Who Should Read This? Anyone that deals in distressed debt, and in particular anyone that acquires distressed or defaulted bond debts.

One of the most dramatic tools a lender can use in the collection of a loan is the involuntary bankruptcy case.  It is dramatic because of the implications for both the debtor and the lender who files the case.

On June 12, the United States Supreme Court in Clark v Rameker resolved the question that has recently split the 5th and 7th Circuits– Are inherited IRAs protected from the beneficiary’s creditors in a bankruptcy proceeding? The Court unanimously held that they are not.

On June 9, 2014, a unanimous Supreme Court issued the latest in a series of key rulings regarding the extent of a bankruptcy court’s constitutional authority.¹ Notably, while Monday’s Executive Benefitsdecision answered one important question arising out of the Court’s 2011 decision in Stern v. Marshall,² it also left the primary question that resulted in a split in the Circuit Courts of Appeals to be decided another day.

The Aftermath of Stern v. Marshall

In 2012, the Fifth Circuit ruled in In re Chilton that inherited IRAs constituted retirement funds within the “plain meaning” of §522 of the Bankruptcy Code and were thus exempt from the bankruptcy estate, under § 522(d)(12) (the federal exemptions). See our prior discussion of this case here.

After Chilton, many thought the issue was settled.

The English Court of Appeal decision in Caterpillar v John Holt & Company, and its analysis of “retention of title” and “no set-off” clauses, will be of interest to commodity traders, compliance officers and legal counsel in industries dealing with energy and natural resources internationally.

On January 17, 2014, Chief Judge Kevin Gross of the Bankruptcy Court for the District of Delaware issued a decision  limiting the right of a holder of a secured claim to credit bid at a bankruptcy sale. In re Fisker Auto. Holdings, Inc.,  Case No. 13-13087-KG, 2014 WL 210593 (Bankr. D. Del. Jan. 17, 2014). Fisker raises significant issues for lenders who  are interested in selling their secured debt and for parties who buy secured debt with the goal of using the debt to  acquire the borrower’s assets through a credit bid.

Northern District of Oklahoma Chief Bankruptcy Judge Terrence L. Michael’s introduction to the opinion in In re Harrison (2013 WL 6859303) serves as a good introduction to this post:

Would you know what to do if you learned that one of your franchisees had filed for bankruptcy? Perhaps more importantly, would you know what not to do? While each circumstance and franchise agreement is different, there is a general framework for dealing with a franchisee in bankruptcy. Here we’ll introduce some of the issues you are likely to encounter throughout the bankruptcy process.

The Automatic Stay

The United States Court of Appeals for the Fourth Circuit recently affirmed the bankruptcy court decision in the Qimonda AG chapter 15 bankruptcy case,¹ providing that holders of intellectual property licenses based on U.S. patents are entitled to the special protections contained in 11 U.S.C. § 365(n).² In so doing, the court bolstered the rights of U.S. intellectual property licensees whose agreements might otherwise be vulnerable to termination in a cross-border insolvency proceeding.

Background