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ABTJ Volume 36 Issue 1

In This Issue

Winter 2020 | Volume 36 | Issue 1

The In Pari Delicto Defense - Exceptions, Limitations and Potential Workarounds for Chapter 7 Trustees

The situation is alarmingly common: Before filing bankruptcy, a business debtor was at the epicenter of a Ponzi or other fraudulent scheme. Its trustee believes the debtor’s former officers, directors, professionals, auditors, or other agents facilitated the scheme, or negligently failed to detect it, and should be held accountable. When the trustee sues them, though, the defendants argue that the debtor and they were “in pari delicto,” and seek to dismiss on the grounds that the debtor is as much or more responsible than they were. Read Full Article

Issues Arising From Tenancy By The Entirety Ownership

Bankruptcy trustees are charged with liquidating a debtor’s interests in property. While federal law defines the interests of debtors included in a bankruptcy estate, state law creates such interests, and for the most part, property interests are analyzed under state law. The creation and analysis of certain property interests may vary from state to state, including with regard to whether a tenancy by the entirety is a recognized form of property ownership and the extent to which creditors can execute upon such an interest to satisfy debt. These variations are important. While bankruptcy trustees cannot practically remain aware of all state laws concerning an interest in a tenancy by the entirety, it is important for trustees to be aware that a tenancy by the entirety interest can limit the trustee’s ability to liquidate property. Read Full Article

Medical Record Considerations During Bankruptcy

Congratulations! You’ve been assigned a health care provider bankruptcy. Nothing too difficult, right? What about the medical records? What are the responsibilities of the trustee for those records? For the purposes of this article, the definition of what constitutes a medical record that should be maintained during a bankruptcy will be discussed. In addition to the medical record, there are two other health records patients consider vitally important: pathology specimens and medical images/x-rays (specifically mammograms) stored in the pathology and x-ray departments. Read Full Article

Pro Se Debtors - Do We Care

When I volunteered to write an article about trustee tools for dealing with pro se debtors, I expected it to be simple. I would just interview some trustees about how they handle difficult pro se cases and compile that information into an article. So, I sent an email out to the NABT listserv asking trustees what they consider important about pro se cases and how they handle any issues that arise. Read Full Article

Long Term Thinking Creates Short Term Gains for the Estate

As you sit at your desk, your paralegal just walked in and asked you again about the one-third interest you have in some real estate. The case has been open for seven months now. You’ve written to the other two owners with no response. The property, as a whole, is valued at approximately $100,000, which means the estate portion should theoretically be worth approximately $33,000. The question is, what do you do to sell the one-third interest in this real estate? You could file an action under §363(h) to sell the entire property. Unfortunately, sometimes that can be met with resistance, or there could be other circumstances that just don’t make sense for that to work. You’re thinking, “Well, I could put it on the NABT website, list it on eBay, or try one of the auction companies that regularly advertise.” However, in most circumstances, that one-third interest will not bring nearly as much money in the open market as it would if the person who owned it, or possibly to the other co-owners were interested in purchasing the property. Read Full Article

Unscrambling the Egg with Substantive Consolidation of Assets

When chapter 11 cases with multiple debtors are converted to chapter 7, one of the biggest challenges facing trustees is the task of accurately demarcating co-mingled assets to determine the appropriate allocation to creditors of each estate. Substantive consolidation of assets - the merging of assets and liabilities from multiple related debtors into one pool from which creditors are paid ratably - remains a strategic, yet less commonly used legal remedy that trustees and professionals can leverage to alleviate the burdens of this process with the court’s approval. Read Full Article

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