Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

FeaturesKickerLJN NewslettersNewsSectionsThe Bankruptcy Strategist

'Triggering Event Test'

BY Aram Ordubegian
November 30, 2014

In the preference avoidance context, the insolvency of the debtor is an element of the prima facie case that is not commonly litigated. When it is litigated, however, the scope of a debtor's liabilities can make or break the case. This is because under established case law, if a liability is determined to be “contingent,” then courts are required to discount the face value of that liability by the estimated probability of the contingency occurring and the contingent liability becoming an actual liability. If the liability is deemed to be “non-contingent,” then the entire amount of the judgment can be added to the liability side of the balance sheet to usually make the debtor insolvent, thereby satisfying the insolvency element.

In August 2014, the Bankruptcy Appellate Panel for the Ninth Circuit (the Panel) issued a decision upholding a published decision by Judge Julia W. Brand in the Central District of California that left no doubt that the so-called “triggering event test” was the appropriate test to determine whether a liability is contingent or not for the purpose of showing insolvency under 11 U.S.C ' 547. The decisions are notable because prior to the bankruptcy court's decision, no court in the Ninth Circuit had provided clear guidance as to what constitutes a contingent liability in the specific context of an insolvency analysis under 11 U.S.C. ' 547. Applying the “triggering event test” to the facts at hand, the Panel held that a state court judgment is a non-contingent liability in its full amount for purposes of determining the insolvency of the debtor, even though on the date in question the judgment was not final under state law and the debtor had expressed optimism that the judgment would likely be overturned on appeal.

Factual Background

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Yachts, Jets, Horses & Hooch: Specialized Commercial Leasing Models Image

Defining commercial real estate asset class is essentially a property explaining how it identifies — not necessarily what its original intention was or what others think it ought to be. This article discusses, from a general issue-spot and contextual analysis perspective, how lawyers ought to think about specialized leasing formats and the regulatory backdrops that may inform what the documentation needs to contain for compliance purposes.

Hyperlinked Documents: The Latest e-Discovery Challenge Image

As courts and discovery experts debate whether hyperlinked content should be treated the same as traditional attachments, legal practitioners are grappling with the technical and legal complexities of collecting, analyzing and reviewing these documents in real-world cases.

Identifying Your Practice's Differentiator Image

How to Convey Your Merits In a Way That Earns Trust, Clients and Distinctions Just as no two individuals have the exact same face, no two lawyers practice in their respective fields or serve clients in the exact same way. Think of this as a "Unique Value Proposition." Internal consideration about what you uniquely bring to your clients, colleagues, firm and industry can provide untold benefits for your law practice.

Risks and Ad Fraud Protection In Digital Advertising Image

The ever-evolving digital marketing landscape, coupled with the industry-wide adoption of programmatic advertising, poses a significant threat to the effectiveness and integrity of digital advertising campaigns. This article explores various risks to digital advertising from pixel stuffing and ad stacking to domain spoofing and bots. It will also explore what should be done to ensure ad fraud protection and improve effectiveness.

Turning Business Development Plans Into Reality Image

This article offers practical insights and best practices to navigate the path from roadmap to rainmaking, ensuring your business development efforts are not just sporadic bursts of activity, but an integrated part of your daily success.