Recently, a Colorado bankruptcy court considered for the first time the effects of Bankruptcy Code Section 552 on a lender’s security interest in the proceeds of an FCC broadcast license. The court held that a prepetition security interest would not extend to proceeds received from a post-petition transfer of the debtor’s FCC license because the debtor did not have an attachable, prepetition property interest in the proceeds. Such an interest does not arise until the FCC approves an agreement to sell the license.
On December 23, 2010, the Bankruptcy Appellate Panel of the 6th Circuit, upheld the Eastern District of Kentucky’s Bankruptcy Court’s order that post petition rents, revenues or other funds derived from leased real property is property of the estate under 11 U.S.C. §541 and can be used as cash collateral under 11 U.S.C. §363. However, post petition rents can be used as cash collateral only if the debtor can provide adequate protection for the use of those rents through an existing equity cushion in the property.
In Ransom v. FIA Card Servs., N.A., --- S.Ct. ----, 2011 WL 66438 (U.S. 2011), the United States Supreme Court took up the question of whether a Chapter 13 debtor who owns his or her vehicle outright (“free and clear”) may claim an allowance for car ownership costs and thereby reduce the amount that he or she will repay creditors. In her first opinion, Justice Kagan answered simply—no. The Ransom opinion has been seen as a victory for not only credit card companies like the one involved but other creditors, as well.
On December 23rd, the Third Circuit addressed whether the automatic stay provisions of the Bankruptcy Code prevents a home mortgage lender from accounting for the pre-petition escrow shortage in its post-petition calculation of future monthly escrow payments. The Court concluded that when the terms of the loan allow the lender to escrow taxes and insurance payments, the lender has a pre-petition claim. In re Francisco Rodriguez.
The Supreme Court of Kentucky recently held that under Kentucky law, a security interest in a motor vehicle is not deemed perfected unless and until physical notation of the security interest is made on the certificate of title, pursuant to KRS 186A.190.
On December 1st, the Seventh Circuit affirmed the approval of a receiver's plan to distribute the assets of a failed investment manager, finding that where a receivership trust lacks sufficient assets to fully repay investors and the investors' funds are commingled, a pro rata distribution plan is appropriate, and that the trial court properly rejected the objectors' arguments that their redemption requests made them creditors and not equity holders. SEC v.
On December 3rd, the CFTC published for public comment proposed requirements for swap dealers and major swap participants with respect to the treatment of collateral posted by their counterparties to margin, guarantee, or secure uncleared swaps. The proposal also would ensure that, for purposes of subchapter IV of chapter 7 of the Bankruptcy Code, securities held in a portfolio margining account that is a futures account constitute "customer property" and owners of such account constitute "customers." Comments should be submitted on or before February 1, 2011.
Late this summer, the United States District Court for the Northern District of Illinois, Eastern Division, took on an issue of first impression – whether the fraud of one partner can be imputed to an “innocent” partner in order to render a judgment non-dischargeable.
On November 10th, the International Swaps and Derivatives Association announced that its Americas Credit Derivatives Determinations Committee resolved that a bankruptcy credit event has occurred in respect of Ambac Financial Group, Inc. An auction will be held for Ambac Financial Group for which ISDA will publish the auction terms. ISDA Press Release.
On November 1st, the Treasury Department provided an update regarding the federal government's involvement with AIG. AIG will use the proceeds from its sale of one unit and the IPO from a second to repay the loan extended to AIG by the Federal Reserve Bank of New York and to repurchase a substantial amount of the FRBNY's preferred interests in certain AIG subsidiaries. AIG will then draw up to $22 billion in remaining Troubled Asset Relief Program funds from the Treasury Department to restructure its governmental obligations.