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The Bankruptcy Court has the inherent power to impose civil contempt as a sanction for a violation of the discharge injunction. 11 U.S.C. §105. Even though these inherent powers derive from civil contempt, courts have fashioned their own standards for violators of the discharge injunction. The majority of circuits applied an objective standard akin to strict liability to discharge injunction violations. But the Ninth Circuit concluded that a “creditor’s good faith belief” that the discharge order “does not apply to the creditor’s claim precludes a finding of contempt, even if the creditor’s belief is unreasonable.” This circuit split resulted in the Supreme Court’s recent opinion in Taggart v. Lorenzen, 139 S. Ct. 1795, 1799 (2019), which rejected both bankruptcy court approaches. Instead, the Supreme Court decided that “[a] court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct.” Id. at 1799. Although this standard appears to be new, it is more than a century old and “brings the old soil” from civil contempt with it.
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By John J. Rapisardi and Joseph Zujkowski
Plan support agreements are often an essential component of a successful complex Chapter 11 reorganization and provide a framework for a debtor’s financial restructuring. These agreements have increasingly been used to induce core groups of major lenders and bondholders to support a debtor’s restructuring in return for enhanced recoveries.
By Thomas R. Slome, Michelle McMahon and Sophia Hepheastou
On Dec. 6, 2019, Gov. Andrew Cuomo signed legislation modernizing New York’s 95-year-old fraudulent conveyance law and making it consistent with the U.S. Bankruptcy Code and the law of at least 44 other states. The Uniform Voidable Transactions Act (UVTA) primarily clarifies the rights and remedies of parties involved in transactions with financially distressed entities.
By Francis J. Lawall and Kenneth A. Listwak
In the day-to-day practice of bankruptcy law, it may occasionally be tempting to dismiss “reservation of rights” language as unnecessary or unimportant — after all, a pragmatically minded court will consider the economic reality of the case before it. Right? Well, the U.S. District Court for the District of Delaware’s recent ruling in Emerald Capital Advisors v. Victory Park Capital Advisors (In re KII Liquidating) demonstrates the flaws in that way of thinking.
By Zach Shelomith
The advantages of Chapter 11 bankruptcy are oftentimes unavailable to small businesses and its owners. The substantial disclosure and reporting requirements alone scare off many potential debtors. In response to this problem, Congress recently created the Small Business Reorganization Act of 2019.