Business Bankruptcy Issues

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Business Bankruptcy Issues Recent Developments

Jumping Up: Bankruptcy Code Dollar Amounts Will Increase On April 1, 2025

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An official notice from the Judicial Conference of the United States was just published announcing that certain dollar amounts in the Bankruptcy Code will be adjusted upward by 13.2004%, perhaps the largest increase to date. Inflation adjustments are made to certain Bankruptcy Code dollar amounts every three years, and these new amounts will apply to cases filed on or after April 1, 2025.

Follow this link for the Federal Register page with a chart listing all of the updated dollar amounts.  Among the most meaningful increases for Chapter 11 and other business bankruptcy cases:

  • The employee compensation and employee benefit plan contribution priorities under Sections 507(a)(4) and 507(a)(5) both increase to $17,150 from $15,150;
  • The consumer deposit priority under Section 507(a)(7) rises to $3,800 from $3,350;
  • The total amount of claims required to file an involuntary petition rises to $21,050 from $18,600;
  • The dollar amount in the bankruptcy venue provision, 28 U.S.C. Section 1409(b), which requires that actions to recover for non-consumer, non-insider debt be brought against defendants in the district in which they reside, has increased to $31,425 from $25,700;
  • The minimum amount required to bring a preference claim against a defendant in a non-consumer debtor case, specified in Section 547(c)(9), rises to $8,575 from $7,575; and
  • The total debt amount in the definition of small business debtor in Section 101(51D) will rise to $3,424,000 from $3,024,725.

Other adjustments will affect consumers more than business debtors. For example, the debt limit for an individual to qualify for a Chapter 13 bankruptcy case will rise to $1,580,125 of secured debt, and certain exemption amounts will also increase.

These new dollar amounts, on top of the 10.973% increase made in 2022, are now approximately 25% higher than the amounts in effect in 2019. Be sure to keep the new, higher amounts in mind when assessing cases filed after April 1, 2025. Official bankruptcy forms will likely be updated as the April 1, 2025 effective date draws near.

Image Courtesy of Flickr by Pictures of Money

Business Bankruptcy Issues Recent Developments

ABI’s Industry Viewpoint Interview: Intellectual Property And Bankruptcy

 

I recently had the honor of talking with the American Bankruptcy Institute’s Editor-at-Large Bill Rochelle about the intersection of intellectual property and bankruptcy, as part of ABI’s Industry Viewpoints video series.

Bill and I discussed issues ranging from the U.S. Supreme Court’s Tempnology decision involving trademark licenses, to Section 365(n) of the Bankruptcy Code, to the very different issues posed when a licensee files bankruptcy and wants to assume or assign an inbound IP license.

You can watch the video by following this YouTube link. I hope you enjoy it.

Photo courtesy of the American Bankruptcy Institute

Business Bankruptcy Issues Recent Developments The Financially Troubled Company

The Monetization Of Intellectual Property In Bankruptcy And Restructuring

ABI Panel. Last month I had the honor of speaking on a panel at the American Bankruptcy Institute’s 2022 Annual Spring Meeting in Washington, D.C. The topic of our panel was the Monetization of Intellectual Property in Bankruptcy and Restructuring.

  • I was joined by four distinguished panelists, Leslie Zmugg, General Counsel of Gordon Brothers (who was our moderator); Arthur Daemmrich, the Jerome and Dorothy Lemelson Director at the Lemelson Center for the Study of Invention and Innovation at the Smithsonian Institution; Bradley Limpert at Limpert & Associates; and Joshua Pichinson, Managing Director at Sherwood Partners, Inc./agencyIP.
  • The panel covered a range of issues, including an historical perspective on intellectual property and the way business failures impacted technological development, the impact of licenses on IP sales in bankruptcy, due diligence issues in distressed IP sale transactions, and cross-border implications in certain intellectual property transactions.

Video Available. The American Bankruptcy Institute has now made the the video of the panel discussion available for your viewing pleasure — just follow the link in this sentence to watch it.

I hope you find it helpful.

 

 

Image Courtesy of Flickr by Alejandroxwq

Business Bankruptcy Issues Recent Developments

Official Bankruptcy Forms Revised To Reflect April 1, 2022 Dollar Amount Adjustments Now In Effect

As discussed in an earlier post called “Moving Up: Bankruptcy Code Dollar Amounts Will Increase On April 1, 2022,” various dollar amounts in the Bankruptcy Code and related statutory provisions were increased for cases filed on or after today, April 1, 2022. This information sheet has a list of all of the dollar amount changes now in effect.

The official bankruptcy forms have also been revised to reflect these new dollar amounts.

Separately, the temporary change in the 2020 CARES Act as subsequently extended, boosting the aggregate non-contingent liquidated debt limit to $7,500,000 for filing a Subchapter V case, expired on March 27, 2022. Although Congress may raise the debt limit later, these new official forms reflect the April 1, 2022 inflation-adjusted cap of $3,024,725 for Subchapter V cases.

Remember, the increased dollar amounts, now reflected on these forms, apply only to cases filed on or after April 1, 2022.

Image Courtesy of Flickr by Pictures of Money

Business Bankruptcy Issues Recent Developments

Moving Up: Bankruptcy Code Dollar Amounts Will Increase On April 1, 2022

An official notice from the Judicial Conference of the United States was just published announcing that certain dollar amounts in the Bankruptcy Code will be increased a larger than usual 10.973% this time for new cases filed on or after April 1, 2022. Follow this link for the Federal Register page with a chart listing all of the updated dollar amounts.  Among the most meaningful increases for Chapter 11 and other business bankruptcy cases:

  • The employee compensation and employee benefit plan contribution priorities under Sections 507(a)(4) and 507(a)(5) both increase to $15,150 from $13,650;
  • The consumer deposit priority under Section 507(a)(7) rises to $3,350 from $3,025;
  • The total amount of claims required to file an involuntary petition rises to $18,600 from $16,750;
  • The dollar amount in the bankruptcy venue provision, 28 U.S.C. Section 1409(b), which requires that actions to recover for non-consumer, non-insider debt be brought against defendants in the district in which they reside, has increased to to $27,750 from $25,000;
  • The minimum amount required to bring a preference claim against a defendant in a non-consumer debtor case, specified in Section 547(c)(9), rises to $7,575 from $6,825; and
  • The total debt amount in the definition of small business debtor in Section 101(51D) will rise to $3,024,725 from $2,725,625.

Other adjustments will affect consumers more than business debtors. For example, the debt limit for an individual to qualify for a Chapter 13 bankruptcy case will rise to $1,395,875 of secured debt, and certain exemption amounts will also increase.

Given recent inflation, these increases are larger than usual. Be sure to keep them in mind when assessing cases filed after April 1, 2022. Official bankruptcy forms will likely be updated as April 1st draws near.

 

 

 

Image Courtesy of Flickr by Pictures of Money

Business Bankruptcy Issues Recent Developments

Amendments To The Federal Rules Of Bankruptcy Procedure Take Effect December 1, 2021

 

Each year amendments are made to the Federal Rules of Bankruptcy Procedure, which govern how bankruptcy cases are managed. The amendments address issues identified by an Advisory Committee made up of federal judges, bankruptcy attorneys, and others. The rule amendments are ultimately adopted by the U.S. Supreme Court and technically subject to Congressional disapproval.

Just A Handful Of Rule Amendments This Year. This year there are only four bankruptcy rule amendments expected to take effect on December 1, 2021. They are all relatively minor technical or administrative revisions. That means you don’t have to worry about major bankruptcy rule changes this year — good to know.

Here are the amendments:

  • Rule 2005, addressing release conditions for a debtor taken into custody, was amended to refer to the correct section of Title 18.
  • Rule 3007, governing service of claim objections, was amended to make clear that an insured depository institution, now identified only as one “defined in section 3 of the Federal Deposit Insurance Act,” also has to be served pursuant to Rule 7004(h) and its more rigorous service requirements (including certified mail in some situations). Although a minor change, it’s a good reminder of the special service rules that apply to FDIC insured depository institutions. The Committee Note clarifies that this provision does not apply to credit unions because they’re covered by National Credit Union Administration insurance instead of FDIC insurance.
  • Rule 7007.1, involving corporate ownership disclosures, was amended to align with similar disclosure rules in the Federal Rules of Appellate Procedure and the Federal Rules of Civil Procedure. It has been revised to apply only to nongovernmental corporations, although including when such corporations intervene in bankruptcy cases and adversary proceedings.
  • Rule 9036, governing notice and service, was amended to address high-volume paper-notice recipients and to specify procedures for such recipients related to the Bankruptcy Noticing Center (BNC).
  • Although not a Bankruptcy Rule, Federal Rule of Appellate Procedure 6, which governs bankruptcy appeals, was also revised slightly but only to change the reference to a form given amendments made to Federal Rule of Appellate Procedure Rule 3 (which, in turn, split former Form 1 into Form 1A and Form 1B).

I Need A Redline. No question — the best way to see the changes (and how minor they are this year) is to review a redline. Follow the link in this sentence for the complete set of rule changes, including redlines showing the revisions made, as well as the Advisory Committee’s explanations for each amendment. In addition to the amendments discussed above to the Federal Rules of Bankruptcy Procedure (the redline changes start at page 61), the linked document includes the amendments to the Federal Rules of Appellate Procedure.

December Is Almost Here. These rule amendments are slated to take effect on December 1, 2021, which will be here before you know it (and so will 2022).

 

Image Courtesy of Flickr by Robert Lyle Bolton

Business Bankruptcy Issues Recent Developments

Amendments To The Federal Rules Of Bankruptcy Procedure Take Effect December 1, 2019

Each year amendments are made to the rules that govern how bankruptcy cases are managed — the Federal Rules of Bankruptcy Procedure. The amendments address issues identified by an Advisory Committee made up of federal judges, bankruptcy attorneys, and others. The rule amendments are ultimately adopted by the U.S. Supreme Court and technically subject to Congressional disapproval.

Only A Few Rule Amendments This Year. Unlike previous years, there are only four rule amendments expected to take effect on December 1, 2019. Here they are:

  • Rule 4001(c) has been amended to clarify that Rule 4001(c), governing the obtaining of credit, does not apply in Chapter 13 cases.
  • Rule 6007 has been amended to specify who needs to be served with a motion to abandon, to provide that the objection deadline is within 14 days of service of the motion unless otherwise fixed by the court, and to clarify that a court’s order granting the motion itself effects the abandonment without need for further notice.
  • Rule 9036 has been revised to confirm that both notice and service to a registered electronic filing system user can be done by filing the pleading with the court’s electronic filing system. This, however, does not apply to service requirements under Rule 7004.
    • The Advisory Committee states that the “use and reliability of electronic delivery have increased since the rule was first adopted” and so Rule 9036 is being amended to make “a party who registers [ ] subject to service by filing with the court’s system unless the court provides otherwise.”
    • Likewise, service may be made to any person who has consented to service electronically, at least to the extent of the consent.
    • Service or notice is complete upon filing or sending unless the filer or sender gets notice that it did not reach the intended person.
  • Rule 9037 has been amended to add a subsection (h) setting forth procedures for motions seeking to redact previously filed documents otherwise protected under Rule 9037(a). Rule 9037(a) protections cover social security numbers, birth dates, names of minors, and financial account numbers.
    • A belated motion under the new subsection can be filed by the original filer or anyone else.
    • The new procedures include identifying the proposed redactions, attaching the document to be redacted, and specifying who is to be served. Courts are authorized to alter the national rule’s procedures, presumably through adoption of local rules.
    • The court is required to restrict from public access both the motion to redact and the previously available unredacted document. If granted, the redacted document is to be docketed. If denied, the restrictions must be lifted unless the court orders otherwise.

A Bonus: Federal Rule Of Appellate Procedure Change Impacting Bankruptcy Cases. In addition, although not a Federal Rule of Bankruptcy Procedure change, Rule 26.1(c) of the Federal Rules of Appellate Procedure has been revised to require certain disclosures in bankruptcy case appeals. Each debtor, including any debtors not named in the caption, must be identified. For each debtor that is a corporation, the Federal Rule of Appellate Procedure 26.1(a) disclosures must be provided regardless of whether the corporate debtor is named in the caption.

Give Me A Redline. If you’re like me, the best way to see the changes is to go through a redline. Follow the link in this sentence for the complete set of rule changes, including redlines showing the revisions made, as well as the Advisory Committee’s explanations for each amendment. The redline of the bankruptcy rule amendments starts at page 65 of the linked document. The change to Federal Rule of Appellate Procedure Rule 26.1(c) is found on page 32.

Is It December Already? These rule amendments are slated to take effect on December 1, 2019, a few weeks from now, so read through them to be ready when they do.

 

 

 

 

Photo by Kealan Burke on Unsplash