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The Third Circuit recently affirmed the bankruptcy court’s approved retention of the debtor’s counsel (“S”) when that “law firm dropped an existing client to avoid conflicts that would prevent it from taking on a more lucrative client [i.e., the debtor].” In re Boy Scouts of America, 2022 WL 1634643, *7 (3d Cir. May 24, 2022) (BSA). According to the court, there were “not enough facts to put [the so-called “hot potato” doctrine] into play” and disqualify S under the Rules of Professional Conduct. Id. Moreover, because S’s representation of the debtor “did not prejudice [the objecting former client], but disqualifying [S] would have been a significant detriment to [the debtor], it was well within the [bankruptcy] court’s discretion to determine that the drastic remedy of disqualification was unnecessary.” Id. Particular facts of the case, highlighted by the court, supported its finding that there was “nowhere close to an abuse of discretion” by the bankruptcy court’s applying Bankruptcy Code (Code) §327(a) to approve S’s retention.
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Supreme Court Finds 2017 Bankruptcy Fee Increases Unconstitutional But Leaves Remedy Unclear
By Theresa A. Driscoll
The Supreme Court concluded that because the 2017 amendments exempted debtors located in two States, it was not “uniform” as it did not apply equally to all debtors regardless of where they were situated and, therefore, the statute was unconstitutional.
It May Not Be Too Late to Assume That Lease
By Paul A. Rubin and Hanh V. Huynh
Given the potentially harsh consequence of failing to timely assume a vital lease, a Chapter 11 debtor must be vigilant to avoid a forfeiture. It is important to know, however, that all might not be lost even if the debtor misses this deadline.
Second Circuit Insulates Innocent Friend from Corporate Debtor’s Fraudulent Transfer Liability
By Michael L. Cook
The defendant “was a ‘mere conduit’ of [a] fraudulent transfer and cannot be liable to the bankruptcy estate for funds she never knew about,” held the U.S. Court of Appeals for the Second Circuit in In re BICOM N.Y., LLC.
Court-Based Student Loan Management Programs Can Facilitate Repayment of Debt Under Chapter 13
By Igor Roitburg and Scott F. Waterman
While bankruptcy traditionally has been seen as a challenging pathway for debtors with student loans, court-based student loan management programs have been adopted to facilitate the repayment and resolution of student loan debt within the Chapter 13 bankruptcy process.
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