Overview: The Fifth Circuit’s highly anticipated decision on December 31, 2024, in the Serta Simmons case has significant implications for borrowers and lenders in financial distress situations. The issue on appeal concerned an uptier transaction, a liability management exercise sometimes referred to as “lender-on-lender violence.” The Fifth Circuit’s opinion addresses the contractual viability of uptier transactions and the enforceability of related indemnities in bankruptcy plans, potentially reshaping the landscape for future financial restructurings.
Two recent cases out of the Third Circuit and the Southern District of New York highlight some of the developing formulas US courts are using when engaging with foreign debtors. In a case out of the Third Circuit, Vertivv. Wayne Burt, the court expanded on factors to be considered when deciding whether international comity requires the dismissal of US civil claims that impact foreign insolvency proceedings.
What happens to funds recovered by the trustee after the final plan payment is made in a chapter 13 case? According to the U.S. Bankruptcy Court for the District of Iowa, absent a plan provision providing otherwise, those funds revert to the debtors.
The debt purchaser in In re McIntosh argued that because it was enforcing a debt that was not listed correctly on the debtor’s bankruptcy schedules, it was entitled to assume the debt had not been discharged. The U.S.
On January 2, the Consumer Financial Protection Bureau (CFPB) filed an amicus curiae brief urging the U.S. Court of Appeals for the First Circuit to reverse a district court’s decision finding that a debt collector lacked the requisite knowledge and intent to violate the Fair Debt Collection Practices Act (FDCPA) when it sent a debt-collection communication prior to any knowledge of the debtor’s bankruptcy filing.
When a majority of a company’s board approves a tender offer in good faith, can it still be avoided as an actually fraudulent transfer? Yes, says the Delaware Bankruptcy Court, holding that the fraudulent intent of a corporation’s CEO who was a board member and exercised control over the board can be imputed to the corporation, even if he was the sole actor with fraudulent intent.
Background
Recently, in In re Moon Group Inc., a bankruptcy court said no, but the district court, which has agreed to review the decision on an interlocutory appeal, seems far less sure.
In January, the U.S. Supreme Court agreed to hear Lac du Flambeau Band of Lake Superior Chippewa Indiansv. Coughlin after the First Circuit barred the Lac du Flambeau Band from seeking to collect on a $1,600 debt obligation to the tribe’s lending arm, Lendgreen, after the debtor filed for Chapter 13 bankruptcy.
Yes, says the Delaware Bankruptcy Court in the case of CII Parent, Inc., cementing the advice routinely given by bankruptcy counsel to borrowers in default. We always counsel borrower clients in default of the risk associated with lenders taking unilateral actions pre-filing, stripping debtors of valuable options and assets. Thus, we normally recommend to always obtain a forbearance and undertake the preparations required to file a bankruptcy petition immediately upon forbearance termination, although whether or not to file depends on variety of factors that should be considered.
The Second Circuit recently held that a non-party to an assumed executory contract is not entitled to a cure payment (although it may be so entitled if is a third-party beneficiary of the contract). The result would have seemed obvious to bankruptcy practitioners. So, what in the world made the party pursuing payment take this to the Second Circuit? Well, surprisingly, as the Second Circuit decision shows, the answer is not found in the plain text of the Bankruptcy Code. And while it was argued prior to the Supreme Court’s ruling in Bartenwerfer v. Buckley, No. 21-908, 598 U.S.