Setoff is a doctrine based as much on practical considerations as on equitable ones.

The recent financial crisis has resulted in events that once seemed impossible. Recently, in the federal government’s attempts to bail out the auto industry, an event unprecedented in American history almost occurred: the forced subordination of existing secured debt to new loans issued by the federal government. If the government were to revive this concept in future bailouts and attempt to subordinate the liens of secured creditors, a suit challenging the constitutionality of such action would have a good chance of success.

The Potential For Forced Subordination

When a creditor seeks equitable relief in a bankruptcy court, must the court always follow common law principles of equity? Not according to several courts, including the Second Circuit. Concluding that the granting of equitable remedies may circumvent the Bankruptcy Code's equitable distribution system, courts have limited the application of equitable remedies in the bankruptcy context.

A recent decision of the Court of Appeals for the Seventh Circuit appears to have further raised the hurdle to equitably subordinate claims. Continuing what appears to be a move toward a narrower interpretation of equitable subordination, the Seventh Circuit held that misconduct alone does not provide sufficient justification to equitably subordinate a claim; injury to the interests of other creditors is required as well.

With the economy in poor shape and personal debt still at high levels, the outlook is less than rosy for people who are facing insolvency. Even after the changes made by the Enterprise Act 2002, bankruptcy is still a difficult experience. This is especially true where the family home is the main asset of the bankrupt’s estate.

The trustee in bankruptcy will normally seek a possession order over the property so that it can be sold to satisfy the claims of creditors.

When deciding whether the possession order is to be granted, the court is obliged to consider:

The rejection of collective bargaining agreements or modification of retiree benefits under Bankruptcy Code §§ 1113 and 1114, respectively, were again of central importance in a number of airline cases.

In the wake of the recent turmoil in the financial markets the German government has agreed on a package of measures to stabilise the financial markets and to avoid adverse effects on the real economy. The draft bill as introduced on 15 October 2008 has been passed already and comes into force as from 18 October 2008.

In the wake of recent bankruptcy filings by several prominent financial institutions, there’s a growing interest in changing standard credit documentation to address the risks of defaulting lenders and nonperforming administrative agents. Here are credit agreement provisions that financial institutions, acting as swingline lenders and letter of credit issuers, can require to protect themselves against the risk of a defaulting lender.

On July 22, 2008, the US Court of Appeals for the Second Circuit affirmed denial of the motion of Parmalat S.p.A. ("New Parmalat") to extend an injunction provided to its predecessor, Parmalat Finanziaria, S.p.A., under Bankruptcy Code section 304, against securities fraud actions.1 Although the appeal addressed the issue of injunction in the context of superseded Bankruptcy Code section 304, this decision and the underlying lower court opinion signify other issues of broader import, including the need for careful plan drafting and the complexities inherent in cross-border cases.

The Fifth Circuit recently issued an opinion addressing an important issue with respect to the preservation of a debtor's causes of action in a Chapter 11 plan of reorganization. The Fifth Circuit held that a reorganized debtor lacked standing to pursue certain common-law claims that were based on the pre-confirmation management of the bankruptcy estate's assets.