Lenders and mortgage holders may be surprised to learn that a New York bankruptcy court voided the foreclosure sale of non-debtor property where the debtor filed for bankruptcy with no legitimate intent to reorganize. In a case of first impression, In re Ebadi1 addresses a common scenario: a foreclosure action against multiple parties, including a borrower not in bankruptcy and a guarantor in bankruptcy.

In a decision that was not surprising but nevertheless disappointing, the U.S. Court of Appeals for the Second Circuit recently affirmed the order of the U.S. Bankruptcy Court concluding that the “net equity” calculation for distributions back to Madoff victims should be based on the Net Investment Method, the total of actual deposits and withdrawals, and not the last statement amount listed on the final brokerage account statement. As a result, claw back law suits against the inaptly named “net winners” are sure to continue unabated.

Background

The Bottom Line:

In a decision likely to affect thousands of Madoff investors, the Second Circuit Court of Appeals on Aug. 16, 2011 unanimously upheld the method used by the liquidating trustee for Bernard L.

For some years, companies in the United Kingdom have utilized a statutory process called solvent schemes of arrangement. These schemes amount to what in the United States is called a “cram down” voluntary reorganization of financially distressed, but solvent, debtors. They impose upon creditors reductions in the amount owed to them outside the U.S. Bankruptcy Code. Rhode Island adopted a similar statutory scheme, which became effective in 2004.

On June 13, the Pension Benefit Guaranty Corporation ("PBGC") released a final rule that, in most cases, will reduce the amount of pension benefits guaranteed under the agency's single-employer insurance program when a pension plan is terminated in a bankruptcy case. The rule will also decrease the amount of pension benefits given priority in bankruptcy.

The Bankruptcy Code provides that a Chapter 11 plan of reorganization may be confirmed over the opposition of a class of secured creditors whose secured claims are not being paid in full only if it provides one of the following1--

Summary

The United States Court of Appeals for the Second Circuit found in favor of the trustee (the Trustee) presiding over the liquidation of Bernard L. Madoff Investment Securities (BMIS), affirming the Trustee’s calculation of “net equity” in the BMIS liquidation. The Trustee calculates net equity to determine the value of claims submitted by victims of Madoff’s massive fraud.

On August 7,  2009, Meridian Automotive Systems ("Meridian") filed a voluntary petition for relief under chapter 7 of the United States Bankruptcy Code.  Soon after Meridian filed its petition for bankruptcy, the Office of the United States Trustee appointed George L.