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What a Post-COVID-19 World: Debtors' Extraordinary Responses to COVID-19
It has been said by many, in many different ways and in many different settings, that "desperate times call for desperate measures." Practically since its enactment more than 40 years ago, that idiom has been the foundation of various business and legal strategies employed by those clinging to the Bankruptcy Code while pressing an argument in court for some form of relief. Indeed, the Bankruptcy Code is, by all accounts, a safe harbor for businesses and people in search of a "fresh start," a venue to liquidate in an orderly fashion or just the opportunity to demonstrate that it is worth saving through a balance sheet and/or operational restructuring. Current times are desperate indeed, as the impact of the pandemic rages on and, in its path leaves many businesses and industries demolished or, at best, severely impaired. Once again, the Bankruptcy Code has been called upon to provide relief to those in dire need, relief that could certainly be called extraordinary in many respects.
Abstention and Inherent Power: The Suspension of Proceedings
In relevant part, section 305(a)(1) of the Bankruptcy Code provides that "[t]he court, after notice and a hearing, may … suspend all proceedings in a case under … [T]itle [11], at any time if — the interests of creditors and the debtor would be better served by such dismissal or suspension." Traditionally, courts have interpreted section 305(a) to apply to a suspension of all proceedings, rather than to certain proceedings. See, e.g., In re Rookery Bay, No. 95-04781 (Bankr. M.D. Fla. Nov. 17, 1995) (granting the debtor's motion for abstention, holding that it was "appropriate to suspend any further proceeding in the involuntary case" until the debtor's pending appeal of the creditor's judgment was resolved); In re Milestone Educ. Inst., No. 93-20747 (Bankr. D. Mass. May 25, 1994) (finding that a creditor's "motion for relief from stay for cause and concomitant suspension of all activity" would, among other things, permit the state appellate court to "address novel and unsettled issues of receivership law").
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