Perfect your liens on time or you may lose them. That’s the painful lesson U.S. Bankruptcy Judge Karen B. Owens taught Halliburton Energy Services, Inc. in her recent decision.

Ruling on plaintiff-debtor Southland Royalty Company LLC’s motion for partial summary judgment, Judge Owens found that Halliburton did not obtain a lien on Southland’s production of oil, natural gas, or their proceeds. In re Southland Royalty Co., LLC, 20-10158 (KBO) at 1 (Jan. 21, 2021, Bankr. D. Del.) (the “Opinion”).

The issue in this case concerned the failure of a holder of a Qualifying Floating Charge (QFC) to give notice to a prior QFC holder before appointing administrators, therefore potentially calling into question the validity of the administration.

In 2019, we began following a Circuit split regarding a secured creditor’s obligation to return collateral that it lawfully repossessed pre-petition after receiving notice of a debtor’s bankruptcy filing.

We have blogged previously about section 546(e), the Bankruptcy Code’s safe harbor for certain transfers otherwise subject to avoidance as preferences or fraudulent transfers. See 11 U.S.C. § 546(e). Among the transfers protected by the section 546(e) safe harbor are transfers by or to a “financial participant” made “in connection with a securities contract.” Id.

Every so often, we post an article on case law discussing proofs of claim. The decisions often contain basic but important information about the timing and manner of claim filing.

In sophisticated real estate financing transactions, most prudent lenders attempt to deter borrowers from filing for bankruptcy before loans are paid in full by providing in loan documents that such a filing constitutes an event of default. Many lenders will insist that their borrowers remain “bankruptcy remote” in the form of a so-called “single asset real estate” entity during the term of the loan.

The facts of this case were somewhat unusual although it serves as a reminder of the principles involved in the trading of a business by a trustee in bankruptcy.

Background

1In Sutton 58 Associates LLC v.

Cuker Interactive, LLC filed a Chapter 11 bankruptcy petition on December 13, 2018, in the United States Bankruptcy Court for the Southern District of California.

JMW Solicitors have recently obtained an Order made pursuant to Section 234 of the Insolvency Act 1986 (the “Act”), which includes a term that allows the office-holder to recover possession of a residential property, without the need for separate possession proceedings being issued pursuant to Part 55 of the Civil Procedure Rules (“CPR”), which sets out the usual Court procedure for obtaining an order for possession of land.