Recently, the Fifth Circuit decided a case regarding the appropriate interest rate to be charged when a secured creditor's claim is "crammed down," pursuant to section 1129(b)(2)(A) of the United States Bankruptcy Code (Code), 11 U.S.C. §§ 101-1532. Unfortunately, the decision does little to clarify the confusion precipitated by the Supreme Court's 2004 decision of Till v. SCS Credit Corp., 541 U.S. 465 (2004), and perhaps even adds to it.
The IRS issued final regulations providing a limited exception to the anti-cutback rules under Code section 411(d)(6) for a plan sponsor that is a debtor in a bankruptcy proceeding. The anti-cutback rules generally prohibit amendments to qualified retirement plans that reduce or eliminate accrued benefits, early retirement benefits, retirement-type subsidies or optional forms of benefits.
One of the fundamental principles of commercial law is the freedom to contract with a particular party, or to refuse do so. "As a general rule, businesses are free to choose the parties with whom they will deal, as well as the prices, terms and conditions of that dealing." See Pac. Bell Tel. Co. v. Linkline Commc'ns, Inc., 555 U.S. 438 (2009). However, the Bankruptcy Code may permit a court to alter this fundamental principle in certain circumstances. A bankruptcy court did just that in In re Mathson Industries, Inc., 423 B.R. 643 (E.D. Mich. 2010).
Favorable contracts are an important asset for a bankruptcy estate. If a contract is an executory contract (a contract with performance remaining by both parties), the Bankruptcy Code gives a debtor the choice of either assuming and performing under the contract going forward, or rejecting the contract and leaving the resulting rejection damages as a claim against the bankruptcy estate. Similarly, a debtor may choose to perform or not perform under a nonexecutory contract for which it has continuing obligations.
It is not uncommon for a supplier of goods or services to receive a demand letter or adversary complaint alleging that it received avoidable transfers—commonly known as "preferential payments" or "preferences"—during the 90 days preceding a customer's bankruptcy filing. Such claims arise under section 547 of the Bankruptcy Code, and can result in a supplier having to return certain payments made during the 90-day preference period.
The IRS issued proposed regulations providing a limited exception to the anti-cutback rules under Code section 411(d)(6) for a plan sponsor that is a debtor in a bankruptcy proceeding. The anti-cutback rules generally prohibit amendments to qualified retirement plans that reduce or eliminate accrued benefits, early retirement benefits, retirement-type subsidies or optional forms of benefits.
Recently, in In re Longview Aluminum, LLC,1 the Seventh Circuit Court of Appeals held that members of a limited liability company (“LLC”) are insiders for preferential transfer purposes under the Bankruptcy Code.
On June 28, 2011, the Seventh Circuit Court of Appeals decided In re River Road Hotel Partners, LLC v. Amalgamated Bank, 651 F. 3d 642 (7th Cir. 2011). The Court addressed Section 1129 (b)(2)(A) of the United States Bankruptcy Code in connection with a Plan of Reorganization to sell substantially all of the Debtor's assets. The Court held that the indubitable equivalent prong, (i.e., the "cram down" provisions of section 1129(b)(2)(A)(iii)) could not be used to preclude a secured creditor from credit bidding its claim under sections 363(k) and 1129(b)(2)(A)(ii) of the Code.
Many creditors have had the unfortunate experience of receiving a demand letter or adversary complaint alleging that they received avoidable transfers—commonly known as "preferential payments" or "preferences"—during the 90 days preceding a customer's federal bankruptcy filing. Such claims arise under section 547 of the Bankruptcy Code, and can result in a creditor having to return certain payments made during the 90-day preference period.