Filing an involuntary bankruptcy petition is an alternative not often considered by creditors. However, faced with the possibility of having to write-off a claim, a creditor may choose to file an involuntary bankruptcy petition in order to put the debtor under the control of the Bankruptcy Code and the bankruptcy court. Such a move comes with risk, and a recent Eleventh Circuit Court of Appeals decision may expand that risk.

Key Point

The Court of Appeal has overturned a first instance decision (discussed in our April 2014 Update) that the Companies Court should not normally make an order upon a winding up petition based on tax assessments that are under appeal.

The Facts

Events are happening quickly these days with Caesars Entertainment.  On January 13, holders of second lien notes issued by Caesars Entertainment Operating Company (“CEOC”) filed an involuntary chapter 11 petition against CEOC in the U.S. Bankruptcy Court for the District of Delaware.  Two days later, CEOC itself filed a voluntary chapter 11 petition in the U.S. Bankruptcy Court for the Northern District of Illinois, setting up a venue fight over the bankruptcy case.  And later that same day, the U.S.

Introduction

Put your lender’s hat on. Wouldn’t it be great if you could prevent your borrower from filing bankruptcy in the first place? Unfortunately for lenders, a recent decision demonstrates how hard it is to prevent bankruptcy filings.

On December 1, 2014, the U.S. House of Representatives passed the Financial Institution Bankruptcy Act of 2014(FIBA).  The legislation passed on a voice vote and is supported by the major Wall Street banks.

All bankruptcy practitioners know that a debtor may choose which contracts to assume and which contracts to reject.  But may a debtor reject contracts that are part of an overall, integrated transaction?  In a recent bankruptcy decision, the court found the answer to be no, at least if the parties are careful in drafting their contracts.

Key Point

A provisional liquidator may be appointed if the evidence justifies it even where the tax assessments upon which the winding up petition is based are under appeal.

Facts

Key Point

Subrogation operates not by assigning the benefit of the relevant third party's security but by creating new security rights in the hands of the subrogated creditor similar to those held by that third party.

Facts

Key Point

An administrator appointed under a qualifying floating charge can "adopt" an existing winding up petition for the purposes of liquidating the company where the benefit to the creditors of the insolvent estate is manifest on the facts.

Facts