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Asset protection is an important issue for individuals that are defendants in litigation or in financial distress. Parties that are contemplating bankruptcy ponder how to protect their assets from their creditors. Asset protection and pre-bankruptcy planning occurs when a party contemplating filing for bankruptcy converts non-exempt assets into exempt assets. An exempt asset is an asset that is protected by either a state or federal exemption statute that excludes particular assets from being subject to execution by a bankruptcy trustee or creditor. An exempt asset is not available for distribution to a debtor’s creditors, and the particular asset is retained by the debtor. This article examines asset protection and pre-bankruptcy planning and its impact on a debtor’s discharge through Bankruptcy Code §727(a)(2)(A). Courts, pursuant to Bankruptcy Code §727(a)(2)(A), have denied debtors discharges when there were factual findings that a debtor’s pre-bankruptcy planning constituted a transfer of a debtor’s assets within one year of the filing of the debtor’s Chapter 7 case with the intent to hinder, delay, or defraud his or her creditors. E.g., Norwest Bank Nebraska, N.A. v. Tveten, 848 F.2d 871 (8th Cir. 1988).
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Delaware District Court Could Guide Supreme Court Purdue Pharma Decision
By Michael L. Cook
A bankruptcy court properly held that derivative claims based on “piercing the corporate veil theory of liability [were] released under” a confirmed reorganization plan, but that direct “claims for negligent undertaking” were not released and “could be asserted” in state court against the debtors’ equity sponsors.
Court Caps Landlord's Bankruptcy Claim Against Lease Guarantor
By Andrew C. Kassner and Joseph N. Argentina Jr.
A big issue in real estate and retail bankruptcies, among others, involves the disposition of commercial real estate leases, given the potential magnitude of landlord damage claims under state law resulting from a tenant’s default under a long-term lease.
Delaware Bankruptcy Court Rejects Equity Holder's Challenge to Revoke Confirmation Order
By Lawrence J. Kotler
The equity owner asserted that the confirmation order previously entered by the court should be revoked based on the equity owner’s claim that value was lost due to improper sale and marketing efforts by the debtors and its professionals both pre- and post-bankruptcy and, as such, they should have been “in the money” and entitled to a distribution under the confirmed plan.
By George Williams
One of the major catalysts of the “Crypto Winter” that began in 2022 was the collapse of Terraform Labs’s native token LUNA in May 2022. Now two years and a dozen crypto-related bankruptcies later, Terraform Labs has filed for Chapter 11 protection.