Chapter 11 bankruptcy has long been thought of as anathema to commercial real estate (CRE) lenders. This is due to the debtor-friendly bankruptcy forum, particularly with respect to (i) the up to 18 month exclusivity period during which only the debtor could propose a plan of reorganization and (ii) threats of a "cram-down" plan used to lever concessions from lenders. These provisions can be, and often were, abused by debtors with no real rehabilitative intent using bankruptcy only as a leverage tool.
At the Commodity Futures Trading Commission (CFTC) open meeting on April 14, the CFTC unanimously approved proposed amendments to Part 190 of its rules governing bankruptcy proceedings of commodity brokers, including futures commission merchants (FCMs) and derivatives clearing organizations (DCOs). The proposed amendments are intended to comprehensively update Part 190 to reflect current market practices. Among other revisions, the proposed amendments to Part 190 would:
(Bankr. S.D. Ind. Dec. 4, 2017)
The bankruptcy court grants the motion to dismiss, finding the defendant’s security interest in the debtor’s assets, including its inventory, has priority over the plaintiff’s reclamation rights. The plaintiff sold goods to the debtor up to the petition date and sought either return of the goods delivered within the reclamation period or recovery of the proceeds from the sale of such goods. Pursuant to 11 U.S.C. § 546(c), the Court finds the reclamation rights are subordinate and the complaint should be dismissed. Opinion below.
(Bankr. E.D. Ky. Nov. 22, 2017)
(B.A.P. 6th Cir. Nov. 28, 2017)
The Sixth Circuit B.A.P. affirms the bankruptcy court’s dismissal of the Chapter 12 bankruptcy case. The court finds that the bankruptcy court failed to give the debtor proper notice and opportunity to be heard prior to the dismissal. However, the violation of due process was harmless error. The delay in filing a confirmable plan and continuing loss to the estate warranted the dismissal. Opinion below.
Judge: Preston
Attorney for Appellant: Heather McKeever
(6th Cir. Nov. 14, 2017)
(Bankr. W.D. Ky. Nov. 1, 2017)
The bankruptcy court grants the creditor’s motion for stay relief to proceed with a state court foreclosure action. The creditor had obtained an order granting stay relief in a prior bankruptcy filed by the debtor’s son, the owner of the property. The debtor’s life estate interest in the property does not prevent the foreclosure action from proceeding. Opinion below.
Judge: Lloyd
Attorney for Debtor: Mark H. Flener
Attorney for Creditor: Bradley S. Salyer
The Sixth Circuit affirms the B.A.P., holding the entry of summary judgment in favor of the creditors in the nondischargeability action was appropriate. The creditors obtained a default judgment against the debtor in Tennessee state court. The default judgment was on the merits and the doctrine of collateral estoppel applied. Opinion below.
Judge: Rogers
Appellant: Pro Se
Attorneys for Creditors: Keating, Muething & Klekamp, Joseph E. Lehnert, Brian P. Muething, Jason V. Stitt
(Bankr. E.D. Ky. Nov. 1, 2011)
(Bankr. S.D. Ind. Oct. 20, 2017)
The bankruptcy court dismisses the debtor’s complaint against the lender, which asserted claims related to the lender’s foreclosure of its mortgage lien in state court. The court dismisses the stay violation claim, because the property was not property of the estate at the time of the alleged acts, and dismisses the remaining claims because the court lacks subject-matter jurisdiction. Opinion below.
Judge: Carr
Attorney for Debtor: Sawin, Shea & Des Jardines LLC, J. Andrew Sawin