On August 3, 2021, the Senate Judiciary Committee held a hearing to examine student loan bankruptcy reform. Committee members and witnesses highlighted the unfair treatment of student loan debt under the bankruptcy code and the rigid standard borrowers must meet to discharge student loans.
U.S. Senators Dick Durbin and John Cornyn introduced TheFresh Start Through Bankruptcy Act to address the growing bipartisan consensus that struggling borrowers need student loan bankruptcy reform.
For lenders dealing with troubled loans, a forbearance agreement or loan modification is often a great solution. An agreement may give borrowers breathing room to get back on the path to compliance or set the stage for a palatable exit strategy. A recent decision from the U.S.
The Delaware Bankruptcy Court (“Bankruptcy Court”) recently issued a ruling that provides additional clarity regarding the treatment of “appraisal rights” in bankruptcy proceedings and the scope of section 510(b) of the Bankruptcy Code. In In reRTI Holding Company, LLC, et al., (decided August 4, 2021) the Bankruptcy Court subordinated the general unsecured claims filed by holders of “appraisal rights” in respect of the debtors’ equity (the “Claimants”).
In a recent post, I discussed three situations in which a debtor in bankruptcy might find itself dispossessed of assets that appeared to be property of the bankruptcy estate. This article expands on that general idea and presents a compendium of situations in which creditors or circumstances may deprive a debtor of assets or their value.
Editor’s Note: this is likely not an asset upon which you should base your reorganization – see below.
Should a claim for appraisal rights brought by a former shareholder of a Chapter 11 debtor be subordinated under Section 510(b) of the Bankruptcy Code? According to the Bankruptcy Court for the District of Delaware, the answer is yes. See In re: RTI Holding Co., LLC, No. 20-12456, 2021 WL 3409802 (Bankr. D. Del. Aug. 4, 2021).
Background
HEADLINES
Is there any downside to a debtor filing a motion to estimate a claim? Or, is an estimation motion simply procedural in nature? As the debtors recently discovered in In re SC SJ Holdings LLC, a motion to estimate a claim before a bankruptcy court may not always lead to a significantly reduced claim, and may impact plan confirmation.
The Facts
A key goal of the Bankruptcy Code is to prevent corporate insiders from profiting from their employer’s misfortune. Section 503(c) of the Code makes clear: “there shall neither be allowed, nor paid... a transfer made to, or an obligation incurred for the benefit of, an insider of the debtor for the purpose of inducing such person to remain with the debtor's business” absent certain court-approved circumstances.
