be respected in the event of bankruptcy and that the assets of the SPE will remain isolated and will not be grouped in a common distribution pool with those of the subsidiaries of the SPE.

Since the Bankruptcy Code does not contain prescribed standards for substantial consolidation, the standards for review were developed through the courts. Bankruptcy courts have developed multiple, complicated, and sometimes conflicting criteria for determining whether a SPE should be substantially consolidated with one or more of its parent entities. However, four important categories of factors emerged:

1. Record keeping: the SPE must have separately identifiable assets and liabilities, as well as separate accounting records and financial statements.




2. Operational issues: the SPE should be sufficiently capitalized and economically independent of its shareholders.




3. Intercompany transactions: the SPE’s transactions with Affiliates must be at arm’s length and commercially reasonable terms, and guarantees of the SPE’s obligations by Affiliates and other credit support by Affiliates must be limited.




4. Advantages and disadvantages: whether the benefits of the consolidation of assets outweigh the harm caused to creditors by the consolidation of assets.

Essentially, the courts seek to determine whether the assets and liabilities of the SPE can be separated from those of its affiliates and whether the SPE can operate as a stand-alone entity.

The courts are also considering whether the pooling of estates would cause injustice to creditors who relied on the separate credit and existence of the host structure.

Substantial consolidation can occur when the assets and liabilities of an SPE are “hopelessly intertwined” with those of its affiliates or when an SPE has to rely on its affiliates to conduct its business.

PRACTICAL ADVICE

Affiliates of the SPE that are included in the non-consolidation notice are referred to as non-consolidation notice “matches”.

• The basic rule, and requirement in rated transactions, is to match the SPE with any equity owner (or group of affiliated equity owners) that owns 49% or more of the equity interests in the SPE, plus any Guarantor and any Affiliated Manager (collectively, the “Related Entities”).




• The non-consolidation notice will have the SPE on one “side” of the notice and the related entities on the other. Other SPEs to be transacted, such as operating lessees or general partners of a limited partnership SPE, should be included on the SPE side of the notice of non-consolidation, matched with related entities. No notice of non-consolidation is required between the SPEs involved in the transaction.




• In real estate transactions involving both a mortgage loan and a mezzanine loan, the mezzanine borrower is not a required SVC for the purposes of the mortgage loan, as it has a separate debt which must be isolated from the debt of the mortgage borrower. Instead, the mezzanine borrower, as the owner of the mortgage borrower’s equity, should be included as a related entity in the mortgage non-consolidation notice.

Originally posted by Pratt’s Journal of Bankruptcy LawVolume 18, Number 1, January 2022.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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3. Lawyers from 2 states sanctioned for association…

Ethics

Lawyers in 2 states sanctioned for association with national bankrupt law firm

By Debra Cassens-Weiss

February 14, 2022, 1:59 p.m. CST

Lawyers in Iowa and Virginia have been disciplined for associating with a national bankruptcy law firm accused of using high-pressure tactics to recruit clients.

Dubuque, Iowa, attorney Christopher Soppe was reprimanded by the Iowa Supreme Court in a November 2021 order for his work with the bankruptcy firm. The reprimand included a July 2021 letter of reprimand sent to Soppe by the Iowa Supreme Court Prosecutors’ Disciplinary Board.

The reprimanding letter warned bankruptcy attorneys of their ethical responsibilities when working with the Chicago-based firm, which does business as UpRight Law and Law Solutions. The Iowa Capital Dispatch published an article about the reprimand last week.

In Virginia, attorney John Carter Morgan Jr. of Warrenton, Virginia, was suspended from practicing law for a year because of his work for an UpRight Law client. The Fauquier Times covered the January 2022 stay order by a three-judge Fauquier County Circuit Court panel in an article last week.

UpRight Law uses non-attorneys to screen callers, determine which type of bankruptcy is right for them, send fee agreements and accept fees, according to the Iowa Supreme Court Attorneys’ Disciplinary Board. New clients are then assigned to partner attorneys in the states where the clients reside.

UpRight Law operates in nearly every state and the District of Columbia. The Iowa Supreme Court Prosecutors’ Disciplinary Board first heard of UpRight Law when a complainant said she called the insolvency firm in March 2019. She was told that the law firm Lawyers needed her credit card for her records, but learned days later that she had been charged $500 without authorization, she alleged.

She filed for a refund on March 4, 2019, but was told UpRight Law couldn’t process it until mid-May. She didn’t actually receive a refund until July 12, 2019, a 92-day wait, the Disciplinary Board said.

The Iowa Attorney General investigated and discovered that several Iowa residents had requested reimbursements from UpRight Law and had not received them promptly. A client of UpRight Law said that when she threatened to call the Better Business Bureau, UpRight Law replied that she “doesn’t scam anyone” and that she doesn’t “specialize in refunds”. We file bankruptcies.

The investigation revealed that only one attorney in Iowa had registered an IOLTA account in connection with UpRight Law. Sopp was not that lawyer. UpRight Law’s client funds were managed and managed by accountants and attorneys in Chicago, and Soppe did not have access to or oversight of that account, according to the July 2021 letter of reprimand.

Soppe declined contact when contacted by the Iowa Capital Dispatch.

In Virginia, Morgan’s suspension stemmed from a penalty issued by the U.S. Bankruptcy Court for the Western District of Virginia in February 2018. Morgan was fined $5,000 by the court and suspended from practice before the court for 18 months. UpRight Law and its executives were fined $250,000 and the law firm suspended from practicing in court for five years, according to bankruptcy court notice, Bloomberg Law article and press release of the US Department of Justice.

The bankruptcy court focused in part on an UpRight Law program in which customers could pay their legal fees by turning in their cluttered cars to an Indiana towing company. The company claimed the right to keep the lien holder’s cars until towing, hauling and storage costs were paid. If the towing company sold the vehicle at auction, despite a security from the auto lender, it used the money to pay bankruptcy costs.

Morgan had responsibility for filing a case in which his client was placed in the auto program, the bankruptcy court heard.

“Local attorneys joining multijurisdictional law firms as local partners or limited partners cannot be both large and small,” the bankruptcy court said. “A lawyer cannot claim to be a partner in the firm and file cases in court as lead counsel, but does not claim responsibility for what happens at the main office on any filings the lawyer decides to take on. “

The court also faulted Morgan for allowing his wife, his non-lawyer assistant, to meet with the client and review the bankruptcy petition and timelines. The documents filed in the plaintiff client’s case “were filled with errors”, the court said.

Morgan told the Fauquier Times that he has not been a “limited partner” of UpRight Law since 2016. He said he has advised hundreds of people referred by UpRight Law and filed 63 bankruptcy filings as a result.

UpRight Law’s vice president of legal delivery, Ryan Galloway, did not immediately respond to emailed questions from the ABA Journal.

In a bankruptcy case, discharge from bankruptcy means that a judge has declared that you are no longer responsible for paying your debts. It is a permanent action that affects some types of debt, but not all.

Although a discharge cancels some debts and can help put your finances in order, bankruptcy remains on your credit report for seven or ten years, depending on the type of bankruptcy.

What is a bankruptcy discharge?

A bankruptcy discharge permanently prevents a creditor from trying to collect discharged debts. A discharge can occur in four types of bankruptcy cases:

• Chapter 7. This is the most common form of personal bankruptcy. A Chapter 7 bankruptcy can eliminate most of your debts by selling or liquidating many of your personal assets.
• Chapter 11. Businesses typically use this type of bankruptcy, but individuals can also file. A Chapter 11 bankruptcy establishes a debt repayment plan.
• Chapter 12. This type of bankruptcy aims to establish a debt repayment plan for family farmers and family fishers.
• Chapter 13. Designed for individuals, Chapter 13 bankruptcy places a debtor on a repayment plan.

How Does Bankruptcy Discharge Work?

Bankruptcy discharge only applies to debts that you accrued prior to declaring bankruptcy.

According to the United States Department of Justice, it is important to list all of your assets and debts in bankruptcy documents. If you fail to mention a debt, a judge cannot discharge it. Also, a judge can refuse to pay a debt if, for example, you hide property or falsify records.

A Chapter 7 bankruptcy filer generally gets an automatic discharge of eligible debts, such as credit card bills, unless legal challenges have been raised about a requested discharge. Meanwhile, debts included in a Chapter 13 bankruptcy can be discharged, but normally are not since this type of bankruptcy usually involves debt restructuring. Chapter 7 and Chapter 13 are the two most common types of bankruptcy.

How long does it take to get a discharge?

In a Chapter 7 bankruptcy case, a discharge can take four to six months. In other bankruptcy cases, including Chapter 13, payments are often made over a period of three to five years, so typically a discharge takes about four years.

What debts are discharged in the event of bankruptcy?

A table of debts can be discharged in a case of bankruptcy. Some of them include:

• Credit card bills
• Debt that has been turned over to a collection agency
• Medical bills
• Personal loans from friends, relatives and employers
• unpaid rent
• Overdue utility bills
• Most civil court judgments

Non-discharging debts

Not all debts can be discharged in bankruptcy. Some of the debts exempt from discharge include:

• Most federal, state, and local taxes
• Mortgages
• HOA dues
• Car loans
• alimony
• Pension
• Most student loans
• Debts secured by liens
• Judicial fines
• Criminal restitution
• Attorney fees
• Cases of bodily injury related to driving while intoxicated or under the influence of drugs

Can a bankruptcy discharge be refused?

A judge may deny a bankruptcy discharge for several reasons, such as:

• Not keeping financial records properly
• Committing a crime related to the bankruptcy case
• Failure to comply with a bankruptcy court order
• Fraudulently transferring, concealing or destroying property purporting to be part of the bankruptcy case
• Not taking a court-ordered financial management course

Bankruptcy discharge and student loans

You may be able to get your federal and private student loans canceled if the bankruptcy court approves your request through what’s called an “adversarial process.” In this application, a Chapter 7 or Chapter 13 bankrupt declares that paying off student loan debt would cause financial hardship for him and his dependents.

Positive scenarios that could result from a hardship case include:

• Your student loan debt is fully paid, which means you owe no debt.
• Your student loan debt is partially discharged, which means you have to pay off some of the debt.
• Your student loan debt isn’t discharged, but you qualify for better terms, like a lower interest rate.

In 2021, the American Bar Association, a group of lawyers and law students, urged Congress to change the US bankruptcy code to give borrowers the option to repay student loans without proving that repayment of the debt would impose “undue hardship” on them or their dependents.

The proposed federal Fresh Start Through Bankruptcy Act of 2021 would make federal student loans eligible for bankruptcy discharge 10 years after the first loan payment is due. Additionally, the law would retain the current “undue hardship” release option for private student loans and for federal student loans less than 10 years past due.

“Student loan debt follows you to your grave. For years, I have supported allowing troubled borrowers to repay their bankrupt loans as a last resort,” said U.S. Senator Dick Durbin, D-Illinois, co-sponsor of the Fresh Start legislation, in a statement. Press release.

Can a creditor attempt to recover a paid debt?

Debt collectors cannot attempt to collect debts that have been discharged in a bankruptcy case. Also, debt collectors are not allowed to attempt to collect a debt while a bankruptcy case is pending.

If you think a creditor has violated the court’s ban on contacting you about a discharged debt, consider asking a lawyer about your legal options. If a creditor attempts to collect a discharged debt, a debtor can report this to the bankruptcy court and request that their case be reviewed. A judge can punish a creditor who broke the no-contact rule.

Discharge from bankruptcy vs dismissal

In bankruptcy, a discharge is a good thing. On the other hand, a layoff might not be such a good thing.

A discharge in a bankruptcy case means that all permitted debts have been cancelled. Meanwhile, a dismissal refers to the referral of your case by a bankruptcy court. Reasons your case could be rejected include failing to submit proper documentation, failing to provide requested documents or showing up for a court appearance, or seeking a type of bankruptcy that does not qualify. does not apply to you.

Bankruptcy discharge and your credit

Filing for bankruptcy and discharge from bankruptcy can hurt your credit. This is because filing for bankruptcy and discharged debts can remain on your credit report for seven or 10 years. However, a debt that appears on your credit report as paid may be less damaging than an unpaid debt that lingers on your credit report indefinitely.

A Chapter 7 bankruptcy falls off your credit report after 10 years. For Chapter 13 bankruptcy, it’s seven years.

Keep in mind that a paid debt may not appear on your credit report as paid. If you notice that a paid debt is misclassified on a credit report, notify the credit bureau that produced the report and request that the error be corrected. Each year, you can get a free credit report from the three major credit bureaus (Equifax, Experian, and TransUnion) through annualcreditreport.com.

Fortunately, if you manage your credit responsibly after completing the bankruptcy process, the impact of bankruptcy on your credit score will fade over time. You may even see an improvement in your credit score within 12 months of closing a bankruptcy case.

The Cushman Watt Scout Center, headquarters of the Boy Scouts of America for the Los Angeles Area Council, is pictured in Los Angeles, California October 18, 2012. The Boy Scouts of America, acting by court order, released thousands of files which detail allegations and admissions of child sexual abuse within the organization between 1965 and 1985. REUTERS/Fred Prouser (UNITED STATES – Tags: CRIME LAW)

(Reuters) – The U.S. Justice Department’s bankruptcy watchdog on Monday objected to the Boy Scouts of America’s proposed reorganization plan and underlying $2.7 billion sexual abuse settlement, claiming that it offers impermissible legal protections to insurers and local councils of the bankrupt youth organization, among others.

The U.S. trustee said in a court filing that nondebtor releases provided to insurers and others, who have not filed for Chapter 11, in exchange for settlement contributions are not permitted under bankruptcy law.

“The plan lacks even a superficial discussion of why the nondebtor releases are necessary,” the U.S. trustee said in Monday’s filing, while noting that the releases were so broadly drafted that it doesn’t It was unclear who was covered by them.

BSA filed for bankruptcy in February 2020 to resolve allegations by former Scouts spanning decades that they were abused by troop leaders as children. Since then, more than 82,000 abuse claims have been filed in bankruptcy.

The plan aims to resolve all of these claims through the $2.7 billion settlement, which will be funded by insurers, local councils (which are independent legal entities) and the BSA itself, among others. Insurers, local councils, committees that represent survivors of abuse, current and former BSA officers and employees, and organizations that have chartered Scouting units and activities will be among those covered by non-debit releases. . Anyone who has personally committed or been accused of committing abuse is not protected.

The U.S. administrator also opposed these types of releases in the Chapter 11 case of OxyContin maker Purdue Pharma LP. In December, a federal judge overturned a bankruptcy court’s approval of those releases for members of the Sackler family who own Purdue. Purdue appealed that decision, but it, the Sacklers and several states also initiated mediation to reach an amended settlement of the opioid litigation.

BSA won the support of 73.57% of abuse survivors who voted on the plan, but this figure is lower than the 75% sought. Under the plan, survivors would receive compensation based on the severity of the abuse they suffered, among other factors.

The official committee representing victims of bankruptcy abuse, which has long opposed the deal, has yet to file documents outlining its views on the plan. He has previously argued that the payouts the plan offers to survivors who have filed claims are too low. However, a BSA lawyer said last week that “significant progress” had been made in providing more support to survivors.

BSA representatives did not immediately respond to a request for comment.

The case is In re Boy Scouts of America, US Bankruptcy Court, District of Delaware, No. 20-10343.

For the Boy Scouts: Jessica Lauria, Mike Andolina, Matt Linder and Laura Baccash of White & Case; and Derek Abbott and Andrew Remming of Morris, Nichols, Arsht & Tunnell

For the US Administrator: David Buchbinder and Hannah McCollum

Read more:

Boy Scouts lawyer touts ‘significant progress’ toward sexual abuse settlement

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