Lenders take note—a state court has held that in some circumstances a refinancing transaction can extinguish an original guarantee.

The U.S. Court of Appeals for the Third Circuit has issued a recent decision that is instructive as to what creditors should not do when a customer is having a hard time paying its bills.

Assignee creditors are protected by the provision of the Bankruptcy Code that prevents debtors from obtaining a discharge for debts obtained through fraud, the Bankruptcy Appellate Panel for the U.S. Court of Appeals for the Ninth Circuit has held.

A recent decision from the Bankruptcy Court of the Southern District of New York has rendered the enforcement of reclamation claims that arose 20 days prior to the bankruptcy filing almost impossible in cases in which there is a prepetition lien on inventory.

In In re Dana Corp., 2007 WL 1199221 (Bankr. S.D.N.Y. Apr. 19, 2007) there was $300 million in reclamation claims asserted, but the debtor estimated that valid reclamation claims totaled only approximately $3 million.

Though the shareholders of a corporation did not sign a corporate sale agreement, they were considered to be the sellers of the corporation, and therefore were entitled to avail themselves of the indemnification provisions under the agreement, ruled the Bankruptcy Court for the Eastern District of Pennsylvania. See In re NuNet, Inc., 348 B.R. 300 (Bankr. E.D. Pa. 2006).

Residents of the nation’s capital recently were captivated by a bizarre tale that began when a local administrative law judge allegedly lost his pants – literally. The ALJ claimed his dry cleaner lost the pants and filed suit claiming $67,000,000 in damages under consumer protection statutes. Although the dry cleaner successfully fought the suit, doing so took more than two years and cost more than $100,000 – costs for which the dry cleaner was not insured.

A federal district court in New York has overturned a bankruptcy court decision that some say had threatened to disrupt the secondary market in claims against companies in bankruptcy. See Enron Corp. v. Springfield Associates, L.L.C., No. 01-16034 (S.D.N.Y., Aug. 27, 2007).

The U.S. Court of Appeals for the Fourth Circuit has upheld the dismissal of a debtor’s chapter 11 petition filed two days before for the expiration of a holdover, at-will tenancy, finding that the debtor’s lack of good faith in filing the petition constituted cause for dismissal. Maryland Port Admin. v. Premier Auto. Svcs., Inc. (In re Premier Auto. Svcs., Inc.), 492 F.3d 274 (4th Cir. 2007).

A recent ruling by a federal court in New York has the potential to severely impact the $500 billion a year distressed debt market.

A decision by the Illinois Court of Appeals reinforces the importance of providing pre-disposition notice to preserve a deficiency claim against an obligor. General Motors Acceptance Corp. v. Stoval, No. 1-06-1858, ____ N.W. 2d ____ (Ill. Ct. App. June 29, 2007).