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.

In In re Bernard L. Madoff Investment Securities LLC (“Madoff”),1 the United States Court of Appeals for the Second Circuit reaffirmed  its broad and literal interpretation of section 546(e) of the Bankruptcy Code, which provides a  safe harbor for transfers made in connection with a securities contract that might otherwise be  attacked as preferences or fraudulent transfers.

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.

On August 11, 2009, the US Bankruptcy Court for the Southern District of New York denied five motions to dismiss bankruptcy cases filed by certain bankruptcy remote, special purpose subsidiaries (SPEs) of General Growth Properties, Inc. (GGP). The motions were filed by or on behalf of secured lenders to the SPEs (Movants) who argued that the bankruptcy filings were inconsistent with the bankruptcy remote structures that they had negotiated with GGP.