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Reversing State Law Tax Sales and Lease Terminations in Bankruptcy: Expanding the Reach of Avoidance Powers

Strategies for Protecting Equity and the Value of Below-Market Leases; Role of Competitive Bidding; Federalism Issues

Note: CPE credit is not offered on this program

Recording of a 90-minute CLE video webinar with Q&A

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Conducted on Thursday, September 28, 2023

Recorded event now available

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This CLE webinar will discuss whether a prepetition tax sale of the debtor's property or a noncollusive lease (or option or contract) termination can be avoided post-petition as a fraudulent transfer or preference. The program will discuss how different circuit courts are analyzing these transactions under Sections 548 and 547 of the Bankruptcy Code. Finally, the panel will offer practical strategies for managing the uncertainty.

Description

Tyler v. Hennepin County, No. 21-166 (May 25, 2023), held that a tax sale can violate the Fifth Amendment, and may shed light on the continuing circuit split over whether a prepetition tax sale can be avoided as a fraudulent transfer or preference. The Fifth, Ninth, and Tenth Circuits have applied BFP v. Resolution Trust Corp., 511 US 531 (1994), to tax sales and held "no." The Second, Third, Sixth, and Seventh Circuits have held that tax-lien foreclosure sales can be fraudulent conveyances.

Courts are also divided over whether noncollusive, pre-petition lease (or contract or option) terminations can be avoided. The question arises usually because the debtor or trustee may wish to assume and assign a "terminated" lease or recover from the landlord the value the debtor forfeited by terminating a profitable or below-market lease. When considering terminating a lease, landlords want to know the potential value of a leasehold interest and take steps to reduce the risk of liability for its value in a subsequent bankruptcy proceeding.

Listen as this distinguished panel discusses how courts analyze prepetition tax sales and lease terminations under Sections 548 and 547 of the Bankruptcy Code. The panel will offer practical strategies for managing the uncertainty and the costs this uncertainty creates.

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Outline

  1. Tax sales
    1. BFP v. Resolution Trust Corp., 511 US 531 (1994)
    2. Fifth, Ninth, and Tenth Circuits
    3. Second, Third, Sixth, and Seventh Circuits
    4. Effect of Tyler v. Hennepin County
    5. Recent cases
  2. Pre-petition lease/contract/option terminations
    1. How the issues arise
    2. Defining what is transferred
    3. Reasonably equivalent value
    4. Recent cases
  3. Managing the risks to increase certainty

Benefits

The panel will discuss these and other key issues:

  • What are aspects of state tax foreclosures that make them similar to or different from mortgage foreclosures?
  • Does Tyler v. Hennepin County affect the analysis?
  • Does termination of a lease (or other contract) constitute a transfer under Section 101(54) of the Bankruptcy Code?
  • Does it matter whether the debtor is the party seeking termination?

Faculty

Carson, Benjamin
Benjamin M. Carson
Attorney
Law Offices of Benjamin M. Carson

Mr. Carson brings more than eight years of experience in the legal industry and is dedicated to helping businesses and...  |  Read More

Vilaplana, Victor
Victor A. Vilaplana
Partner
Practus

Mr. Vilaplana is a business reorganization attorney focusing on the handling of insolvency matters, particularly...  |  Read More

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