Having practiced in Puerto Rico for nearly a decade, including being involved heavily in the ongoing Title III PROMESA proceedings, the recent ruling handed down by the First Circuit could prove to be the most impactful for the Island’s long term restructuring prospects and its access to the Bond markets. The controversial ruling, which pertains to the treatment of municipal revenue debt, has left investors with questions about the value and significance of a revenue pledge in a municipal bankruptcy. This blog provides some background and potential ramifications.

The Federal Arbitration Act, 9 U.S.C. §§ 1-307, represents a federal policy in favor of enforcing arbitration clauses. The Supreme Court has held that courts are generally obligated to enforce arbitration clauses absent a countervailing federal statute. Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 226 (1987). However, this policy inevitably comes into conflict with the Bankruptcy Code, which is grounded on a policy of centralized dispute resolution. Congress has not offered any legislative guidance on how to reconcile these competing policies.

An April 16, 2019 ruling in the U.S. Bankruptcy Court for the Northern District of Texas in the case of In re: Essential Financial Education, Inc. held that an involuntary bankruptcy petition filed under 11 U.S.C. §303 may not dismissed when it serves a legitimate purpose and is not merely an extension of a two-party dispute. The Essential Financial Education, Inc. decision gives creditors another factor to consider before filing an involuntary petition. Ultimately, Essential Financial Education, Inc.

With the recent uptick in energy-related bankruptcies expected to continue for the foreseeable future (in one prominent example, industry giant Weatherford has just filed for Chapter 11 protection), oil and gas royalty owners need to be on alert. Because companies in financial distress usually fall behind on royalty payments, royalty owners, usually one of the largest groups of creditors in oil and gas bankruptcies, tend to have a lot at stake. This blog goes over how oil and gas royalty owners can protect their interests in these tough economic times.

Healthcare bankruptcies present unique challenges in addition to financial restructuring. An immediate concern that must be addressed in these cases is the ability of the debtor to provide, and continue to provide, adequate services to existing and future patients. Having been involved in numerous healthcare matters filed under both Chapter 7 and Chapter 11, I know first-hand how important this issue is. Debtors are generally required to employ, at their cost, a specialized professional, i.e., an ombudsman, who will monitor the quality of patient care being provided during the case.

Debtors who have filed for bankruptcy and received their Discharge often continue to receive collection letters and phone calls from their creditors. Some creditors even go so far as to sue on these discharged debts or garnish wages and bank accounts. Such actions may result in severe penalties, sanctions and damages. This article goes over the basics of the Bankruptcy Discharge and the importance of having measures in place to avoid violations.

What is the Bankruptcy Discharge?

When a creditor is notified that a debtor has filed for bankruptcy, the creditor should be careful to determine whether it needs to file a Proof of Claim in the case to preserve its rights to receive payments from the bankrupt estate. This article goes over the importance of a creditor acting in a timely and proper fashion and preserving its rights in the bankruptcy process.

Cases Under Chapter 7 and 13

The initial stage of a Chapter 11 filing is the most crucial and debtors must be ready for the tactics of aggressive creditors and stakeholders jockeying for priority in the restructuring proceedings. As part of this phase, “first day motions” are typically filed on the first day of a case. These motions are to obtain permission to take certain actions necessary to maintain the debtor’s business operations that cannot be taken unless the court first issues an order authorizing the debtor to take the actions.

The phrase ipso facto is Latin for “by the fact itself.” Ipso facto clauses are sometimes included in lease and purchase contracts, and they assert that if the lessee or purchaser becomes insolvent, or files for bankruptcy protection, then the contract has been breached. In other words, under such a clause the very act of filing for bankruptcy protection constitutes a breach of contract that absolves the other party of any further contract obligations.

A gasoline retailer defaults on its obligations under an ongoing Franchise Agreement that it has with a brand name in the oil & gas industry. What steps are available to the franchisor to protect its economic interests in that particular station or station(s)? How about if the franchisee/retailer files for bankruptcy protection? As the Energy Capital of the World, this issue is particularly relevant in Texas, home to thousands of retailers and dozens of the world’s top brands.