Specifically, it looks at the bankruptcy court’s treatment of claims made by the Internal Revenue Service (IRS) under §4980H of the Internal Revenue Code. The specific issue addressed is whether or not such claim is entitled to priority status as an excise tax under §507(a)(8)(E) of the Bankruptcy Code. Ultimately, the Court concluded that it is entitled to such priority status to the extent that such claim related to any payments required under the statute arising within three years from the petition date.Section 4980H was added to the Internal Revenue Code by the Affordable Care Act (“ACA”), enacted on March 30, 2010. Section 4980H applies to applicable “large employers” (generally, employers who employ at least 50 full-time employees, including full-time equivalent employees, on business days during the preceding calendar year).

most actions against the debtor or its property to collect on prepetition debts. This includes "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." 11 U.S.C. §362(a)(3). Because a lender is prevented by the automatic stay from foreclosing on its collateral after the borrower files for bankruptcy, the creditor is entitled to "adequate protection" of its interest in the collateral, which commonly takes the form of a cash payment or an additional or replacement lien to compensate the secured creditor for diminution in the value of its collateral during the bankruptcy case.11 U.S.C. § 361(1)-(2).If the adequate protection provided fails to preserve the value of the collateral during the bankruptcy case, the secured creditor is entitled as compensation to a "super-priority" administrative expense claim that must be paid before the payment from the bankruptcy estate of other administrative expense claims. 11 U.S.C. §§ 507(a)(2), (b); In re Blackwood Assocs., L.P., 153 F.3d 61, 68 (2d Cir. 1998).Sears HoldingsIconic retailer Sears Holdings Corporation and its affiliates (collectively, "Sears") filed for chapter 11 protection in the Southern District of New York in October 2018.When Sears filed for bankruptcy, its secured debt totaled approximately $2.68 billion, consisting of approximately $1.53 billion in first-lien debt secured by inventory, receivables, and certain other assets, and approximately $1.15 billion in second-lien debt secured on a junior basis by substantially the same collateral. The collateral securing both tranches of debt consisted of $2.39 billion in book value of borrowing-base inventory (referred to as "eligible" inventory), and approximately $300 million in book value of "non-borrowing-base" ("NBB") inventory that was excluded from the borrowing base against which asset-based lenders would loan money to Sears. The first-lien lenders had also issued $395 million in letters of credit ("LC

In re Affirmative Insurance Holdings Inc., No. 15-12136-CSS (D. Del. July 27, 2020). 11 USC Sec. 507(a).I find myself in a quandary. There are codes and then there are Codes.

U.S. District Judge Louise W. Flanagan recently affirmed a ruling from the U.S. Bankruptcy Court for the Eastern District of North Carolina in In re Construction Supervision, Inc.1 that a secured creditor that was oversecured on the date the debtor filed for bankruptcy was not entitled to a superpriority administrative expense claim under 11 U.S.C. § 507(b) for post-petition interest, costs or fees. Background When Construction Supervision Services, Inc. (the debtor) filed its voluntary Chapter 11 petition on January 24, 2012, the secured creditor held claims against the estate totaling $1,265,868.

Id. at *2-*3. The size of the benefit to which a participant was entitled depended on the duration of his service to the employer.Id.The employer terminated approximately 125 employees within 180 days of filing its bankruptcy petition.Id. at *4.In the subsequent bankruptcy proceedings, the terminated employees asserted that their claims for severance were entitled to priority treatment up to the maximum amount provided under 11 U.S.C. § 507(a)(4).Id. at *5.The trustee argued that the former employees “earned” an entitlement to severance pay throughout the course of their employment, and were therefore only entitled to priority treatment for that portion of the severance that was “earned” within the 180 day pre-petition time period.Id.The Bankruptcy Court overruled the trustee’s objections to priority treatment, and the trustee’s appeal was certified to the Court of Appeals.Id. at *6.

The debtors in the case, Fabio Alicea and Sarah Zabek, did not maintain the health insurance required by the ACA. They did not include the SRP when they filed their 2018 income tax return. Then, they filed a Chapter 13 bankruptcy case. The IRS filed a proof of claim for the unpaid SRP and asserted that the claim was entitled to priority under Bankruptcy Code § 507(a)(8). That section affords priority to a claim for a “tax on or measured by income or gross receipts for a taxable year ending on or before the date of the filing of the petition.”The Debtors objected to the claim, asserting that the SRP was not a “tax,” but a “penalty” assessed against them for failing to maintain health insurance. They relied on the Supreme Court’s decision in National Federation of Independent Business v. Sebelius in which the Court held that the SRP was not a tax for purposes of the Anti-Injunction Act. That Act prohibits lawsuits to “restrain the assessment or collection of any tax.”The IRS also relied on Sebelius. It noted that, although the Supreme Court held that the SRP was not a tax for purposes of the Anti-Injunction Act, it also said that whether the SRP was a tax for purposes of that Act “does not determine whether the payment may be viewed as an exercise of Congress’s taxing power” and that the SRP was constitutional because it fell within the taxing power.Th

The Settlement provided for a “structured dismissal, a disposition that winds up the bankruptcy with certain conditions attached instead of simply dismissing the case and restoring the status quo ante.” However, the Settlement did not include the WARN Claims of the Drivers against the Jevic Estate, estimated to have been worth $12.4 million, of which $8.3 million was a priority claim under 11 U.S.C. section 507(a)(4). The Court of Appeals agreed with the Drivers that the Bankruptcy Code does not expressly authorize structured dismissals: “As we understand them, however, structured dismissals are simply dismissals that are preceded by other orders of the bankruptcy court (e.g., orders approving settlements, granting releases, and so forth) that remain in effect after dismissal.

The most relevant increases are with respect to the amount of priority claims allowed under the Bankruptcy Code. The priority amount allocated for employee compensation claims (11 U.S.C. § 507(a)(4)) and benefit plan contributions (11 U.S.C. § 507(a)(5)) rise from $11,725 to $12,425. The priority amount mandated for consumer deposits (11 U.S.C. § 507(a)(7)) increases from $2,600 to $2,775.

If there are objections to the proposed distribution schedule, the Court will rule on those objections and then a distribution can be made.The assignee’s proposed distribution schedule must comport with the statutory order of priority: (1) secured claims, subject to reimbursing the assignee for the reasonable and necessary expenses of preserving, protecting or disposing of the collateral, including allowed fees and expenses of the assignee and its professionals; (2) other expenses incurred during the ABC process; (3) wages incurred within 90 days of the filing of the ABC, capped at $13,650 (see 11 U.S.C. § 507(a)(4)); (4) security deposits for the purchase, lease or rental of non‑commercial property, capped at $3,025 (see 11 U.S.C. § 507(a)(7)); (5) past due domestic support obligations; (6) unsecured claims of governmental units for taxes that accrued before the commencement of the ABC; (7) all other unsecured claims; and (8) interest on unsecured claims. Minn. Stat. § 576.51.Notwithstanding this priority schedule, the United States government claims the right to be paid first.

On November 22, 2011, Keith filed a Chapter 7 bankruptcy case. In the bankruptcy case, Alisa filed a claim for $221,546.66 as a DSO priority claim pursuant to 11 U.S.C.§507(a)(1)(A). Rockstone Capital, LLC (“Rockstone”), the holder of a judgment against Keith and the largest unsecured creditor, filed a general unsecured claim in the amount of $774,225.35.