On September 8, 2011, Judge Walsh of the United States Bankruptcy Court for the District of Delaware held that an order substantively consolidating multiple debtors' estates does not automatically have retroactive or nunc pro tunc effect. The court held that: (i) as a general rule, absent language to the contrary, an order becomes effective on the date it is entered, and (ii) retroactive relief is a form of extraordinary relief that is only permissible when necessary and appropriate to carry out the provisions of the Bankruptcy Code.
The Court's ruling arose in the context of a trustee's attempt -- in substantively consolidated bankruptcy cases that were filed on different dates -- to pursue carious preference actions by relying on the preference period for the first-filed bankruptcy case as a means of asserting claims against defendants who were creditors of the last-filed case. The trustee in Sunset Aviation had hoped to capture payments made to these defendants occurring before the 90-day preference periods of the last-filed case.
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