The Restructuring Report

Nearly 2 million nonprofits are registered with the IRS, and the National Center of Charitable Statistics reports that about 30% of nonprofits close within 10 years. How do directors and officers of nonprofits satisfy their fiduciary obligations when a nonprofit faces economic difficulties and insolvency?

Recent decisions in the Third Circuit, Fourth Circuit and Indiana bankruptcy court appear to implement an insolvency prerequisite for a debtor to commence a case under the Bankruptcy Code. What is the basis of the insolvency prerequisite and how will courts implement this prerequisite in the future?

When drafting a pleading, it is important to remember the applicable burden of proof and which party bears that burden. This is even more important in bankruptcy proceedings, as multiple provisions of the Bankruptcy Rules and Bankruptcy Code shift the burden of proof between parties.