Global Insolvency | Daily News Headlines on Insolvency Developments across the Globe

Troubled economic times predictably result in an escalation in bankruptcy filings. As the economy began to worsen last year, the U.S. Court of Appeals for the Fifth Circuit issued a reminder that courts can—and will—penalize parties that tax an already busy bankruptcy court system with bad faith filings.

Filed under:

USA, Insolvency & Restructuring, Litigation, Reed Smith LLP, Bankruptcy, Debtor, Limited liability company, Consideration, Limited partnership, Due diligence, Bad faith, United States bankruptcy court, Fifth Circuit

Authors:

Jennifer P. Knox

Location:

USA

Firm:

Reed Smith LLP

Knowledge of bankruptcy does not bar state action where credit or is not given formal notice

2009-04-27

A known creditor, which was aware of a debtor’s pending bankruptcy but did not receive legally required notice of the debtor’s chapter 11 case, was not barred from bringing a state action following bankruptcy discharge.

The U.S. Court of Appeals for the First Circuit held that actual knowledge of the pending chapter 11 case did not satisfy due process requirements; therefore, the known creditor’s subsequent claim was not barred by the debtor’s discharge injunction. Arch Wireless, Inc. v. Nationwide Paging, Inc. (In re Arch Wireless, Inc.), 534 F.3d 76 (1st Cir. 2008).