Boensch v Pascoe [2019] HCA 49

The High Court has recently considered the question of whether, and in what circumstances, property held by a bankrupt on trust for a third party vests in the trustee in bankruptcy pursuant to s 58 of the Bankruptcy Act 1966 (Cth): Boensch v Pascoe [2019] HCA 49. The decision was handed down late last year, providing further guidance for trustees following Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth (2019) 93 ALJR 807.

Mr Boensch held land on trust for his children and subsequently became a bankrupt. The trustee in bankruptcy lodged a caveat claiming a legal interest in this property, on the basis that whatever beneficial interest the bankrupt might have in the property would vest in him as trustee in bankruptcy and that was enough to support a caveat.

Mr Boensch claimed compensation against the trustee in bankruptcy under s 74P(1) of the Real Property Act 1900 (NSW) for lodging or maintaining a caveat without reasonable cause.

High Court decision

The High Court unanimously dismissed the former bankrupts appeal from the Full Court of the Federal Court and held that his right of indemnity as trustee was a sufficient interest such that the property held by the bankrupt on trust for third parties vested in the trustee in bankruptcy. That is, provided the bankrupt has a valid beneficial interest in the trust property, the trust property will vest in the trustee in bankruptcy subject to the equities to which it is subject in the hands of the bankrupt.

For these purposes, a valid beneficial interest means a vested or (subject to applicable laws as to remoteness of vesting) contingent right or power to obtain some personal benefit from the trust property. In this case, Mr Boenschs right to retain the property as security for satisfaction of his right of indemnity as trustee was a sufficient beneficial interest in the trust property.

Conversely, the property may not pass where the bankrupt has no valid beneficial interest in the property. Ordinarily, the burden of proving the absence of such a beneficial interest is on the bankrupt. On the evidence, Mr Boensch failed to discharge this onus that any beneficial interest would be set off against any benefit he obtained from living in the property free of rent.

Practically, the trustee in bankruptcy was entitled to be registered as proprietor of the property and there was a sufficient basis to sustain a caveat. The trustee in bankruptcy was warranted in lodging a caveat, provided that the caveat was lodged on the basis of an honest belief on reasonable grounds that the bankrupt had an extant beneficial interest in the property, including a beneficial interest by way of right of indemnity. Thus the former bankrupt was not entitled to damages for a caveat lodged without reasonable cause.

Consideration of other issues

In relation to the description of the caveat, Bell, Nettle, Gordon and Edelman JJ doubted that the expression Legal Interest pursuant to the Bankruptcy Act 1966 was adequate to describe an equitable estate vested in bankruptcy pursuant to s 58(2) by reason of the bankrupts right of indemnity. Their Honours considered that the use of the word legal in this context was apt to mislead and the expression as a whole did not afford sufficient information to determine whether any dealing with the property would adversely affect the interest claimed.

However, this deficiency did not of itself demonstrate the absence of reasonable cause to lodge and not withdraw the caveat, at least where the caveat did not overstate the interest sought to be protected.

Kiefel CJ, Gageler and Keane JJ reflected on the Full Courts decision not to determine the issue of whether Mr Boensch had, at the time of his bankruptcy, an entitlement in equity to be indemnified. Their Honours considered the principle sometimes referred to as judicial economy that an appellate court should confine itself to determining only those issues which it considers to be dispositive of the justiciable controversy raised by the appeal before it. Their Honours stressed that intermediate courts of appeal should not feel compelled to treat determination of non-dispositive issues in appeals before them as the norm. This promotes judicial efficiency by narrowing the scope of issues for determination and ensuring pronouncements by appellate courts on contested issues of law are limited to those that have the status of precedent.

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High Court considers whether trust property vests in trustee in bankruptcy - Lexology

GRAND RAPIDS, Mich. (WOOD) Goodrich Quality Theaters wants a federal judge to force movie studios to keep providing films so it can stay alive amid bankruptcy.

The Kentwood-based company filed for Chapter 11 protection last week. It says it owes millions, including more than $1 million to movie distributors.

According to Wednesday court filings, Goodrichs attorneys say big-name distributors like Disney, Focus, Lionsgate, Paramount, Sony and more have suggested, threatened and promised to stop sending their movies to Goodrich.

If that happens, the filings say, the theaters would have no movies to show and would have to shut down, destroying Goodrichs chances to reorganize. Goodrich is asking a judge to protect it from losing the movies.

The judge did not make a decision Wednesday. If the court denies the request, Goodrich theaters could close immediately.

It has 14 theaters in Michigan, including in Battle Creek, Grand Haven, Hastings, Holland, Kalamazoo, Lowell and Three Rivers.

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Goodrich worried about getting movies amid bankruptcy - WOODTV.com

AFTER Wullie Rennie faced calls to step down from politics and get back to bus driving because he protected David Steel, who in turn protected the child abusing Cyril Smith in order to protect the reputation of the Liberal Democrats, there are now suggestions that Wullie should be replaced with Jo Swinson who protected Wullie Rennie, who protected David Steele, who protected the child abusing Cyril Smith in order to protect the reputation of the party.

According to a report in The National last week, Jo Swinson is seriously considering returning to frontline politics in the Holyrood elections next year. The report didnt say whether she was also seriously considering returning to live in Scotland with her family instead of telling us that she stays at her maws hoose.

The LibDems have been all but invisible since their electoral catastrophe in December, so dont say its all bad news in British politics. Jo Swinson started that election campaign confidently, predicting that she was going to be the next prime minister, but couldnt even keep her seat.

Jos inauthenticity oozes out of her every time she opens her mouth. No doubt her fans in the Scottish media, desperate as they are for a new Saviour of the Union, will tout her as the next First Minister. Theyve already run through the Labour Party and the Conservatives only to be left with less than nothing, so its only fair that the LibDems get a shot at the crown of thorns.

The suggestion that Jo Swinson should return to Scottish politics and the notion that shes going to help prevent this countrys move towards independence is a symptom of the political, intellectual, and moral bankruptcy of British nationalism in Scotland.

READ MORE:Jo Swinson 'considering' running for Willie Rennie's Holyrood seat

Its an ideology which is desperately flailing around seeking something that might provide a solid surface upon which to build its appeal, only to discover that everywhere its landed so far has been a swamp thats only caused it to sink even lower. If youre reduced to pinning all your hopes on a politician who has already been rejected by the voters, its an admission that youve already lost.

We see the bankruptcy of British nationalism all around us. Its in the way Brexit has turned from a demand to restore the sovereignty of the British Parliament into a power grab for the Prime Minister. We see it in the undermining of the devolution settlement. We see it in the failure of Boris Johnson to provide reassuring leadership during the various crises that have already assailed his Government during its short time in office, whether thats the floods or the coronavirus outbreak.

Far from the promised sunny uplands of Brexit, the UK has rapidly descended into fights in supermarkets over toilet paper. Im a bit of a fan of dystopian movies and fiction. Ive seen depictions of the apocalypse which feature alien invasions, zombies, gladiatorial contests, rioting, looting, and mass death. Ive yet to see an apocalypse where everyone sits at home wiping their backside. Its safe to assume that all those millions of Keep Calm and Carry On items sold over the past few years havent had any effect. Perhaps if those fighting over toilet paper stocked up on Keep Calm posters instead then there wouldnt be a problem. Normal service will be restored once the panic buyers have starved to death in their homes, trapped by piles of toilet paper but with nothing to eat.

Yet a responsible and reassuring government would have ensured that such nonsense never happened in the first place. Where Vietnam produced a catchy song and dance routine encouraging people to wash their hands to help prevent the spread of the virus, we got Jacob Rees-Mogg telling us to sing God Save the Queen.

We have a Prime Minister who gets up in the morning and lies for breakfast. Then he lies all morning, he has some untruths for lunch, and he lies all afternoon. Then he has a plate of untruths for dinner and gets another spot of mendacity in with a few drinks. This is not a man who is capable of reassuring anyone with a functioning set of neurones.

The problems for Boris Johnson are only going to get worse as the coronavirus outbreak starts to bite and collides with public services which are suffering the malign effects of a decade of Tory austerity.

The Brexit negotiations are only going to prove ever more difficult. The rumblings of discontent at a government inhabited by bullies and clowns will only grow louder. None of this is going to prove any easier to sell to an increasingly disenchanted Scottish public, not by a Scottish Labour Party which is neither Scottish nor labour, and not even if a failed LibDem politician with a reputation for inauthenticity is roped in to help.

READ MORE:Michael Gove 'bullying Electoral Commission over indyref question'

None of them have shown the slightest inclination that in order to appeal once more to the electorate in Scotland, they need to make fundamental changes. Most of them are scarcely aware that they need to change at all. All of them are still in denial that opposing independence is in itself a nationalist, a British nationalist, proposition.

This week and the weeks to come will, of course, be dominated by news of a certain trial. Social media is full of apologists for the British state who are gleefully rubbing their hands in the belief that this trial will spell the end for the SNP and for hopes for Scottish independence. Theyre going to be proven wrong.

While there may well be a short-term effect on Scottish politics, the demand for Scottish independence isnt driven by the SNP, its driven by the way in which the British state and its nationalist ideology which masquerades as non-nationalism is incapable of meeting the political, economic, and social needs of modern Scotland.

The failure of British nationalism as an ideology is compounded by the incompetent arrogance of British politicians. Even a former Tory spin doctor, Eddie Barnes, was forced to admit in an article in The Sunday Times at the weekend that Westminster is pushing Scotland to independence.

That dynamic isnt going to change, no matter what happens in a court room in Edinburgh. Once the trial is over and the dust has settled, the underlying dynamic driving demand for Scottish independence will reassert itself.

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Wee Ginger Dug: The bankruptcy of British nationalism's all around us - The National

Its still business as usual with local and regional Boy Scout organizations, despite the national groups recent bankruptcy declaration.

Facing myriad sexual abuse lawsuits, the Boy Scouts of Americas national organization filed for Chapter 11 bankruptcy last week in the hopes of restructuring and creating a Victims Compensation Trust to pay damages to victims.

Recent events at national level will not adversely affect local Boy Scouts programming, Sioux Council Scout Executive Tom Smotherman told the Press & Dakotan.

The Sioux Council, our corporation, is legally separate and independent financially from the national organization, Smotherman said. The national organization has filed for a restructuring under Chapter 11, but that does not affect any of our resources here in the Sioux Council. All of our resources are owned and located inside Sioux Council and theyre governed by our volunteer executive board.

Every individual council is like that, he said.

We pay a service fee to the national office for services that they can provide more economically than we could independently for ourselves, Smotherman said. (Those include( things like creating policies for health and safety for our summer camps, creating promotional materials and marketing.

Local chapters also take advantage of the national organizations engineering and architectural departments for help designing new camp buildings, he said.

They are their own independent corporation, Smotherman said. They have their own executive board, and they determined that they needed to do this restructuring.

The Sioux Council has not filed for bankruptcy, he said.

Meetings and activities, district and council events, other scouting adventures and countless service projects are taking place as usual, Smotherman said. In short, there should be no change to the local scouting experience.

Only the national organization of the Boy Scouts is involved in the chapter 11 filing, he added.

The Sioux Council, which provides programming, financial facilities and administrative support to local units and individual Boy Scouts in our area, is separate and distinct from the national organization, Smotherman said. Our camps, properties and all the local contributions are controlled by our council.

The Sioux Council covers 61 counties from the Rosebud Indian Reservation, North to the North Dakota border, and east to include seven counties in Minnesota and one county in Iowa.

The Sioux Council will not only be continuing with activities as planned, but officials are also excited about 2020 and beyond, he said.

In 2019, we had our best fall membership drive in several years, Smotherman said. In 2019, we increased the number of youth recruited in 2018 by about 37%. So, we believe that families believe that scouting is a great organization for character education, citizenship training and physical fitness.

Having identified approximately $6 million in needed improvements, the Sioux Council launched a capital improvement campaign that has raised over $3 million in the last year or so, he said.

We plan to make some really extensive improvements, not only to our Center for Scouting in Sioux Falls, but at our camp properties, including Lewis and Clark down at Tabor, Smotherman said. Things are moving very quickly and we are excited about our opportunity to serve more and more youth with the scouting program and its beneficial aspects.

He said the group is always looking for more unit leaders and volunteers, too.

We ended the year with more units than the year before, Smotherman said. We added 20 new units with the volunteers that go along with them. So, things are moving well and in the right direction, but we always want to grow more and do more.

The biggest takeaway from the positive trend is that communities believe that the Boy Scouts is still relevant, he said.

They are contributing to the capital improvement campaign, and we depend on community organizations to charter our Cub Scout Packs and our Boy Scout Troops, Smotherman said. So, we had more companies, more businesses and more community organizations coming to us and saying, Hey, lets talk about starting a new Cub Scout Pack or a Boy Scout Troop.

Were in a good position to move forward for a long time to come.

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Local Boy Scouts Not Affected By Bankruptcy Filing - Vermillion Plain Talk

Updated: May 25, 2018:

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Clarity Of Drafting And Reliance On A Spouse For Bankruptcy Protection - A Cautionary Tale - JD Supra

SAVANNAH, GA - Two Midwestern Farmers Union leaders says farm bankruptcy numbers dont tell the whole story about the financial crisis in U.S. agriculture.

There were 595 Chapter 12 bankruptcies in 2019, the highest level since 2012 and Nebraska Farmers Union President John Hanson calls bankruptcies the tip of a very large iceberg.

Hanson says theyre seeing a repeat of the 80,15,5 situation.

"80 percent have lost equity and in some cases they've lost quite a bit of cash, but they're in a strong enough financial position yet to continue to go forward. Then you have 15 percent that are in the red zone and those folks are really scampering to try to do anything they can to turn their numbers around. The five percent are the folks that are pretty much upside down and don't have enough equity left."

South Dakota Farmers Union President Doug Sombke believes 2020 is going to be even tougher than 2019.

Sombke says MFP payments have helped, but in many cases have only prolonged the inevitable.

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Farm bankruptcies 'just the tip of a very large iceberg' - Norfolk Daily News

A former solicitor has lost his appeal over being adjudged bankrupt arising from a summons issued by the Revenue Commissioners after it got judgments for some 405,808 against him.

A stay, subject to certain variations requiring John Tobin to co-operate with bankruptcy trustee Chris Lehane, applies on the bankruptcy adjudication pending further orders arising from the Court of Appeals judgment.

Mr Tobin, with an address at Cornmarket, Robert Street, Limerick, appealed a High Court refusal to dismiss a bankruptcy summons served by Revenue on him and also appealed the High Courts subsequent decision adjudicating him bankrupt.

On Tuesday, the three judge Court of Appeal dismissed his appeal and adjourned final orders for three weeks. Giving the judgment, Mr Justice Maurice Collins noted the Revenue had on April 18th, 2016 served a bankruptcy summons on Mr Tobin, then still practising as a solicitor.

The summons warned, unless he paid some 405,808 to the Collector General (CG) within 14 days, he would have committed an act of bankruptcy for which he might be adjudicated bankrupt unless he had a court order to dismiss the summons on the ground he had no debt to the CG, or had a debt of 20,000 or less. It set out particulars of seven judgments the CG had obtained against Mr Tobin between September 2011 and January 2015, totalling some 405,808 net. The judge said that summons was in line with the requirements of Order 76 of the Superior Courts Rules. Mr Tobin had not applied within the prescribed 14 days to have the summons dismissed but, in November 2016, some six months later, he applied to dismiss it.

He claimed the sum sought by Revenue was incorrect because he was due a refund from it of 71,030, plus interest, from February 2009, for reasons including alleged overpayment of stamp duty made from his own resources to Revenue on behalf of a client.

Even if that sum was due to Mr Tobin, it was not disputed he still owed some 330,000 to the Revenue, Mr Justice Collins observed. The Revenue, he said, did not dispute Mr Tobin had paid sums towards stamp duty liabilities of clients but its position was that was a matter between him and the client. Having examined the evidence, the judge said Mr Tobins claims on the issue of overpayment/credit/refund arising from the stamp duty issues raised by him were fundamentally lacking in credibility.

There was no overpayment of the clients liabilities and Mr Tobin was at all times fully aware of that fact, he said. If there was no overpayment, no question of any refund or credit could possibly arise. It followed Mr Tobin had not established any real and substantial issue that the amount set out in the bankruptcy summons overstated his liability by failing to allow him a credit of 71,300.

Even if there was a credible basis for contending there was a stamp duty overpayment, Mr Tobin had failed to show that gave rise to any entitlement to credit or refund for him, rather than his client, the judge said. He agreed with the High Court there was nothing in a subsidiary ground of appeal concerning the Revenues handling of stamp duty certificates. In concluding observations, the judge said the question of what a debtor must show in answering a bankruptcy petition or seeking to dismiss a bankruptcy summons while having no impact on this particular case requires attention from some quarter, whether judicial or legislative.

Existing jurisprudence indicates Order 76 apparently requires that a summons has to be set aside if a debtor can show there is an issue that the amount in the summons exceeds what the debtor owes, even where the undisputed part of the debt may be multiples of the statutory threshold of 20,000, he said. If that is the correct approach, Order 76 requires urgent review.

Read more:

Former solicitor loses appeal over bankruptcy decision - The Irish Times

Boy Scouts of America Issue June 30, 1950 (Wikimedia Commons)

Although with the Boy Scouts of America recently said theyre filing for Chapter 11 bankruptcy, the organization made it known in a recent news release that the move to create a Victims Compensation Trust will not affect troops in local communities.

Local councils, which provide programming, financial, facility and administrative support to Scouting units in their communities, have not filed for bankruptcy. They are legally separate, distinct and financially independent from the national organization, according to the news release.

The Boy Scouts of America Troop 94 (Yorktown) and BSA Troop 103 (Williamsburg) did not immediately respond to comment for this story.

In Hampton, Justin Stewart, committee chairman for Cub Scout Pack 151, said the same about the local councils financial independence: We really have control over whats going on in our pack.

If we dont fundraise, if we dont do things inside of our pack, our program lacks in that aspect, he said. So when you talk about in the sense of the BSA and theres going to be a flow down of all this stuff were a speck on the map.

Stewarts Cub Scout pack is one of many groups in the regional Hampton and Newport News areas designated as the Monitor-Merrimac district. And the district is one of five spanning from Gloucester and Mathews County to Suffolk and even Brunswick County, encompassed by The Colonial Virginia Council.

Filing for bankruptcy comes after more than 300 men sued the Boy Scouts of America with claims they were sexually assaulted while they were scouts in the organization. In an open letter to victims, BSA National Chairman Jim Turley encouraged others to come forward and file claims.

Turley also expressed regret on BSAs policies, saying measures werent always in place or werent always enough.

Safety policies like implementing mandatory background checks for volunteers and staff in the organization have come a long way as knowledge on sexual abuse prevention has advanced, Turley wrote.

On a national level, the BSA now requires Youth Protection trainingfor staff every two years though Stewart said locally its required annually, noting in his five years with the program, he hasnt personally heard any accounts of sexual abuse in local troops.

[Youth Protection] is training that everybody has to go through as a leader. It goes over [topics like] grooming, bullying, the requirement for there to always be two adults, and it talks about the boys always having to be together in a buddy system, he said.

Stewart said before his pack takes the summer off, theyll raise funds for awards or gifts like compasses, pocket knives, and survival packs scouts can take with them when they start in the next level of the organization.

Nani Cawthray, committee chairwoman for Pack II in Newport News,, said the group was not affected, adding most of the support comes from the district or council level.

While the cub master did notify parents of the bankruptcy, she said the pack is still moving forward with their programming, including its summer camps.

Scouting has really worked hard to improve their policies to make sure everyone is protected and safe, she said, adding leaders are trained and scouts have youth protection with families. Scouts and leaders are never alone together.

Other troops and packs did not immediately respond for comment. Some were not interested in commenting or referred a WYDaily to the Boys Scouts of America Colonial Virginia Council in Newport News.

Clinton Hammett, scout executive and CEO of the Boys Scouts of America Colonial Virginia Council, said the local Boy Scout councils are legally and financially separate from the national organization, which is filing for Chapter 11 bankruptcy.

Local programs will still continue to go on, he said. Were excited about scouting and to continue our programming.

The Saturday after the national organizations announcement, there was a record turnout of more than 500 scouts and leaders at the Council Camporee Lumberjack event at Endview Plantation, Hammett said.

Were certainly here to stay and are excited about the future of scouting, he said. We certainly know scouting is safer today than it ever was.

WYDaily multimedia reporters Lucretia Cunningham, Julia Marsigliano and Alexa Doiron contributed to this story.

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The Boy Scouts of America filed for bankruptcy but these local troops are unscathed - Williamsburg Yorktown Daily

Bankruptcy is a scary proposition. The word "bankruptcy" itself sounds so ominous. The media bombards us with nightmare tales of seemingly solid business giants going from bedrock to bankrupt. The list of the bankrupt runs the spectrum from personal to corporate bringing together the likes of Donald Trump with Enron.

And gossip columns never tire of dishing on the latest celebrity inches from bankruptcy whether it's Gary Coleman or Mike Tyson having to part with his pet tigers. You might even fear that you're a few steps from going under. After all, we live in an economy in which credit card offers clutter our mailboxes. And living in debt is an accepted norm. But, just how can you tell when it's time to throw in the towel and declare bankruptcy?

Here are a few questions to help you assess your financial danger zone:

Assess Your Situation

If you answered yes to two or more of the questions above, you at least want to give your financial situation a little more thought. Simply put, bankruptcy is when you owe more than you can afford to pay.

To determine where you are financially, inventory all of your liquid assets. Don't forget to include retirement funds, stocks, bonds, real estate, vehicles, college savings accounts, and other non-bank account funds. Add up a rough estimate for each item.

Then, collect and add up your bills and credit statements. If the value of your assets is less than the amount of debt you owe, declaring bankruptcy may be one way out of a sticky financial situation. However, bankruptcy shouldn't be approached casually. After all, it's not a simple, easy cure-all for out-of-control debt.

How do I Declare Bankruptcy?

You can go bankrupt in one of two main ways. The more common route is to voluntarily file for bankruptcy. The second way is for creditors to ask the court to order a person bankrupt.

There are several ways to file bankruptcy, each with pros and cons. You may want to consult a lawyer before proceeding so you can figure out the best fit for your circumstances.

Chapter 7 Bankruptcy

There are lots of reasons people file for Chapter 7 bankruptcy. You're probably not the only one, whatever your reason is. Some common reasons for filing for bankruptcy are unemployment, large medical expenses, seriously overextended credit, and marital problems. Chapter 7 is sometimes referred to as a "straight bankruptcy." A Chapter 7 bankruptcy liquidates your assets to pay off as much of your debt as possible. The cash from your assets is distributed to creditors like banks and credit card companies.

Within four months, you will receive a notice of discharge. The record of your bankruptcy will stay on your credit report for ten years. But even that doesn't have to mean doom. Lots of Chapter 7 filers have bought homes with recent bankruptcies on their record. For many people, Chapter 7 offers a quick, fresh start.

But Chapter 7 bankruptcies aren't right for everyone. Almost all assets are taken and sold to repay creditors. If a debtor owns a company, a family home, or any other personal assets which he or she wants to keep, Chapter 7 may not be the best option.

Chapter 13 Bankruptcy

For people who have property they want to keep, filing a Chapter 13 bankruptcy may be the better choice.

A Chapter 13 bankruptcy is also known as a reorganization bankruptcy. Chapter13 enables people to pay off their debts over a period of three to five years. For individuals who have consistent, predictable annual income, Chapter 13 offers a grace period. Any debts remaining at the end of the grace period are discharged.

Once the bankruptcy is approved by the court, creditors must stop contacting the debtor. Bankrupt individuals may then continue working and paying off their debts over the coming years, and still keep their property and possessions.

Declaring Bankruptcy: Scary, But Sometimes Necessary

It can be hard to admit you need help getting out of debt, or that you can't do it alone. But that's why our government has bankruptcy laws to protect not only the creditors, but you! If you have a nerve-racking debt-load, it may be time to face financial facts. Perhaps you've been trying to ignore the ringing phone and the pile of unpaid bills that won't go away.

However, you could be doing yourself a disservice by not filing for bankruptcy. With a good lawyer and the right information, filing bankruptcy could give you the financial footing you need to get a fresh start. In other words, throwing in the towel may just be the beginning you need.

If you're considering bankruptcy, it's important to understand your options. Receive a free bankruptcy evaluation from a bankruptcy attorney through LegalZoom and take the first step toward a financial fresh start.

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Bankruptcy Basics: When Should You File for Bankruptcy ...

On 15 January 2020, we published a newsflash regarding the decision of the Hong Kong Court of First Instance dated 13 January 2020 (Decision) on the recognition of the appointment of bankruptcy administrators of CEFC Shanghai International Group Limited (Company) in the mainland of the People's Republic of China (Mainland). This was the first and so far only application in Hong Kong made by Mainland administrators for recognition of their appointment and judicial assistance at common law.

This follow-up client bulletin seeks to analyse the Decision in greater depth and to put into context not only its immediate significance but also its importance in furthering judicial co-operation between the Hong Kong and Mainland courts in the granting of reciprocal recognition of insolvency office holders appointed under the different insolvency regimes.

The Company is incorporated in the Mainland, an investment holding company, and part of a conglomerate whose business includes capital financing, petroleum refining and infrastructure. The Company went into insolvent liquidation in the Mainland and bankruptcy administrators (Administrators) were appointed by the Shanghai No. 3 Intermediate Peoples Court (Shanghai Court) on 24 November 2019.

The Companys assets included a HK$7.2 billion claim (HK Receivable) against its Hong Kong subsidiary. The Administrators discovered that one of the Companys creditors had obtained a default judgment against the Company and was seeking to enforce it against the HK Receivable by obtaining a garnishee order absolute from the Hong Kong court (Court) after a garnishee order nisi was obtained in August 2019.

The Administrators therefore made an urgent application, supported by a letter of request issued by the Shanghai Court, to the Court for recognition and assistance in Hong Kong. An order of recognition and assistance (Recognition Order) was made by the Court on 18 December 2019 which included the standard stay on proceedings against the Company in Hong Kong and thus preserved the status quo.

The Decision provides:

In the Decision, the Court applied two well-settled criteria, both of which must be satisfied before recognition and assistance will be granted in Hong Kong:

If these criteria are satisfied, the Court may recognise insolvency proceedings opened, including in a civil law jurisdiction such as the Mainland[3].

However, the powers that can be granted to foreign office holders under the common law power of assistance are subject to the three, equally well-settled, limits[4]:

Accordingly, the ability under common law to grant assistance applies only to the extent that (a) the foreign insolvency regime is similar to the insolvency regime in Hong Kong, and (b) in granting any specific power sought, a substantially similar power is available in both regimes[5].

The Court found that the Mainland insolvency regime fulfilled the criteria for recognition and assistance set out above. In particular the Court found that:

a. Article 25 of the EBL which sets out the Administrators powers and duties, which correspond to a Hong Kong liquidators powers and duties;

b. Article 19 of the EBL which imposes a stay, corresponding to the Hong Kong liquidation stay; and

c. Article 113 of the EBL which sets out the requirement of pari passu distribution of the debtors assets, which is consistent with the Hong Kong insolvency regime.

The Court noted that it was not a requirement under common law principles that recognition and assistance be reciprocal. Rather, the principle behind recognising and assisting a foreign liquidation is to make it possible for there to be one bankruptcy. Therefore, in addition to the requirement for the foreign jurisdiction to operate an insolvency regime which is similar to the Hong Kong insolvency regime, that foreign jurisdiction must also, if faced with the insolvency of a company with assets and creditors in other jurisdictions, aim to promote one bankruptcy with the aim of avoiding the need for separate liquidations in multiple jurisdictions.

It was noted in the Decision that the issue of whether the Mainland insolvency regime promotes one bankruptcy in a transnational context is uncertain given the lack of any statutory provision of law or decision on point of the Supreme Peoples Court. However, the Court expressly noted that the EBL clearly envisages the possibility of recognising foreign liquidators given the extent to which transnational business is conducted by Mainland businesses.

The key effect of the Recognition Order is that administrators of companies in insolvent liquidation in the Mainland can now apply to have the Mainland insolvency moratorium extended to Hong Kong and to exercise their investigative powers in Hong Kong.

But of particular note is that, while these powers include requests for document production and information from third parties, if the Recognition Order is read together with the decisions of The Joint Provisional Liquidators of China Lumena New Materials Corp (In Provisional Liquidation)[6] and Bay Capital Asia Fund, LP v DBS Bank (Hong Kong) Ltd[7], it would now seem that Mainland administrators (like foreign insolvency office holders generally) have the power to request documents and information in Hong Kong without the need for a recognition order from the Court. This is obviously an important tool for Mainland administrators to conduct cross-border investigation in Hong Kong.

The Recognition Order is also of effect to enable the Administrators to proceed to locate, protect, secure and take control of all assets and property within Hong Kong to which the Company is, or appears to be, entitled. But one unsettled question is the extent to which, given that the priority for distributions under the Mainland insolvency regime is different from that in Hong Kong, an administrator appointed in the Mainland will be entitled to remit the proceeds of assets realised in Hong Kong to the Mainland for distribution in accordance with the Mainland insolvency regime (see Lord Hoffmans decision in Re HIH Casualty & General Insurance Ltd[8] to allow certain remittance of proceeds of assets realised in Hong Kong to the Mainland notwithstanding these differences).

While there are on-going discussions between the Hong Kong Government and the Central Government on mutual recognition and assistance in insolvency-related proceedings, no formal arrangement has as yet been entered into between Hong Kong and the Mainland.

Even so, Article 5 of the EBL provides for the possibility of foreign insolvency proceedings being recognised in the Mainland in accordance with the principle of reciprocity, and it is on this point that the Decision has implications beyond its facts.

The importance of the Decision in this context should not be underestimated: the Hong Kong Court has demonstrated its commitment to the principle and has, in effect, invited the Mainland Courts to respond in kind. It would now seem simply a matter of time before an application, supported by a letter of request, is made to the Mainland courts for an order granting recognition of and assistance to Hong Kong liquidators of a Hong Kong company.

It is difficult to predict whether and to what extent the Mainland courts will respond to the Decision and modify their approach towards recognition of a Hong Kong insolvency process. Whilst it may still be unlikely for Hong Kong insolvency office holders to be granted unfettered access to assets located in the Mainland, it may at least become possible for them to be recognised as having standing to request documents and information from third parties, apply for a Hong Kong moratorium to be extended to the Mainland, or perhaps even to commence a Mainland bankruptcy in the name of the company being wound up in Hong Kong.

This decision is a long awaited one and a milestone in the administration in Hong Kong of cross border insolvencies and shows that the Hong Kong Court is committed to applying the doctrine of modified universalism and assisting insolvency practitioners appointed in foreign jurisdictions.

Hong Kong has for over 20 years been looking to update its laws on insolvency and it is nothing short of ground breaking that, without any statutory basis, the Hong Kong Court has, through incremental developments in jurisprudence, reached a position where there is in Hong Kong a simple and robust process for recognising foreign insolvency processes, which has now been extended to Mainland insolvencies and opened the door for reciprocal recognition. Something for which, it almost goes without saying, considerable credit should be given to the present Hong Kong Companys Judge, the Honourable Mr Justice Harris.

For insolvency practitioners, possibility of mutual recognition of insolvency processes between Hong Kong and the Mainland offers a number of interesting options for creditors in terms of choice of insolvency regime and access to possibly otherwise remote lines of recourse, but also for the very same reasons, a number of new challenges in credit analysis, all of which are, as ever, amenable to creative solutions.

Allen & Overy is advising a major creditor of Shanghai Huaxin Group (Hong Kong) Limited, the Hong Kong subsidiary of the Company which was the catalyst for the application for recognition being made and which is now in liquidation in Hong Kong.

Read the full judgment

Read the rest here:

Hong Kong recognises administrators appointed under the Enterprise Bankruptcy Act of the Peoples Republic of China - JD Supra

Photograph courtesy of Steak 'n Shake

This has been a good year for bankruptcy attorneysat least those that work with the restaurant business.

Five restaurant operating companies withnine chains in all have sought out debt protection so far in 2020, following this weeks filing by Logans Roadhouse and Old Chicago owner CraftWorks Holdings. Go back to November, and there have been seven bankruptcies accounting for13 restaurant chains. Thats not including the filing by big Sonic Drive-In franchisee SD Holdings.

Others are likely coming, too. According to a report Wednesday by Fitch Ratings, burger chains Checkers & Rallys and Steak 'n Shake are among the names facing a greater risk of a Chapter 11 filing.

In addition, big Pizza Hut and Wendys franchisee NPC International is considering a bankruptcy filing.

In its report, Fitch cited reasons for the industrys challenges that will surprise nobody reading this post: along period of declining sales due to heightened competition, shifting consumer tastes, rising competition from food delivery options and the inability to maintain brand relevancy, along with higher labor costs due to increasing minimum wages.

Its not just the companies that have filed for bankruptcy that are feeling those effects. Numerous restaurant chains have struggled, period, Fitch noted, from large concepts such asSubway, which has closed about 8% of its units over the past two years, toOCharleys, TGI Fridays and Fuddruckers, among others. These restaurants have closed units and overhauled operations.

Imagine what might happen in a recession.

The challenges reflect an operating environment thats simply unfriendly to weaker competitors with a lot of debt, costly leases or both.

There are a lot of competitors: Restaurant companies have been adding locations at a rate exceeding population growth every year since the end of the recession. Even with a growing economy, that has left consumers picking winners and losers. So we get situations likePopeyesLouisiana Kitchen generating 40% same-store sales growth while Krystal ends up filing for bankruptcy.

Despite a strong economy and modest same-restaurant sales growth in 2019, traffic trends remain weak, a dynamic that is expected to persist in 2020, Fitch wrote in its report. It noted that shifts in consumer preferences, as baby boomers eat out less and younger Gen Z and millennial consumers eat out more, is making more restaurant chains irrelevant.

Retail shifts are also influencing behavior, because consumers arent shopping all that much.

There are other factors, too. Labor represents about a third of many operators costs, and higher minimum wagescoupled with intense demand for workers that itself is driving up wagesare wreaking havoc for many restaurant operating companies. Fitch noted that 20 states raised their minimum wage this year and 32 states now have minimums that exceed the federal level.

Lease costs are also causing problems. With so many restaurant chains vying for the same type of location, rents have increased, adding additional costs to operators shrinking bottom line.

All of which means we can expect more restaurants to go under, particularly large-scale operators likeNPC that have spent much of the past decade amassing restaurants, remodel obligations, development commitments and the debt needed to do all that.

Checkers & Rallys recently named Frances Allen CEO, takingover for longtime CEO Rick Silva. The company has struggled of late with weak sales and profits.

Steak 'n Shake is a more interesting case. The company is throwing a Hail Mary at its problems this year by planning to convert most of 107 closed units tocounter servicerather than a full-service model.

The burger chain has $181.5 million outstanding in a loan that comes due in more than a year. Yet parent company Biglari Holdings does not guarantee that debt.

See the original post:

Restaurant bankruptcies are increasing, and more could be on the way - Restaurant Business Online

Within two months, two of the largest milk processors in the U.S. filed for bankruptcy. First came Dean Foods, which made the announcement in November. By January, Borden Dairy was doing the same. So what happened?

For at least two years, the dairy giants have increasingly struggled with competition from milk alternatives, innovative startups and deeply discounted private label dairy.

Its going to take some disruptors to wake up some of the folks who havent made those decisions to invest in the future. If youre not investing in the category today, youre going to have a major challenge to survive, Paul Ziemnisky, EVP of global innovation partnerships at Dairy Management Inc., told Food Dive.

Consumer preferences shifted, but Borden and Dean didnt change enough, leaving them in dire financial straits and facing significant debt. Dean Foods net income dropped from $61.6 million in 2017 to a loss of $327.4 million last year. And while Borden once had a presence in all 50 states, as of last summer, it offered only 35 products in parts of the Midwest, South and Southeastern U.S.

The company continues to be impacted by the rising cost of raw milk and market challenges facing the dairy industry, Bordens CEO Tony Sarsam said in a statement when it filed for bankruptcy. These challenges have contributed to making our current level of debt unsustainable.

Although for Dean and Borden, the troubles date back further than just 24 months, the issues have accelerated to a breaking point.

Eric Snyder, partner at law firm Wilk Auslander and chairman of the firms bankruptcy department, told Food Dive that for both Borden and Dean, debt was building as people were drinking less traditional milk. He said that dairy processing facilities are also extremely cost intensive, and it can be very difficult to scale down businesses like these.

Its just too much debt on the books for businesses that can no longer support it, he said.

For decades, milk consumption has been declining while new innovations and plant-based options have taken away some consumers who once turned to the popular drink. Non-dairy milk sales in the U.S. increased 61% from 2013 to 2017, while overall sales of dairy milk dropped 15% from about $18.9 billion in 2012 to $16.12 billion in 2017, according to Mintel.

Despite our best efforts to make our business more agile and cost-efficient, we continue to be impacted by a challenging operating environment marked by continuing declines in consumer milk consumption, Dean Foods CEO Eric Beringause said in a statement when the bankruptcy filing was announced.

Although the economy is strong, certain industries have seen increased bankruptcies because of changing consumer demands, Snyder said.

Its a function of the times, its a function of the cause and its a function of the debt. So it doesnt look good for dairy just like it doesnt look good for coal and it doesnt look good for retail, Snyder said. There are certain businesses that just dont have bright futures and we know what they are.

Snyder said that about 90% of bankruptcies end in a sale today.

In February, Dairy Farmers of America agreed to buy a substantial portion of Dean Foods business for $425 million. If the deal is approved by the bankruptcy court and the U.S. Department of Justice, DFA will acquire 44 of the companys fluid and frozen facilities, but could still face the same issues that have weighed down Dean for years.

Kenneth Rosen, a partner focused on bankruptcy and financial reorganization at Lowenstein Sandler, previously told Food Dive that Dean is facing a lot of problems that likely wont just be resolved with a change in ownership.

Ziemnisky, however, believes there is a bright future for dairy when looking at the growing international market and the players that are adapting, finding innovative ways to produce and sell the staple beverage.

New Zealands a2 Milks products, for example, lack a protein that can cause stomach discomfort, and more than doubled its retail count in 2018. Meanwhile, Fairlife, a joint venture with Coca-Cola, produces ultra-filtered milk, a higher-protein and lower-lactose product that has seen substantial growth.

Retailers themselves are launching their own products into the space.

In 2018, Walmart held a grand opening for its first U.S. food production facility, a milk processing plant that produces whole, skim and chocolate milk under its own Great Value brand a move that led Dean to cancel its contracts with more than 100 dairy operations across eight states. Kroger and Albertsons have also introduced private label lines.

So retailers today, if youre a mainstream product and youre not bringing innovation in the market, theyre asking what are you going to do to drive a category, Ziemnisky said.

Below is a compilation of some of the major events that happened over the last two years, offering the big picture of how Borden and Dean got here and whats next for the industry.

Read more:

How two years of changes in dairy led to two major bankruptcies - Food Dive

Ford Motor Company (NYSE:F) stock has tanked since I last wrote about the companys unavoidable bankruptcy. After reporting depressing fourth-quarter earnings, the stock is trading near 11-year lows.

The automakers revenue fell 5% to $39.7 billion and losses for the quarter were $1.7 billion. Ford struggled to grow market share in all of its key regions. Its expansion plans didnt bear fruit, and the failed execution led to massive losses.

Yet Ford Credit Company, the companys financial arm, posted its best results in nine years. Profits jumped to $3 billion before taxes, meaning its responsible for 50% of Fords profits up from 15 to 20% in the past.

Ford Credit Company has subsidized Fords losses and enabled the company to maintain a high dividend yield.

But judging by the data released by the New York Fed, the superior performance of Fords financial arm may not last long.

The damning data released by the New York Fed showed that the volume of 90+ days delinquent loans had risen sharply.

The value of the overall auto loan and lease balances has surged to $1.33 trillion. Worse, subprime loans reached $66 billion in the final quarter of 2019.

Ford Motor Credit Company doesnt lend to high-risk subprime borrowers. So, it doesnt have a high delinquency rate. But Ford Motors increasing dependence on its financial arm is a cause for concern.

Since not all Ford debtors are prime borrowers, the imminent pop of the sub-prime bubble will hurt the company. The auto loan lending business has thin margins. Even a slight increase in delinquencies can have a severe impact on profits.

Many investors buy Ford for its high dividend yield. But the high yield has been unable to prevent the stocks free fall. This may be because investors know Fords dividend is unsustainable, and a dividend cut is right around the corner.

And a subprime loan crisis, combined with an auto industry recession, can trigger a steep dividend cut.

U.S. car sales have witnessed no growth over the last few years. For 2019, sales topped 17 million units, but still edged lower compared to 2018.

Whats worth noting is that car sales have remained flat despite the rise in auto-loans.

It seems like the only thing supporting car sales and automaker profit margins is the rise in subprime loans. The situation is reminiscent of the subprime mortgage crisis of 2007.

Clearly, the U.S. auto market is in terrible shape. Lenient lending practices have kicked the can further down the road, but that wont last forever.

In addition, the situation in China, which is another key market for auto manufacturers, is dire. To contain the spread of coronavirus, hundreds of millions of people in China have been living under some form of quarantine.

This has taken a toll on the Chinese car market. Sales plunged 92% for the first two weeks of February. The situation forced the hand of carmakers, who are set to cut production by 15%.

The outlook for the automobile industry looks gloomy. And with subprime loans already at record levels, the next downcycle in the automobile industry will be worse than the last one.

Given that Ford barely survived the last recession, the chances of it surviving the next one are close to zero.

This article was edited by Josiah Wilmoth.

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Heres Why Ford Motor Company Still Cant Avoid Bankruptcy - CCN.com

Pacific Gas and Electric Co.s lawyers recently submitted a revised plan to take the company out of bankruptcy, masterfully sprinkling billions among the companys most powerful stakeholders hedge funds, shareholders and bondholders along with perhaps $1 billion in fees to consultants, banks and, yes, attorneys. All will cheer the companys procession out of bankruptcy court and over to the California Public Utilities Commission, again and again, for rate hikes.

But 73,000 wildfire victims and 16 million California ratepayers should not be cheering.

The wildfire victims deserve better. The utility will pay those claimants from a $13.5 billion fund financed half in cash and half in stock PG&E stock. Thats right: The current plan tethers the victims financial futures to the performance of the company that burned down their homes. It also saddles those families with the risk of any future wildfires started by PG&Es failing equipment. Thats chutzpah.

If the victims are worried about uncertain PG&E stock valuations, they should be. In the 23-month span over which the companys wires ignited 18 wildfires killing 107 people and destroying 15,700 homes the companys shares plummeted 90%. What about the next wildfire season?

Last year, a federal court monitor found evidence of shoddy work, poor record-keeping and falsified documents in the companys vegetation maintenance efforts. More recently, PG&E resisted a judges efforts to tie executive bonuses to safety improvements.

The company must compensate wildfire victims entirely in cash, just as it pledged all-cash payments to insurance companies and other claimants. Opportunistic hedge funds gobbled up insurance claims at steep discounts and will reap steep profits on their $11 billion payout in cash, not stock.

PG&Es plan also unfairly dilutes the victims claims by committing to secure bondholders claims over theirs and by allowing the Federal Emergency Management Agency and other government agencies to recover funds from the victims allocation.

Millions of customers dont fare much better under PG&Es plan, which stands to leave us depending on a company with a junk-level credit rating to provide our power. The plans generous distribution of assets to powerful stakeholders will encumber the utility with heavy debts, and many observers doubt it will emerge with the financial soundness to issue investment-grade bonds. Junk-rated PG&E bonds would not only inhibit PG&Es access to capital but also inflate its financing costs a worrisome prospect for a company whose exit plan requires it to take on $38 billion in debt and pay billions of dollars a year in interest.

The result would be hefty rate hikes that force customers to pay hundreds of millions of dollars more to Wall Street through their monthly utility bills. PG&E optimistically projects that electricity rates will increase by a third over the next three years, but more realistic assumptions would push energy bills even higher. Company executives have little to fear, however: By turning wildfire victims into shareholders, they will have created a sympathetic bulwark against customer objections.

There is a better way: transforming PG&E into a customer-owned private company. A customer-owned utility has the best chance of restoring safe, reliable and affordable power delivery by aligning the companys financial interest with the public interest and sharply reducing capital costs. The leaner capital structure of a customer-owned company would avoid billions of dollars in expenses for dividends, high-yield bonds and federal taxes. It would reinvest those savings in grid safety and reliability, compensating victims and dampening rate increases. And unlike a public takeover, a customer-driven buyout would avoid exorbitant costs to taxpayers and endless legal battles.

Getting there wouldnt be easy. We would need a bankruptcy court willing to force shareholders and institutional funds to absorb the losses that any investor should incur in a bankruptcy. We would need a Public Utilities Commission willing to stand up to incessant industry pleas for excessive rate increases. And we would need Sacramento lawmakers to continue resisting company efforts to jam an inadequate plan through bankruptcy.

But we should not waste this crisis or the opportunity it presents to transform PG&E into a responsible, responsive utility. Financial institutions stand ready to effectuate a buyout. We need the states leaders to embrace it as nearly 200 local elected officials, representing more than 9 million Californians, have urged them to do.

Regardless of the outcome, ratepayers collectively face a burden of many billions of dollars in long-overdue investment in maintenance, upgrades, and microgrids. If customers are going to pay for PG&E, we ought to own it.

Sam Liccardo is the mayor of San Jose, the largest city in PG&Es service area. He leads a coalition of 195 mayors, supervisors and other elected officials urging that PG&E become a customer-owned utility.

More here:

Theres a better way out of the PG&E bankruptcy - San Francisco Chronicle

Updated: May 25, 2018:

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The Year in Bankruptcy: 2019 | Jones Day - JD Supra

What Is Bankruptcy?

Bankruptcy is the legal proceeding involving a person or business that is unable to repay outstanding debts.The bankruptcy process begins with a petition filed by the debtor, which is most common, or on behalf of creditors, which is less common. All of the debtor's assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt.

Bankruptcy offers an individual or business a chance to start fresh by forgiving debts that simply cannot be paid while offering creditors a chance to obtain some measure of repayment based on the individual's or business's assets available for liquidation. In theory, the ability to file for bankruptcy can benefit an overall economy by giving persons and businesses a second chance to gain access to consumer credit and by providing creditors with a measure of debt repayment. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy.

All bankruptcy cases in the United States are handled through federal courts. Any decisions over federal bankruptcy cases are made by a bankruptcy judge, including whether a debtor is eligible to file or whether he should be discharged of his debts. Administration over bankruptcy cases is often handled by a trustee, an officer appointed by the United States Trustee Program of the Department of Justice, to represent the debtor's estate in the proceeding. There is usually very little direct contact between the debtor and the judge unless there is some objection made in the case by a creditor.

Bankruptcy filings in the United States fall under one of several chapters of the Bankruptcy Code: Chapter 7, which involves liquidation of assets; Chapter 11, which deals with company or individual reorganizations, and Chapter 13, which is debt repayment with lowered debt covenants or specific payment plans. Bankruptcy filing specifications vary among states, leading to higher or lower filing fees depending on how easily a person or company can complete the process.

Individuals or businesses with few or no assets file Chapter 7 bankruptcy. The chapter allows individuals to dispose of their unsecured debts, such as credit cards and medical bills. Individuals with nonexempt assets, such as family heirlooms (collections with high valuations, such as coin or stamp collections),second homes, cash, stocks, or bonds, must liquidate the property to repay some or all of their unsecured debts. So, a person filing Chapter 7 bankruptcy is basically selling off his or her assets to clear debt.Consumers who have no valuable assets and only exempt property, such as household goods, clothing, tools for their trades, and a personal vehicle up to a certain value, repay no part of their unsecured debt.

Businesses often file Chapter 11 bankruptcy, the goal of which is to reorganize and once again become profitable. Filing Chapter 11 bankruptcy allows a company to create plans for profitability, cut costs, and find new ways to increase revenue. Preferred stockholders may still receive payments, though common stockholders will not.

For example, a housekeeping business filing Chapter 11 bankruptcy might increase its rates slightly and offer more services to become profitable. Chapter 11 bankruptcy allows a business to continue conducting its business activities without interruption while working on a debt repayment plan under the court's supervision. In rare cases, individuals can file Chapter 11 bankruptcy.

Individuals who make too much money to qualify for Chapter 7 bankruptcy may file under Chapter 13, also known as a wage earner's plan. The chapter allows individuals and businesses with consistent income to create workable debt repayment plans. The repayment plans are commonly in installments over the course of a three- to five-year period. In exchange for repaying their creditors, the courts allow these debtors to keep all of their property including nonexempt property.

Financially distressed municipalities, including cities, towns, villages, counties, and school districts, may file for bankruptcy under Chapter 9. Under Chapter 9, there is no liquidation of assets to repay the municipality's debts. Chapter 12 bankruptcy provides relief to "family farmers" or "family fishermen" with regular annual income. Both Chapters 9 and 12 make use of an extended debt repayment plan. Chapter 15 was added in 2005 to deal with cross-border cases which involve debtors, assets, creditors and other parties who may be in more than one country. This type of petition is usually filed in the debtor's home country.

When a debtor receives a discharge order, he is no longer legally required to pay any of the debts on that order. So, any creditor listed on that discharge cannot legally undertake any type of collection activity (making phone calls, sending letters)against the debtor once the discharge order is enforced. Therefore, the discharge absolves the debtor of any personal liability for the debts specified in the order.

But not all debts qualify to be discharged. Some of these include tax claims, anything that was not listed by the debtor, child support or alimony payments, personal injury debts, debts to the government, etc. In addition, any secured creditor can still enforce a lien against property owned by the debtor, provided that lien is still valid.

Debtors do not necessarily have the right to a discharge. When a petition for bankruptcy has been filed in court, creditors receive a notice and can object if they choose to do so. If they do, they will need to file a complaint in the court before the deadline. This leads to the filing of an adversary proceeding to recover monies owed orenforce a lien.

The discharge fromChapter 7 is usually granted about four months after the debtor files to petition for bankruptcy. For any other type of bankruptcy, the discharge can occur when it becomes practical.

Declaring bankruptcy can help relieve you of your legal obligation to pay your debts and save your home, business, or ability to function financially, depending on what kind of bankruptcy petition you file. But it also can lower your credit rating, making it more difficult to get a loan, mortgage, low-rate credit card, or buy a home, apartment, or business in the future.

If you're trying to figure out if you should file, your credit is probably already damaged. A Chapter 7 filing will stay on your credit report for ten years, while a Chapter 13 will remain there for seven. Any creditors you solicit for debt (a loan, credit card, line of credit, or mortgage) will see the discharge on your report, which will prevent you from getting any credit.

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Bankruptcy Definition

TONAWANDA, N.Y. (WKBW) Fridays during Lent means fish fry for many across Western New York. Joseph Kroczynski has been in charge at Saint Amelia's School fish fry in Tonawanda for more than 15 years.

"We love doing it to see the joy of people coming in. It's like a club, an annual club," Krocynski said. The Catholic school holds a fish fry every Friday during Lent. Seven volunteers man the kitchen cooking up 250 orders. All of the proceeds go back towards the school.

"The price is right. The people are nice. The community is good. I'm a community guy, so I sort of stay in my community and do the best I can," Jerry Niedziela said. He was one of the first for fish fry as a steady stream of people came in throughout the evening.

"It's supporting the church and it's supporting the school and you meet your friends and you don't have to cook," Carol Reingold said. She's been a member of St. Amelia's for 45 years.

But the first Friday of the Lent season in Buffalo was also marked with the announcement of the Diocese declaring bankruptcy. Weather is always a topic of conversation, according to Kroczynski, but adds the news about the Diocese also came up at the dinner table.

"I don't think it effects your faith. That's a financial part. It's not that your faith had anything to do with the finances of the whole situation," Kroczynski said.

Reingold adding, "I believe in my church and there's good and bad in everybody and I guess we can't really pick our people."

"I don't know where the money is going to come from. They're not going to take care of the people as much as they promised, so I have a lot of compassion for everyone in that regard," Niedziela said.

Originally posted here:

Fish fry and bankruptcy: Buffalo's first Friday of Lent - WKBW-TV

Modells CEO Mitch Modell and a Modells store in Brooklyn (Credit: Getty Images,Wikipedia)

Modells Sporting Goods is renegotiating leases in a last-ditch effort to avoid bankruptcy.

The 130-year-old retailer, which has more than 150 locations across 10 states, sent letters to 19 landlords pleading with them to dig deeper so the retailer can avoid filing for bankruptcy March 1, the New York Post reported.

So far pledges of help have come from owners of buildings where five stores have launched liquidation sales. More than 2,900 jobs depend on the retailer avoiding bankruptcy.

These people are counting on me; some have been with me for 40 years, Mitch Modell, who is the retailers fourth-generation leader, wrote in a letter to landlords, according to the Post.

It is the latest effort by Modell to save his family business. Last May, The Real Deal reported that the retailer was trying smaller concept stores between 5,000 square feet and 8,000 square feet. The plan was to roll out in 10 locations across New York.

Earlier in 2019, Modells listed its 300,000-square-foot Bronx warehouse for $100 million. [NYP] David Jeans

More here:

Modells begs landlords to help it stave off bankruptcy - The Real Deal

The Supreme Court vacated and remanded Tuesday an appeals court decision that found under federal common law, a tax refund due from a joint tax return generally belongs to the company responsible for the losses that form the basis of the refund, rejecting a nearly half-century-old precedent.

In Rodriguez v. Federal Deposit Insurance Corporation, the case involved the issue of whether a parent corporation or its subsidiary owns a tax refund during bankruptcy proceedings.

Justice Neil Gorsuch (pictured with President Trump), in his opinion, explained the facts of the case: The trouble here started when the United Western Bank hit hard times, entered receivership, and the Federal Deposit Insurance Corporation took the reins. Not long after that, the banks parent, United Western Bancorp, Inc., faced its own problems and was forced into bankruptcy, led now by a trustee, Simon Rodriguez. When the Internal Revenue Service issued a $4 million tax refund, each of these newly assigned caretakers understandably sought to claim the money. Unable to resolve their differences, they took the matter to court.The bankruptcy court agreed with Rodriguez, the FDIC appealed the ruling, and the district court reversed. The Tenth Circuit Court of Appeals affirmed the district court, ruling for the FDIC as receiver for the subsidiary bank rather than for Rodriguez as trustee for the corporate parent.

In reaching its decision, the Tenth Circuit applied federal common law under the Bob Richards rule, which provided that, in the absence of an agreement, a refund belongs to the group member responsible for the losses that led to it. In this case, there was an allocation agreement, but the Tenth Circuit applied a more expansive version of the rule, applying it even to situations where there is an agreement unless the agreement unambiguously specifies a different result. The Supreme Court held that the Bob Richards rule is not a legitimate exercise of federal common lawmaking, and vacated and remanded the decision. Whether this case might yield the same or a different result without Bob Richards is a matter the court of appeals may consider on remand, Gorsuch stated.

Some tax experts see the case as a significant reversal from previous rulings. I was surprised that the Supreme Court has thrown out the Bob Richards doctrine, since it has been used by most courts as a factor in cases over the last 47 years, said Lee Zimet, senior director with Alvarez & Marsal Taxand LLC. Only the courts in the Sixth Circuit have refused to apply federal common law. The elimination of the use of federal common law in deciding ownership of tax refund cases will make the case decisions less predictable. Without the application of Bob Richards, the cases will be decided solely based upon the nuances of state corporate law and the specific language of a tax sharing agreement.

In the Rodriguez case, the Supreme Court reaffirmed the application of state law to determine property rights in a bankruptcy case, even when the property in question is a federal tax refund, according to Annette Jarvis, a partner in the international law firm Dorsey & Whitney.

The Supreme Court overturned federal court-created federal common law that had existed in many Circuits for over 45 years and, in so doing, severely limited the ability of federal courts to create federal common law, she said. Restricting federal court common lawmaking to that which is necessary to protect uniquely federal interests, the Supreme Court found this narrow ability to create common law not to apply to the allocation of federal tax refunds even when the parent and subsidiary companies were both in federally created insolvency proceedings. In addition to setting an important precedent for the limited ability of federal courts to establish federal common law, the impact of this decision is to allow corporate affiliates to freely decide, in a tax allocation agreement, the beneficiary of a tax refund among a corporate group filing a consolidated tax return, even if the allocation does not align with the company which created the tax losses and even when one or more of the corporate affiliates is in a bankruptcy case or an FDIC receivership. When companies face insolvency, this contractual allocation can be critical to the return available to a particular affiliated companys creditors, and, in some cases, to lenders who may have taken an assignment of tax refunds."

Originally posted here:

Supreme Court vacates tax refund awarded to bank in bankruptcy case - Accounting Today

Last week, the Boy Scouts of America filed for bankruptcy. This was not unexpected. Speculation about bankruptcy had been running rampant for over a year now.

It was done in direct response to New Yorks Child Victims Act and similar laws in other states which allow for a temporary lookback for victims of abuse whose claims previously would have been denied by the statute of limitations. Thousands of lawsuits have been filed against churches, schools, clubs and the BSA for transgressions alleged to have been done by leaders and mentors decades ago.

The CVA and its companions are good, as they allow anyone who was abused as a youth in any organization or by any individual to find closure or, in legalese, be made whole after surviving evil and holding dark secrets that are nearly impossible to overcome and/or share as a youth and an adult. Most times, it takes decades to open up about it and these lookbacks recognize that.

The path of bankruptcy isnt the BSA abandoning its responsibility to anyone who was hurt. Instead, it allows the BSA to reach settlements with these parties in an equitable fashion, otherwise potentially large awards in the first rounds of lawsuits would have decimated BSA finances and prevented monetary awards for those who brought lawsuits later in the cycle. The management of finances and settlements ensures that all who deserve something get something and the BSA can continue its mission.

Since early 2019 and especially now following the actual filing, Ive been asked about what bankruptcy and financial reorganization of the BSA means for Scouting; after all, I have long been a champion of Scouting in this column and in the community, having been a scout for eight years and a volunteer in the organization for the past 26.

First and foremost, take comfort in knowing local Scouting is financially sound and protected.

The Iroquois Trail Council (which serves eastern Niagara and the GLOW counties) is, like all councils, a corporation separate from the BSA and it maintains its own 501(c)3 status. Business decisions made on bankruptcy by the BSA will not impact the assets of the Iroquois Trail Council including our camps and donations made to local programs by families, donors and community partners like the United Way. The Council is not on the hook for assisting with the BSAs reorganization.

It is important to note that the Iroquois Trail Council is governed by local volunteers who provide strong oversight on budget development, fundraising, spending and investment. During the past decade, the council has routinely balanced its budget, been creative with its staffing model, made substantial capital improvements to Camp Dittmer and Camp Sam Wood, acquired a new centrally-located headquarters in Oakfield and ensured the future of local scouting through growth in its endowment fund. The Council is also debt-free and has no pending litigation.

Secondly, know that scouting is safe.

At first glance, driven by headlines on smartphones and hot takes on social media, some would wonder why theyd ever want to put their children in scouting for fear that they might be abused, thinking that the spate of lawsuits are recent in nature. They arent; 90% of those filed against the BSA date back 30 years plus. We cant let a few bad apples spoil the barrel, nor can we believe that protections arent afforded. A system is in place to keep out troubled souls and identify and eliminate adults and youths who may put others at risk. As long as Ive been in scouting, there has been detailed and effective youth protection training for all participants, double supervisory control and background checks.

Lastly, know that scouting is just as meaningful now as it was when the BSA was founded 110 years ago.

My Eagle Scout certificate is beside me in my office every day, a reminder of who I am and who I will be because of scouting. The organization and its principled lessons and experiences gave me a deeper understanding of service, leadership, teamwork and humanity and it has helped me greatly at home, work, and in the community. I and my fellow volunteers want to make sure more boys and girls are given such positive experiences in their lives in hopes of making them the very best citizens, spouses and parents they can be. God knows we need that in todays world.

Please know that all of us in scouting cannot and will not let financial restructuring by the national organization distract us from our goals. Scouting will continue to be a guiding light for many children for many decades more even amidst the occasional storm that might shake its very foundation.

Bob Confer is a Gasport resident and vice president of Confer Plastics Inc. in North Tonawanda. Email him at bobconfer@juno.com.

Originally posted here:

CONFER: The Boy Scouts will survive bankruptcy - Niagara Gazette