In the competitive world of commerce, sellers of goods can enhance their prospects for payment by leveraging a Purchase Money Security Interest (PMSI). This legal claim, when properly perfected, can provide a seller with priority over other creditors, even if those creditors have perfected a lien on the same type of collateral first.
In 2023, the digital asset industry demonstrated remarkable resilience amidst significant challenges, including the dissolution of several digital asset financial services companies, numerous bank failures, and a $4.7 billion fine imposed on Binance by the U.S. government. Despite these adversities, the digital asset market rebounded, recapturing over 50% of the market capitalization lost in 2022, bringing the total to $2.59 trillion.
In Chapter 11 bankruptcy cases, two critical documents are the disclosure statement and the plan. These documents represent the culmination of a case and provide a roadmap for the debtor’s path forward. A Chapter 11 plan can be a plan of reorganization, where the debtor emerges from bankruptcy as a reorganized entity, or a plan of liquidation, where the debtor’s remaining assets are liquidated and the proceeds are distributed to creditors. The plan outlines how creditor claims will be paid and, in the case of reorganization, provides that a debtor is fully discharged from its prior debts.
Bankruptcy proceedings often involve preferences, a complex issue that can be mitigated or eliminated through several affirmative defenses provided by the Bankruptcy Code. This article focuses on one such defense: the contemporaneous exchange defense, codified in 11 U.S.C. § 547(c)(1). This defense encourages creditors to continue business with companies potentially facing bankruptcy and protects transfers intended as a contemporaneous exchange for new value given to the debtor.
Businesses can claim a bad debt deduction under the Internal Revenue Code when a customer fails to pay for services or products. However, the ability to claim this deduction depends on several factors, and businesses should be prepared to substantiate their claim if challenged by the IRS.
In a recent speech at Vanderbilt University, Acting Comptroller of the Currency Michael Hsu discussed his views on the potential risk of financial instability due to the merging boundaries between banking and commerce. In his speech, Comptroller Hsu underscored the importance of vigilance, especially in the realms of payments and private credit/equity, where he predicts the risk of this ‘blurring’ is most imminent. The Comptroller also advocated for the analytic framework recently adopted by the Financial Stability Oversight Council (FSOC) as having the greatest potential to identify and address emerging financial stability risks.
In the realm of bankruptcy sales, the role of a stalking horse bidder in a Section 363 sale is crucial. This bidder sets the baseline bid, protecting the debtor from receiving unreasonably low bids for its assets. In return, the stalking horse bidder receives certain protections, such as a break-up fee and reimbursement of reasonable expenses, which are outlined in the asset purchase agreement.
James Stevens, co-leader of Troutman Pepper’s Financial Services Industry Group, was quoted in the February 27, 2024 Vixio article, “Georgia Clarifies Merchant Acquirer Law as Firms Submit First Applications in a Decade.”
“There is at least one large company that is seriously considering filing an application. And we have had a number of
In the complex landscape of bankruptcy, creditors often seek ways to offset amounts owed to the debtor against amounts owed by the debtor. Two mechanisms, setoff and recoupment, provide this opportunity, each with its unique characteristics and implications in a bankruptcy setting.
In the event of a company filing for bankruptcy, creditors often face the risk of preference exposure, where the company may seek to reclaim funds paid to the creditor prior to the bankruptcy filing. However, the Bankruptcy Code offers affirmative defenses that can help creditors reduce their preference exposure or liability. One such defense is the new value defense, also known as the subsequent new value defense. This defense, outlined in 11 U.S.C. § 547(c)(4), is designed to encourage creditors to continue their engagement with financially distressed companies.