Ruling overturns New York decision rejecting market-based approach.

Key Points:

• Court of Appeals for the Second Circuit requires courts to consider efficient market interest rate, if available, for purposes of chapter 11 “cramdown.”

• Second Circuit decision overturns lower court ruling that used “formula approach” to determine appropriate chapter 11 cramdown interest rate.

Ultra court clarifies the requirements for classifying a creditor as “unimpaired” under a plan of reorganization.

Key Points:

• Texas bankruptcy court splits from Third Circuit in finding that a creditor must receive everything it is entitled to under non-bankruptcy law in order for the creditor to be “unimpaired.”

• The decision does not require that unsecured creditors receive post-petition interest but provides that they will be “impaired” if they do not

When the reforms come into force, they will supplement and complement the Recast European Union Insolvency Regulation that became effective on June 26, 2017.

Among other things, new Federal Law No. 266-FZ (July 29, 2017) (the "Amendment") supersedes provisions concerning the vicarious liability of "controlling persons" for a bankrupt corporate debtor’s obligations set forth in RF Law No. 127-FZ on Insolvency (October 26, 2002) (the "Insolvency Law").

The Amendment defines a "controlling person" as any individual or entity who, during the three-year period preceding the existence of "signs of insolvency" or court approval of a bankruptcy petition, had the power to direct the debtor’s affairs, including the execution of contracts.

The ability of a trustee or chapter 11 debtor-in-possession ("DIP") to sell bankruptcy estate assets "free and clear" of competing interests in the property has long been recognized as one of the most important advantages of a bankruptcy filing as a vehicle for restructuring a debtor’s balance sheet and generating value. Still, section 363(f) of the Bankruptcy Code, which delineates the circumstances under which an asset can be sold free and clear of "any interest in such property," has generated a fair amount of controversy.

The ability to avoid fraudulent or preferential transfers is a fundamental part of U.S. bankruptcy law. However, when a transfer by a U.S. entity takes place outside the U.S. to a non-U.S. transferee—as is increasingly common in the global economy—courts disagree as to whether the Bankruptcy Code’s avoidance provisions apply extraterritorially to avoid the transfer and recover the transferred assets. A pair of bankruptcy court rulings handed down in 2017 widened a rift among the courts on this issue.

The next few years are expected to see a significant increase in the volume of bankruptcy cases filed by health care providers. Thus far in 2017, the number of bankruptcies in health care-related sectors, including hospitals, physicians’ offices and clinics, specialty outpatient facilities, assisted-living facilities, and other providers, has been surpassed only by bankruptcies in the oil and gas, finance, and retail industries.

In Midland Funding, LLC v. Johnson, No. 16-348, 2017 BL 161314 (U.S. May 15, 2017), the U.S. Supreme Court ruled that a credit collection agency does not violate the Fair Debt Collection Practices Act ("FDCPA") when it files a claim in a bankruptcy case to collect on a debt which would be time-barred in another court.

On June 27, 2017, the Court granted certiorari n PEM Entities LLC v. Levin, No. 16-492 (U.S. June 27, 2017), in which it will have the opportunity to consider "[w]hether bankruptcy courts should apply a federal rule of decision (as five circuits have held) or a state law rule of decision (as two circuits have held, expressly acknowledging a split of authority) when deciding to recharacterize a debt claim in bankruptcy as a capital contribution." The Court agreed to review the Fourth Circuit’s ruling in PEM Entities, LLC v.

The ability of a trustee or chapter 11 debtor in possession ("DIP") to sell bankruptcy estate assets "free and clear" of liens on the property under section 363(f) of the Bankruptcy Code has long been recognized as one of the most powerful tools for restructuring a debtor’s balance sheet and generating value in bankruptcy.