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A Chapter 11 corporate debtor’s monetary penalty obligation owed to the Federal Communication Commission (FCC), resulting from “fraud on consumers,” survived the debtor’s reorganization plan discharge, even when the FCC “was not a victim of the fraud,” held the U.S. District Court for the Southern District of New York on Sept. 2, 2021. In re Fusion Connect, Inc., 2021 WL 3932346, 1 (S.D.N.Y. Sept. 2, 2021). On appeal, the court reversed the bankruptcy court’s dismissal of the Government’s non-dischargeability complaint under Bankruptcy Code (Code) §1146(d)(6), explaining that the fraud exception to dischargeability reaches debts owed to “creditors who were not themselves defrauded,” such as the Government here. Id., at 2. According to the court, the bankruptcy court had confirmed the debtor’s reorganization plan with a broad discharge (i.e., release) of pre-bankruptcy debt, but the plan confirmation order put “stakeholders … on notice that [the FCC Penalty] could attach to the newly constituted [reorganized] entity,” when its terms made the dischargeability of that liability “an open issue.” Id., at 12.
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By Gerard S. Catalanello and Kimberly (Kodis) Schiffman
A summary of the factors that courts have considered and will likely continue to consider when addressing dischargeability of private student loans under subsection 523(a)(8)(A)(ii) of the Bankruptcy Code, and a cautionary word for practitioners considering whether to put forth an argument to the contrary.
By Michael L. Cook
The Fifth Circuit signaled that it would not approve in later cases a bankruptcy court asset sale of real property that summarily cuts off the rights of the debtor’s lessees.
Why Bankruptcy Attorneys Need to Help Their Clients Face Distressed Assets Now
By William (Bill) Lobel
Cyclical challenges in the economy are nothing new to bankruptcy attorneys and their clients, and 2022 is shaping up to be that kind of year for business owners nationwide. This is likely to result in a greater need for the services of bankruptcy attorneys as business owners face a mounting wave of distressed financial assets.
Fifth Circuit Resolves ‘Clash’ Between FERC and Bankruptcy Courts
By Douglas S. Mintz and Michael L. Cook
A Chapter 11 debtor’s “rejection [(under Code §365(a)] of a filed-rate [natural gas] contract … relieve[d] it of the obligation to continue performance absent the approval of FERC [(the Federal Energy Regulatory Commission],” held the U.S. Court of Appeals for the Fifth Circuit.