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| vol 18, num 3 | September 2020 |
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| Discovery Sanctions Imposed in Disciplinary Matter Dischargeable in Bankruptcy |
| Section 523(a)(7) excepts from bankruptcy discharge a debt “to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss.” The law is clear that restitution payments constitute debts excepted from discharge under Section 523(a)(7). Indeed, the Supreme Court has held that a restitution obligation imposed in a criminal proceeding is not subject to discharge in a chapter 7 proceeding. In Kelly v. Robinson, the Supreme Court found that, because the “criminal justice system is not operated primarily for the benefit of victims, but
for the benefit of society as a whole,” restitution is not actually for the benefit of the victim but is in the nature of a fine, like any other fine that is excepted from discharge. |
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| You Don’t Always Need to File that Adversary! |
| The U.S. Bankruptcy Court for the Southern District of Alabama recently issued a reminder for all attorneys trying to ensure payment for their work. The warning? Exercise a little common sense, practice a little professional courtesy, and don’t jump right into litigation.
Prior to filing bankruptcy, the Army & Air Force Exchange Service (AAFES) offset the retirement benefits of Donald Glenn (the debtor). This offset occurred monthly in the amount of $648.44. In April 2018, the debtor commenced a chapter 13 case under the Bankruptcy Code, and he listed AAFES as a creditor. AAFES filed a Proof of Claim in June 2018 for $5,496.25. AAFES originally ceased offsetting the debtor’s retirement when the bankruptcy commenced, but after filing its claim, the offsets restarted. The offsets continued from July 2018 to January 2019.
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| Section 327(a) is All You Need: McDermott International Court Rejects Retention under Section 363(b) and the J. Alix Protocol |
| The McDermott International bankruptcy plan had already been confirmed by the time the hearing was held on the retention applications described herein. Hon. David R. Jones of the U.S. Bankruptcy Court for the Southern District of Texas acknowledged that the success of the bankruptcy was related “in no small part” to the efforts and talent of the debtors’ chief transformation officer and his team. However, despite the CTO’s success, the court was not content to approve his firms’ retention applications under § 363(b) when that section of the Bankruptcy Code lacked the safeguards and transparency intended for the
debtors’ professionals under § 327(a). The resulting opinion is an entreaty by the court to get back to basics and allow the (generally) elegant checks and balances of the Bankruptcy Code to function as they were intended.
The court was faced with two applications for retention of the debtors’ professionals: one for AlixPartners as financial advisor under § 327(a), and the other for AlixPartners’ affiliate AP Services under §§ 105 and 363(b). The debtors’ pre-petition CTO, John Castellano, was to be designated as post-petition CTO pursuant to a pre-petition agreement. To avoid any issues regarding Castellano’s disinterest, or lack thereof, the application for AP Services was brought under § 363(b).
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| Register Today |
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| Registration is now open to join ABI and 15 other insolvency organizations on September 16 as we kick off one of the most encompassing commercial global insolvency events ever! Insolvency 2020 will bring together thought leaders from the worlds of restructuring, insolvency and distressed debt for six weeks of insightful programming and unique networking events. |
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