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No surcharge for you: Third Circuit rules that section 506(c) surcharge is "sharply limited"

The ability to "surcharge" a secured creditor's collateral in bankruptcy is an important resource available to a bankruptcy trustee or chapter 11 debtor in possession ("DIP"), particularly in cases where there is little or no equity in the estate to pay administrative costs, such as the fees and expenses of estate-retained professionals. However, as demonstrated by a ruling handed down by the Third Circuit Court of Appeals, the circumstances under which collateral may be surcharged are narrow. In In re Towne, Inc., 2013 BL 232068 (3d Cir. Aug.

USA, Insolvency & Restructuring, Litigation, Jones Day, Bankruptcy, Collateral (finance), Foreclosure, Secured creditor, Third Circuit
Section 506(a): why “wait-and-see” won’t work to value secured-creditor claims

Section 506(a) of the Bankruptcy Code contemplates bifurcation of a debtor's obligation to a secured creditor into secured and unsecured claims, depending on the value of the collateral securing the debt. The term "value," however, is not defined in the Bankruptcy Code, and bankruptcy courts vary in their approaches to the meaning of the term. In In re Heritage Highgate, Inc., 679 F.3d 132 (3d Cir.

USA, Insolvency & Restructuring, Litigation, Jones Day, Debtor, Unsecured debt, Collateral (finance), Fair market value, Secured creditor, United States bankruptcy court, Third Circuit
Bankruptcy asset sale not so “free and clear” after all

The ability to sell an asset in bankruptcy free and clear of liens and any other competing “interest” is a well-recognized tool available to a trustee or chapter 11 debtor in possession (“DIP”). Whether the category of “interests” encompassed by that power extends to potential successor liability claims, however, has been the subject of considerable debate in the courts. A New York bankruptcy court recently addressed this controversial issue in Olson v. Frederico (In re Grumman Olson Indus., Inc.), 445 B.R. 243(Bankr. S.D.N.Y. 2011).

USA, Insolvency & Restructuring, Litigation, Jones Day, Contractual term, Environmental remediation, Bankruptcy, Debtor, Statutory interpretation, Interest, Liability (financial accounting), Liquidation, Good faith, Debtor in possession, In rem jurisdiction, Bankruptcy discharge, Title 11 of the US Code, Trustee, United States bankruptcy court, US District Court for the Southern District of New York
Ontario Court of Appeal grants retirees priority over secured creditors

On April 7, 2011, the Ontario Court of Appeal released its long-awaited decision in Re Indalex Limited 1. In a unanimous decision, the Court of Appeal overturned the decision of the Ontario Superior Court of Justice dated February 18, 2010, and allowed the appeals of the United Steelworkers and a certain group of retired executives. The Court of Appeal ordered FTI Consulting Canada ULC (the Monitor) to pay from the reserve fund (the Reserve Fund) held by the Monitor from the sale of Indalex Limited, Indalex Holdings (B.C.) Ltd., 6326765 Canada Inc. and Novar Inc.

Canada, Ontario, Employee Benefits & Pensions, Insolvency & Restructuring, Litigation, Osler Hoskin & Harcourt LLP, Conflict of interest, Bankruptcy, Debtor, Fiduciary, Beneficiary, Retirement, Secured creditor, Constructive trust, United Steelworkers, Companies' Creditors Arrangement Act 1933 (Canada), Court of Appeal of England & Wales, Court of Appeal for Ontario, Ontario Superior Court of Justice