As many creditors have unfortunately discovered, the Bankruptcy Code allows a debtor to sue the creditor for certain payments – called preferences – that the creditor received from the debtor prior to the bankruptcy.

On June 28, 2011, in In re Enron Creditors Recovery Corp. v. Alfa,1 the Second Circuit Court of Appeals held that Enron’s redemption of its commercial paper prior to maturity fell within the definition of a “settlement payment” and was protected from avoidance under § 546(e)’s safe harbor provision in Title 11 of the United States Code.2

The Seventh Circuit recently held that a chapter 11 bankruptcy plan of liquidation is not confirmable over a secured lender's objection if such plan prohibits the lender from credit bidding at a sale of its collateral. In doing so, the Seventh Circuit split with the Third and Fifth Circuit Courts of Appeal which have confirmed plans that block secured creditors' rights to credit bid, potentially making the issue ripe for review by the United States Supreme Court.

On June 23, 2011, the Supreme Court handed down a 5-4 decision in the Stern v.

Last month, the United States Court of Appeals in two separate circuits held that liability insurers have standing as parties in interest to appear and be heard in an insured's Chapter 11 case where the insurer might be liable to indemnify the claims of the insured's creditors.

Prior to the 1984 Amendments to the Bankruptcy Code1 (BAFJA), there was a split as to whether a transfer of title to real estate by virtue of a mortgage foreclosure constituted a transfer as defined in §101 of the Bankruptcy Code.2, 3 However, BAFJA made it clear that a “transfer” included “the foreclosure of a debtor’s equity of redemption.”4 This change in definition has a significant impact on the application of both §547 (preference) and §548 (fraudulent transfer).  

The second priority lien held by a junior lien holder is a property interest sufficient to trigger the protection of the automatic stay.In re Three Strokes L.P., 379 B.R. 804 (Bankr. N.D. Tex. 2008). Inasmuch as a senior lien holder’s foreclosure proceedings would have the effect of extinguishing the debtor’s second lien interest, a court may only lift the stay and permit the foreclosure to proceed upon such senior lien holder’s showing of adequate protection.

In a recent decision, the Bankruptcy Court for the Southern District of New York concluded that an investor in a Real Estate Mortgage Investment Conduit ("REMIC") lacked standing to object to the sale of a chapter 11 debtor's real property, despite that the property served as collateral for loans held in trust by the REMIC for the benefit of its investors.

Vendors who sell goods to customers are probably familiar with the issues that arise when the customer later files bankruptcy.

In a welcome bit of good news for lenders, US District Court Judge Gold (Southern District of Florida) reversed the portion of the 2009 bankruptcy court decision in the TOUSA, Inc. bankruptcy cases that had ordered the disgorgement of $403 million plus interest based on the holding that the amounts were received by certain lenders to the TOUSA parent in connection with a pre-petition transaction that constituted a fraudulent transfer.