The U.S. Supreme Court decided on Monday, June 1, 2015, that Chapter 7 debtors may not rid themselves of second-mortgage liens in cases where, at the time of the bankruptcy, the first mortgage is undersecured. The decision reverses two Eleventh Circuit rulings that would have made such liens disappear under Section 506(d) of the Bankruptcy Code.
A bankruptcy case[1] (no surprise) has produced another instructive court ruling on post-acceleration enforceability of a prepayment (make-whole) premium provision contained in a debt instrument. This latest lesson comes via the U.S. District Court for the Southern District of New York, affirming a ruling of that district’s U.S.
Nearly four years after its decision in Stern v. Marshall raised new doubts about the place of bankruptcy courts in our legal system, the Supreme Court has finally put those doubts to rest. This week, in Wellness International Network, Ltd. v. Sharif, No. 13-935, the Court held that even for claims that must otherwise be resolved by an Article III court, a bankruptcy court may still adjudicate the matter based on consent.
In an opinion issued today, the Supreme Court held that debtors do not have the right to immediately appeal a bankruptcy court’s decision denying confirmation of a proposed reorganization plan. This decision resolves a circuit split, and confirms the balance of power between debtors and creditors in the plan confirmation process. As the Supreme Court explained, “the knowledge that [a debtor] will have no guaranteed appeal from a denial should encourage the debtor to work with creditors and the trustee to develop a confirmable plan as promptly as possible.”
Big Case for UCC Aficionados
The Seventh Circuit Court of Appeal’s recent decision in State Bank of Toulon v. Covey (In re Duckworth)Case Nos. 14-1561 and 1650 (7th Cir. November 21, 2014) illustrates how a banker’s seemingly minor mistake in drafting secured loan documents granting a lien to secure a non-existent obligation can lead to avoidance of a lender’s security interest by the borrower’s bankruptcy trustee.
Swiss Investigating Magistrate Entitled to U.S. Documents
The International Swaps and Derivatives Association, Inc. (“ISDA”) published the ISDA 2014 Resolution StayProtocol (the “Protocol”) on November 12, 2014 in response to continued efforts by regulators to build additional flexibility into the statutory regimes that would apply in the event of the insolvency of a major financial institution.
On September 9, 2014, the Bankruptcy Court for the Southern District of New York held that certain senior lenders were not entitled to the benefit of their indentures’ make-whole premiums, because they had voluntarily accelerated their notes. As we have reminded our readers several times, careful drafting of what may seem like basic boilerplate provisions is important. Seemingly benign stand-alone provisions may have unintended consequences when linked together in a single agreement.
In earlier posts, we discussed rulings by two bankruptcy courts, one in Delaware and one in Virginia, in which the potential chilling e