The Indiana Lawyer Announced on March 31, 2011, that the Fair Finance Co.’s bankruptcy trustee had reached a $371,000 settlement with an Indianapolis attorney who was accused of defaulting on a 2003 loan from the business. The trustee had sued the Indiana attorney and his wife, saying that the couple failed to pay off a $250,000 loan that matured in 2006. Accrued interest had raised the amount owed to over $370,000.

A Cuyahoga County, Ohio trial court did not abuse its discretion when it appointed a receiver for a “defunct” foreign corporation that the trial court found “persists for the purpose of winding up its affairs in Ohio.”In re: All Cases against Sager Corporation (2010), 188 Ohio App 3d 796, appeal accepted for review (2011), 127 Ohio St. 3d 1503. The Court of Appeals found it undisputed that corporate assets existed after the foreign corporation had been dissolved, “and that these assets may afford insurance coverage to Ohioans injured by exposure to Sager’s products”.

The trading rules and conventions of the loan market are well known to its participants. Similarly, the laws and practices governing equity securities trading in the U.S. are quite familiar to securities market professionals. The opportunity for confusion may arise, however, when these two markets quickly converge—for example, when the loans of a reorganized borrower are converted into or satisfied by the issuance of equity securities.

Does this sound familiar? A newly formed entity purchases distressed bank debt after the debtor has proposed a reorganization plan. The purchaser obtains a blocking position and uses its negotiating leverage to obtain control of the plan process and ultimately the borrower’s assets, which have strategic importance to the purchaser.

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.

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.

Years ago, second lien lenders adhered to the truism about children -- they were seen but not heard. As our children have grown more vocal in recent years, so too have second lien lenders. A spate of recent bankruptcy cases demonstrate that second lien lenders have been both seen and heard at many critical junctures in the chapter 11 timeline -- at the sale of the debtor’s assets under section 363 of the Bankruptcy Code,1 in seeking the appointment of an examiner,2 when voting on a chapter 11 plan,3 and in connection with the confirmation hearing.4

The rapid evolution of a robust secondary market for claims against the three largest failed Icelandic banks provides a powerful example of the prompt adaptation of an existing secondary-market legal framework -- originally developed in the US and Europe -- to a complex and novel bankruptcy regime and trading environment.

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.