Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...
By Daniel Gill
President Donald Trump signed into law a bill that extends the tenure of temporary bankruptcy judges in a number of jurisdictions and helps family farmers and fishermen avoid a big tax bill in bankruptcy, giving their restructuring efforts a better chance at success.
The provisions were included in a disaster relief spending bill ( H.R. 2266) that received final congressional approval Oct. 24. Trump signed it two days later.
The new law will allow farmers to sell a portion of their land to help fund their reorganization and stay in business despite getting hit with a big capital gains bill. The law changes how those capital gains taxes are treated.
Instead of being a priority claim that would have to be satisfied in full before unsecured creditors receive payments, the capital gains will be treated as another general unsecured claim. They can be discharged at the end of the plan’s payment period.
The change is significant because frequently these capital gains taxes are quite high, since the farmland has often been in the family for many years or generations. Without the relief, the high capital gains tax makes selling a portion of the land an impractical means to fund a reorganization plan.
The law also provides for the extension of temporary bankruptcy judgeships in a number of jurisdictions and creates several new temporary ones . These include two more in Delaware, one for the Middle District of Florida and one for the Eastern District of Michigan.
The Judicial Conference of the United States has consistently counseled the need for more bankruptcy judges in these areas based on its evaluations of court workloads.
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To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
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