The new value exception to absolute priority in bankruptcy

Article Abstract:

The new value exception was added to the Bankruptcy Code of 1978 to make up for the absolute priority rule's inflexible application under the Bankruptcy Act. That it is unneccesary to continue to recognize this exception is indicated by the wide latitude debtors have in forming classes of creditors, the provision stating that only the statutorily mandated part of a class must vote to confirm a plan, and finally that absolute priority applies only when creditors fail to accept a plan. The policy goals Chapter 11 of the Bankruptcy Code is based on also justify elimination of the exception under post-Code bankruptcy law.

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Preference conundrums

Article Abstract:

Section 547 of the Bankruptcy Code allows creditors to recoup more of their secured debts by giving them a preference over other creditors to the debtors' after-acquired property. After-acquired property is that which is subject to the loan and which accrues between the time the debtor files for bankruptcy and the time when debts are liquidated or discharged. Creditors seeking preferential treatment face problems when a debtor exchanges after-acquired property for other property not the subject of the debt. In this case, creditors must prove that the new property sufficiently relates back to the secured property.

Management

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Pre-petition IRS levies on "cash equivalents": why they are recoverable by the estate even absent a present right to collect

Article Abstract:

IRS levies against assets made before the debtor petitions for bankruptcy have been a troubling issue for the courts, due to conflicting priorities in the Internal Revenue and Bankruptcy Codes, as well as state law. Though courts disagree on the issue, it appears that equitable ownership of the disputed asset remains with the debtor until the IRS has credited the value of the asset against taxes due. If the debtor files for bankruptcy before the IRS actually credits the amount towards the taxes owed, the asset is available as part of the bankruptcy reorganization.

Tax liens, states

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