Legal Issues — Bankruptcy
Fifth Circuit Recharacterizes Non-Insider Debt as Equity in a Case of First Impression in the Circuit
In the Matter of Lothian Oil Inc., the Fifth Circuit concluded that the power to determine claims in bankruptcy under §502 of the U.S. Bankruptcy Code is not limited to merely allowing or disallowing the claim, but can include the power to determine the proper treatment of the claim, including recharacterization of the claim as debt or equity. More important for creditors, the Fifth Circuit rejected as a matter of law the claimant’s contention, and the ruling of the district court, that recharacterization of a debt as equity is only available as a matter of law with respect to a claim held by an insider.
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Involuntary Bankruptcy Proceedings
Maybe a Creditor Should Give It a Second Thought (Part II)
The filing of an involuntary bankruptcy petition by a creditor can be a very useful tool for a creditor to collect money from its recalcitrant debtor. But given some new cases, maybe a creditor should give the filing of an involuntary bankruptcy proceeding a second thought.
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Involuntary Bankruptcy Proceedings Part I
Maybe a Creditor Should Give It a Second Thought
The filing of an involuntary bankruptcy petition by a creditor can be a very useful tool for a creditor to collect money from its recalcitrant debtor. But given some new cases, maybe a creditor should give the filing of an involuntary bankruptcy proceeding a second thought.
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Chapter Nine: What You Might Need to Know About Municipal Bankruptcies
More and more, we hear news of the genuine risk of insolvency for some local governments, increasing the likelihood that some may seek relief under Chapter 9 of the Bankruptcy Code. Lesley Hawes’ article provides a general overview of Chapter 9 and its unique provisions applicable to municipal bankruptcies.
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Bankruptcy Plan Confirmation
Lessons Learned for Lenders From Philadelphia Newspapers
The Third Circuit’s decision in the case In re Philadelphia Newspapers concurs with a similar holding in the case In re Pacific Lumber Co. in which the Fifth Circuit upheld an order confirming a plan proposing to transfer collateral securing claims of the secured lenders free and clear of liens, paying the secured lenders in cash the value of their undersecured claims, and precluding the lenders from credit bidding.
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Bankruptcy §363 Sale
Creditor Prevails in Compelling Assumption or Rejection of Lease
The case of In re Gateway Ethanol, LLC provides an extended discussion of a sticky issue frequently encountered in bankruptcy or litigation: whether or not a lease is a true lease versus a lease intended as security. This recent case is now being cited as authoritative by many courts when looking at the true lease/lease intended as security dichotomy.
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U.S. Supreme Court Reverses Third Circuit on Duty of Trustee to Object to Claims of Exemption in Bankruptcy Case
Claims of exemption can be critical to a debtor that seeks a fresh start through bankruptcy. In addition, they allow a debtor to retain certain categories of property up to a specified dollar value, including equipment and other tools of the trade, vehicles, clothing and household goods. Such assets can provide essential assets for the debtor to start or continue to work and recover financially after bankruptcy.
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Second Circuit Weighs in on BAPCA’s ‘Hanging Paragraph’ in AmeriCredit Bankruptcy
In this edition of Tipping the Scales, Lesley Anne Hawes returns to discuss the implications of the so-called “hanging paragraph” in BAPCA as ruled upon by the Second Circuit Court of Appeals in AmeriCredit Financial Services v. Thompkins. The ruling, Hawes contends, will make it more difficult for debtors going forward … and gives creditors a reason to cheer.
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The Taylor Decision & Avoidance Remedies in Bankruptcy
The case In re Taylor illustrates that the determination that the transfer of the security interest should be avoided is only the first step in granting relief to the estate, and formulating the proper remedy for the estate is more complicated than it would appear both practically and legally.
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Court Decision Marks the End of the Road for the Chapter 7 Ride-Through Option
Under the ride-through option, debtors had an option in bankruptcy … to retain vehicles without reaffirming the debt and without redeeming the collateral. They could simply continue to make the monthly payments. If the debtor defaulted, lenders could repossess. However the Ninth Circuit of Appeals recent decision in the Dumont case may have taken that option away.
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Can Non-Debtors Be Discharged Through a Debtor’s Bankruptcy Reorganization Plan?
This article arises because of a very recent case entitled The Pacific Lumber Co, 2009 West Law 3082766; 2009 U.S. App. LEXIS 21749 filed in the Fifth Circuit. Among many other issues, it revisits the issue as to whether a plan of reorganization can release non-debtors from liability. Before getting to this case, a discussion of the law regarding non-debtor releases is appropriate.
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Is a Bankruptcy §363 Sale of Assets a Lender’s Friend or Enemy?
In some instances, a preplan 363 sale can still be structured to accomplish many objectives: it can meet the requirements of the Bankruptcy Code, be used to limit the leverage of out-of-the-money junior lienholder hold-outs, and serve as an expedient way to get assets sold and money distributed to creditors. In short, the 363 sale can be a lender’s best friend or its worst enemy.
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Ninth Circuit Changes Course on Secured Creditor’s Right to Default Interest in Chapter 11 Bankruptcy
The Court of Appeals in the Ninth Circuit recently ruled a secured creditor whose claim is oversecured can recover default interest under certain circumstances in a Chapter 11 plan. The court also ruled that the secured creditor may recover attorney’s fees and costs if it prevails on its claim for recovery of default interest. What does this reversal mean for secured creditors?
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Bankruptcy Court Refuses to Allow Creditor a Nondischargeable Claim Despite Fraudulent Financial Statement
In this edition of Legal Watch, Andrew Alper reminds us that there are always lessons to be learned from adverse court decisions. Lessons include the necessity for lenders and lessors in making sure their lending and leasing guidelines make sense and the importance of digging deeper into credit information received from a borrower or lessee.
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Using the Bankruptcy Stay to Prohibit Enforcement of Claims Against Nondebtors
Monitor columnist Andrew Alper discusses §105 of the Bankruptcy Code and how the courts determine if it is possible to use a stay to prohibit litigation of a nondebtor’s claims. Whether the court decides to extend a bankruptcy case depends on the facts. Alper provides examples to explain why this is a common occurrence.
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Supreme Court Overrules Ninth Circuit’s Fobian Rule on Attorneys’ Fees in Bankruptcy
The United States Supreme Court yet again reversed a decision of the Ninth Circuit Court of Appeals and resolved a conflict among the circuit courts regarding the allowance of attorneys’ fees in bankruptcy litigation. Columnist Lesley Hawes discusses the court’s process in the case of Travelers Casualty & Surety Co. v. Pacific Gas & Electric Co., and how this decision will affect future litigation.
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U.S. Supreme Court Resolves Conflict Over ‘Absolute’ Right to Convert to Chapter 13
In this issue, Monitor columnist Lesley Hawes provides the summary of the Marrama v. Citizen’s Bank of Massachusetts case and the Supreme Court’s decision detailing if a Chapter 7 debtor can transfer its case to a Chapter 13 or other proceeding if he/she acted in bad faith of the court, as well as the effects this ruling will have on future cases.
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Perfection Delays Mean Big Losses for Lenders in Bankruptcy
The arrival of 2007 was not very happy for the lenders who are the subject of two recent decisions. In opinions issued in the first two weeks of this year, the courts sent a strong message — don’t expect a sympathetic reception when you fail to perfect your security interests promptly.
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