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Bankruptcy Trustees Receive Early Holiday Present – a Circuit Level Win Against Colleges in the Tuition Clawback Cases

November 13, 2019

Authors

Mark Duedall

Bankruptcy Trustees Receive Early Holiday Present – a Circuit Level Win Against Colleges in the Tuition Clawback Cases

November 13, 2019

by: Mark Duedall

 

We here at the Global Restructuring & Insolvency Developments (GRID to our friends) have been following the tuition clawback wars for a few years – the cases in which a bankruptcy trustee sues a college to return tuition that the bankrupt parent paid for  their child when the parent was otherwise stiffing other creditors.  It is a textbook constructively fraudulent transfer because the parent(s) do not receive reasonably equivalent value (or anything, for that matter) for the payment of the kid’s tuition.  Our prior coverage is here and here.  (And for those of you who want to really geek out on this, here’s a video of an entire symposium panel on the topic, from our friends at the Emory Bankruptcy Developments Journal.)

Anywho, yesterday the First Circuit decided the long-awaited appeal in DeGiacomo v.

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No Trustee Left Behind – Another Bankruptcy Court Requires Colleges to Return Tuition to the Bankruptcy Estate

February 13, 2017

Authors

Mark Duedall

No Trustee Left Behind – Another Bankruptcy Court Requires Colleges to Return Tuition to the Bankruptcy Estate

February 13, 2017

by: Mark Duedall

b09036864402bfedc690a2f80d6de804Another bankruptcy trustee catches another hapless college unaware.  In Roach v. Skidmore College (In re Dunston), Bankr. S.D. Ga. (Jan 31, 2017), a trustee appears to win the next battle of “bankruptcy estates v. child’s college,” ruling that an insolvent parent who paid the college tuition of an adult child made a fraudulent transfer to the college.  Thus, the unsuspecting college will likely have to return the tuition to the parent’s bankruptcy estate.

The theory is simple (albeit unsettling to some).  Under Section 548 of the Bankruptcy Code (and applicable state law, as a back-up), if any debtor makes a transfer to a third party while insolvent, and does not receive reasonably equivalent value in return, the debtor’s bankruptcy trustee may reclaim such transfer

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Losing Both Ways: Debtor Diligence in the Identification of Claims

August 3, 2016

Authors

James Maloney

Losing Both Ways: Debtor Diligence in the Identification of Claims

August 3, 2016

by: James Maloney

Two recent cases serve as reminders the devil is truly in the details. As to the front-end risks associated with an early § 363(f) sale, in In re Motors Liquidation Company[1](the “GM” case) we have seen a $10 billion reminder that identification and actual notice to persons with claims against the Debtor is an indispensable element to the “free and clear” result intended by such a sale.  On the back-end risks of a confirmed Chapter 11 Plan, In re AmCad Holdings, LLC[2]teaches that failing to specifically identify claims of the Debtor against others for retained jurisdiction under the Plan can defeat the intended jurisdiction of the Bankruptcy Court to adjudicate those omitted claims.

GM involves the ongoing troubles from the 2009 insolvency of the General Motors Corporation, the United States’ largest car manufacturer.  As opposed to the usual reorganization procedures of 11 U.S.C. §§ 1121?1129, which

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Some Much Needed Transparency Required on Liquidating Trustees, Liquidating Trusts, Plan Documents, and Other Post-Confirmation Matters

July 10, 2016

Authors

Mark Duedall

Some Much Needed Transparency Required on Liquidating Trustees, Liquidating Trusts, Plan Documents, and Other Post-Confirmation Matters

July 10, 2016

by: Mark Duedall

We at The Bankruptcy Cave applaud the recent ruling by Judge Whipple of the Bankruptcy Court for the Northern District of Ohio, seeking to make the post-confirmation parties, processes, and procedures far more transparent. In In re Affordable Med Scrubs, LLC,[1] Judge Whipple declined to approve a disclosure statement for a secured creditor’s liquidating plan.  The key deficiencies were as follows:

 

  • Disclosure Must be Provided about the Liquidating Trustee: While the secured creditor’s disclosure statement did state who the liquidating trustee would be, it provided no disclosures about the putative trustee’s connections to key creditors and other parties in interest. We applaud this effort to require disclosures about a proposed liquidating trustee or plan administrator. The selection of a liquidating trustee or plan administrator is a murky process – at best, it is based on some vague (and undisclosed) considerations of pricing and experience of the individual or
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  • Voidable If Not Fraudulent — NCCUSL Approves the Uniform Voidable Transactions Act

    November 12, 2014

    Authors

    Keith Aurzada and Mark Duedall

    Voidable If Not Fraudulent — NCCUSL Approves the Uniform Voidable Transactions Act

    November 12, 2014

    by: Keith Aurzada and Mark Duedall

    In July 2014, the National Conference of Commissioners on Uniform State Laws (NCCUSL) approved the Uniform Voidable Transaction Act (UVTA), a long-awaited update to the Uniform Fraudulent Transactions Act (UFTA). As the new title suggests, the UVTA, like the UFTA before it, encompasses a broader range of transactions than those traditionally deemed fraudulent and therefore avoidable under the common law. The amended Act clarifies and expands the burden of proof as well as presenting new challenges and opportunities to creditors seeking to avoid transfers by debtors operating under insolvent conditions. This development also has importance for creditors with claims in bankruptcy due to the bankruptcy trustee’s power to bring avoidance actions based on state law under 11 U.S.C. § 544(b) and thereby increase the assets available to repay debts.

    Under the amended Act as before, creditors bringing constructive fraudulent transfer claims have the ability to avoid transactions which deprive the

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