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.

If only it were as simple as swishing your wand and chanting "Wingardium Leviosa" in your best Hermione Granger voice. The question of whether a fixed charge is susceptible to being recharacterised as a floating charge has challenged the legal community since before Ms Granger was even born. In fact some of the case law would not be out of place in the Hogwarts library (although it wouldn't have done anything for JK Rowling's sales figures).

What's the difference between a fixed and a floating charge?