On November 23, 2015, in the first appellate decision of its kind, the District Court for the Southern District of Florida affirmed a bankruptcy court order to compel chapter 7 debtors to surrender real property by directing the debtors to cease all foreclosure defense. The decision in Failla v. Citibank, N.A. (In re Failla), case no. 15-80328, marks the first decision from a federal appellate court to address the question of whether a bankruptcy court may enter an order directing a debtor to cease defending a mortgage foreclosure suit pending in state court.
Introduction
Over the last few years, the European leveraged finance market has seen rapid growth of senior secured high yield notes (“SSN”) and senior secured covenant-lite term loan B (“TLB”) financings. A common feature of both SSNs and TLBs (together “Senior Secured Debt”) is that their terms typically permit the incurrence of senior unsecured debt by a borrower and its restricted subsidiaries (a “Credit Group”) subject to either satisfaction of a financial ratio or through various permitted debt baskets.
It cannot have escaped the attention of anyone involved in the aviation finance industry that the UK is currently in the process of ratifying the Cape Town Convention (being the Convention on International Interests in Mobile Equipment and related Protocol on Matters Specific to Aircraft Equipment). Here, we will look at that ratification process and consider the principal legal and practical implications for our clients.
Ratification Process
Individuals filing for bankruptcy pursuant to Chapter 7 of Title 11 of the United States Code (the "Bankruptcy Code") generally do so to have their debts discharged and receive the proverbial "fresh start."2 The same, however, is not true for corporations.
In Jenkins v. Midland Credit Management, Inc.,[1]the U.S. Bankruptcy Court for the Northern District of Alabama held that the filing of a proof of claim based on a time-barred debt cannot give rise to a claim for damages under the Fair Debt Collection Practices Act (“FDCPA”), reasoning that any such claim is precluded by the Bankruptcy Code’s comprehensive claims-allowance procedure.
Foreclosure defense and bankruptcy often go hand in hand, but sometimes it seems like the left hand doesn’t talk to the right. This has proven especially common with bankruptcy plans that propose to “surrender” real property encumbered by a mortgage. The term “surrender” is not defined in the bankruptcy code. As a result, lenders and borrowers often interpret the term differently. For example, most lenders interpret surrender to mean not defending a foreclosure.
On June 27, 2015, the Italian government approved Law Decree No. 83/2015 (the “Decree”) with the aim of further improving the competitiveness of Italian bankruptcy legislation and facilitating debt restructuring of Italian companies.
The Decree entered into force on June 27, 2015 and needs to be converted into law by the Italian Parliament within 60 days of such date.
New rules on restructuring procedures
On June 1, 2015, the United States Supreme Court issued its decision in Bank of America, N.A. v. Caulkett, in which all nine Justices joined in an opinion that reversed an Eleventh Circuit ruling that chapter 7 debtors may “strip off” wholly unsecured junior liens. The Caulkett opinion largely relies upon the Supreme Court’s prior decision in Dewsnup v. Timm, 502 U.S. 410 (1992), in which the Court held that a chapter 7 debtor may not “strip down” liens where the value of the property partially secures the underlying claim.
Currently before the Supreme Court is Baker Botts, L.L.P. v. ASARCO, L.L.C.,2 in which the Court will determine whether bankruptcy judges have discretion to award compensation for the defense of a fee application under 11 U.S.C. § 330(a). The decision in Baker Botts will likely resolve a circuit split and make clear whether a defense of a fee application is necessary to the administration of the case and, therefore, compensable.
On 27 April 2015, the English High Court sanctioned a scheme of arrangement (the “Scheme”) for the US$200 million 9.5% senior notes due 2015 (the “2015 Notes”) issued by DTEK Finance B.V. (the “Issuer”), a Dutch finance subsidiary of the Ukraine’s largest privately owned energy group (“DTEK”). The Scheme was approved by 91.1% of noteholders.