Typically, in bankruptcy proceedings, a creditor must return payments made shortly before the debtor filed for bankruptcy. At Monday’s argument in United States v. Miller, the justices were asked to decide whether that same rule applies to the Internal Revenue Service
Although Section 106 of the Bankruptcy Code includes an explicit and comprehensive waiver of the federal government’s sovereign immunity in bankruptcy, the IRS argues that the specific language of the waiver does not subject the agency to the obligation private creditors face to return funds paid to them by insolvent debtors shortly before a bankruptcy filing. The case turns on the language of Section 544(b) of the Bankruptcy Code, which allows the trustee in bankruptcy to “avoid” – that is, invalidate and recover – “any transfer … that is voidable under applicable law by a creditor holding” a valid claim against the debtor.” The section usually allows the trustee to recover “fraudulent conveyances,” transfers that a debtor makes shortly before bankruptcy. All Resort Group, Inc., made a payment to the IRS to pay off its owner’s income taxes about three years before filing for bankruptcy.
The question before the Supreme Court is whether the trustee in All Resort Group’s bankruptcy, David Miller, can seek to recover the funds paid to the IRS under Section 544(b) even though the IRS’s sovereign immunity would have prevented a suit against the IRS under the “applicable law,” Utah’s Uniform Fraudulent Transfers Act.
For the most part, the justices seemed unsure about which way to turn. In questioning Yaira Dubin, representing the IRS, Justice Amy Coney Barrett pressed the concern that the IRS’s reading would leave Section 106 wholly futile as applied to Section 544, even though the former lists Section 544 as one one of the sections to which its waiver of sovereign immunity should apply. When Dubin responded that Section 106 would validate actions against the IRS under Section 544(a), Justice Neil Gorsuch responded that Section “106 waives sovereign immunity with respect to all of 544. It doesn’t single out (a). And I think the gist of your argument is that, as you read 544(b), 106 is effectively rendered a nullity.” (https://www.abi.org/newsroom/bankruptcy-headlines/analysis-justices-debate-irs%E2%80%99s-claim-on-pre-bankruptcy-tax-payments)
The Consumer Financial Protection Bureau (CFPB) on Tuesday rolled out a new proposal aimed at cracking down on data brokers selling Americans’ sensitive information, The Hill Under the proposed rule, the agency said that it seeks to ensure data brokers comply with existing privacy law by treating “them as “consumer reporting agencies.” (https://www.abi.org/newsroom/headlines?page=1)
District Case Filings
Cases in the Southern District of Ohio continue to rise and were higher each month in 2023 (with the exception of March)
Case Filings – Chapter 7 filings increased 14% over 2023 (22,886 up from 20,149, according to Epiq AACER, the leading provider of U.S. bankruptcy filing data)
Case Filings Overall – A continued increase in filngs was seen across all Chapters, including:
Bankruptcy filings including all chapters totaled 42,532, a 14% increase from the September 2023 total of 37,360.
Commercial chapter 11 filings increased 26 percent to 734 in September 2024 from the 585 filings recorded in September 2023.
Commercial filings were 2,422, a 9 percent increase in September 2024 compared to the 2,225 filed in September 2023.
Subchapter V small business elections increased 9 percent to 167 in September 2024 from the 153 filings last September.
