Category Archives: Bankruptcy News

Connecticut Bankruptcy Courts Rule That New Homestead Act Applies Retroactively to Claims Arising Before Act’s Effective Date

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A homestead exemption is a law that protects a certain amount of equity in an individual’s primary residence from the claims of his or her creditors or, in some states like Florida, the amount of the exemption is unlimited provided the residence is within a specified acreage.  Equity is typically defined as the fair market value of the residence less the amount of any mortgage, other consensual liens, or statutory lien (such as for real estate taxes) against the residence.

Individual filing bankruptcy can utilize the homestead exemption of his or her state to protect whatever the state will allow as an exemption to its residents.  11 U.S.C. § 522(b)(3)(A).  Thus, many issues relating to the applicability and scope of a state’s homestead laws are commonly decided in the context of a bankruptcy proceeding.

Most states have had homestead exemption laws on their books for many years, but up until 1993, Connecticut did not have one.  The original Connecticut homestead exemption was enacted into law on June 29, 1993, with an effective date of October 1, 1993, and shielded from the claims of creditors a homeowner’s primary residence up to the value of $75,000, with value defined as the fair market value of the residence less the amount of any statutory or consensual lien (like a mortgage) which encumbers it (“Original Act”).   Section 3 of the Original Act expressly provided: “This act shall take effect October 1, 1993, and shall be applicable to any lien for any obligation or claim arising on or after said date.”  Even back in 1993, most other states had some form of homestead protection for their residents.  See In re Duda, 182 B.R. 662, 668 (Bankr. D. Conn. 1994) (observing that the Original Act was enacted “to bring Connecticut law in line with that of other states which generally provide some homestead exemption or [other] protection”).

On July 12, 2021, Governor Ned Lamont signed into law Public Act 21-161 (the “2021 Act” or “Amendment”), which amended Connecticut’s homestead exemption  by repealing the prior version of the statute, renumbering its provisions, and increasing the homestead exemption from $75,000 to $250,000, effective October 1, 2021.  The 2021 Act provides, in pertinent part, as follows:

The following property of any natural person shall be exempt:

(21) The homestead of the exemptioner to the value of two hundred fifty thousand dollars, provided value shall be determined as the fair market value of the real property less the amount of any statutory or consensual lien which encumbers it, except that, in the case of a money judgment arising out of a claim of sexual abuse or exploitation of a minor, sexual assault or other willful, wanton, or reckless misconduct committed by a natural person, to the value of seventy-five thousand dollars.

Unlike the Original Act, however, the 2021 Act did not come with a provision that confined the exemption to claims arising after its effective date of October 1, 2021.

In two recent decisions, Connecticut bankruptcy courts have ruled that the new $250,000 homestead exemption is applicable to any claim arising either before or after the effective date of the 2021 Act, i.e. that it has retroactive effect, principally because, as mentioned, the 2021 Act was not accompanied by a statutory provision which limited its application to claims arising after its effective date.  See In re Cole, 2022 WL 1134626 (Bankr. D. Conn. Apr. 15, 2022) (Tancredi, J.); In re Faherty, 2022 WL 1191256 (Bankr. D. Conn. Apr. 20, 2022) (Nevins, C.J.).  The ruling in Cole is on appeal to the Connecticut District Court.  In re Cole, 3:22-cv-00587-VAB (appeal filed Apr. 25, 2022).

More recently in the Cole case, Judge Tancredi denied the chapter 7 trustee’s motion for a stay pending his appeal which, if granted, would have held up the distribution of the proceeds of the debtor’s $250,000 homestead exemption that were derived from a sale of her homestead during the chapter 7 case.  See In re Cole, 2022 WL 2196737 (Bankr. D. Conn. June 17, 2022).  The stay request was denied on the basis that the trustee could not establish a substantial possibility of success on the merits and, resultingly, was unable to establish irreparable harm if a stay was not granted.  Id. at *7-8.

As a result of the stay ruling, the Court granted the debtor’s motion for distribution of her homestead proceeds, which was ordered to be made within 21 days of it ruling.  Id. at *9.  This latter ruling may imperil the trustee’s appeal based on the doctrine of equitable mootness, which can be the basis for dismissal of an appeal if actions taken under the order appealed from, such as the payment of money, cannot easily be undone or if a court considers it inequitable to unscramble those actions.  See generally In re BGI, Inc., 772 F.3d 102, 107 (2d Cir. 2014) (applying equitable mootness in chapter 11 liquidation proceedings and describing it as a “pragmatic” doctrine “that is grounded in the notion that, with the passage of time after a judgment in equity and implementation of that judgment, effective relief on appeal becomes impractical, imprudent, and therefore inequitable”); ANR Co., Inc. v. Rushton, 2012 WL 1556236, at *4 (D. Utah May 2, 2012) (applying equitable mootness in chapter 7 case).  But see In re Bodenheimer, Jones, Szwak, & Winchell L.L.P., 592 F.3d 664, 668-69 (5th Cir. 2009) (questioning whether equitable mootness applies in chapter 7 cases).

For the time being, the existing law in Connecticut is that its new homestead exemption protecting up to $250,000 in equity in a primary residence from the claims of the homeowner’s creditors is available to assert as against such claims whether they arise before or after October 1, 2021.  This is a significant benefit for Connecticut homeowners who find themselves in troubled financial condition.

The author of this alert appeared in the appeal of the Purdue Pharma confirmation order to the District Court for the State of Connecticut and several other appealing States.

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Revlon files for bankruptcy protection amid heavy debt load

 

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Revlon, the 90-year-old multinational beauty company, has filed for Chapter 11 bankruptcy, weighed down by a heavy debt load, disruptions to its supply chain network and surging costs

NEW YORK — Revlon, the 90-year-old multinational beauty company, has filed for Chapter 11 bankruptcy protection, weighed down by debt load, disruptions to its supply chain network and surging costs.

The New York-based company said it expects to receive $575 million in financing from its existing lenders, which will allow it to keep its day-to-day operations running.

None of Revlon’s international operating subsidiaries are included in the proceedings, except for Canada and the United Kingdom. The filing was made in the U.S. Bankruptcy Court for the Southern District of New York,

Revlon, whose brands from Almay to Elizabeth Arden had been a mainstay on store shelves for decades, has struggled for years for failing to keep pace with changing beauty tastes and stiffer competition. It is backed by billionaire Ron Perelman’s MacAndrews & Forbes.

Major cosmetics company Revlon set to file for bankruptcy amid heavy debt load

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Cosmetics giant Revlon Inc. is preparing to file for Chapter 11 bankruptcy as soon as next week as it battles supply chain problems and a heavy debt load, according to people with knowledge of the matter.

Talks around the potential filing aren’t final and could change, said the people, who asked not to be named discussing private negotiations. A representative for Revlon declined to comment.

Distressed debt news provider Reorg first reported on the potential bankruptcy. Revlon’s shares plunged 53%, the biggest one-day drop on record, on Friday to close at $2.05.

New York-based Revlon, owned by billionaire Ron Perelman’s MacAndrews & Forbes, struggled amid competition from Estee Lauder Cos. and a host of smaller companies using social media to lure customers. Sales had been declining years before the pandemic, which also hit the company hard.

The brand has narrowly averted multiple defaults by cutting debt deals with creditors. The company is talking with creditors and equity ownership of the firm is likely to change, one of the people said.

Revlon has more than 15 brands, including Elizabeth Arden and Elizabeth Taylor, which it markets in nearly 150 countries.

Panthers Owner David Tepper Reportedly Files for Bankruptcy

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Panthers owner David Tepper, the league’s wealthiest owner, has filed Chapter 11 bankruptcy through his company, GT Real Estate Holdings LLC, according to a report from Joseph Person and Daniel Kaplan of The Athletic.

Per the report, Tepper’s real estate company went bankrupt following the issues related to the team’s new facility slated for Rock Hill, S.C.

GT Real Estate Holdings LLC had liabilities between $100 million and $500 million, assets between $100 million and $500 million and up to 49 creditors.

By filing Chapter 11 bankruptcy, the real estate company will now begin a court-ordered process of paying its creditors. GT Real Estate has said that the company has received $20 million in financing from DT Sports Holding LLC, which would allow the company to begin to address its creditor claims and give hope to the Rock Hill site. The financing is subject to court approval.

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Since GT Real Estate is a separate entity and is not linked to the Panthers in any way, an NFL spokesman told The Athletic that the league is not anticipating any issues related to Tepper’s bankruptcy filing for his company.

“GTRE is not part of the club’s ownership group. GTRE does not own any football-related assets, nor have any football-related assets been pledged in any way toward the costs incurred to date or any remaining obligations,” a league spokesman said.

Until the Rock Hill project is resolved one way or another, the Panthers will continue practicing and playing in Charlotte at Bank of America Stadium, which is one of the league’s oldest stadiums.

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National Australia Bank to launch its BNPL offering

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National Australia Bank has invited its customers to pre-register for the forthcoming launch of a new Buy Now, Pay Later offering named ‘NAB Now Pay Later’.

Under the scheme, NAB customers will be able to access up to USD 1,000, split purchases into four payments, use it anywhere Visa is accepted and add NAB Now Pay Later to their digital wallets for online and in person payments.

Unlike other instalment payment or pay-in-four products, NAB’s offering has no late fees, no interest, and no account fees.

Set for launch in July 2022, NAB Now Pay Later has been built for mobile with a range of new technology, including instant credit decisions and safety and security features.

The virtual card also features biometric fraud detection and a dynamic CVV that refreshes regularly to protect customers from fraud and theft.

NAB Now Pay Later follows the bank’s launch of StraightUp, Australia’s first no interest credit card, in September 2020.