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Bankruptcy Litigation

Bankruptcy Court Responses to COVID-19 Relief Orders

The economic impact of COVID-19-related shutdown orders, and the governmental directives, raise questions of how bankruptcy courts will respond.

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The onset of the COVID-19 pandemic led to a significant uptick in bankruptcy filings, especially by debtors in the hard-hit retail and service sectors. The associated shut down orders issued by state and local agencies led to further retrenchments caused by the inability of consumers to patronize businesses in person, with ripple effects through the supply chain. The economic impact, and the governmental directives, raise questions of how bankruptcy courts will respond: Do governmental orders and/or the financial consequences of the pandemic support: 1) the suspension of contractual obligations under force majeure provisions in contracts between debtors and creditors; and 2) bankruptcy court orders suspending cases or proceedings, to provide debtors an opportunity to stabilize their affairs?

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