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Chapter 7 debtors cannot strip off junior liens on underwater home loans, United States Supreme Court rules

This morning, the United States Supreme Court ruled that debtors in Chapter 7 bankruptcy cases cannot “strip off,” or completely void, junior mortgages that—based on the value of the property and the amount of claims secured by senior mortgages—are completely underwater.

USA, Insolvency & Restructuring, Litigation, Bradley Arant Boult Cummings LLP, Debtor, Mortgage loan, Supreme Court of the United States
Seventh Circuit says secured creditors must file proof of claim within ninety days of meeting of creditors

Timely proof of claim filings by secured creditors have “been a thorn in the side of many Chapter 13 cases involving secured creditors,” according to Judge Wood in In re Pajian. However, a recent Seventh Circuit decision may cause the industry to revise their current process for proof of claim filings. Bankruptcy Rule 3002(c) requires creditors to file proofs of claim within 90 days of the date set for the meeting of creditors. Bankruptcy courts have come to conflicting conclusions on whether Rule 3002(c)’s deadline applies to all creditors or merely unsecured ones.

USA, Insolvency & Restructuring, Litigation, Bradley Arant Boult Cummings LLP, Secured creditor, Seventh Circuit
Supreme Court rules that an order denying confirmation of a chapter 13 plan is not a final appealable order

On May 4, 2015, the Supreme Court of the United States affirmed the order of the United States Court of Appeals for the First Circuit dismissing the appeal of chapter 13 debtor Luis Bullard for lack of jurisdiction.1 The Court held that the order of the Bankruptcy Court denying confirmation of Bullard’s proposed chapter 13 plan was not a final order from which Bullard could immediately appeal as of right.2 The Court reasoned that, while confirmation of a plan can be said to fix the rights and obligations of the parties in a way that alters the status quo, d

USA, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Debtor, United States bankruptcy court, First Circuit
Bankruptcy Court in Delaware rules Caesars’ bankruptcy cases belong in Chicago despite involuntary petition in Delaware

In a battle over proper venue for the chapter 11 cases of In re Caesars Entertainment Operating Company, Inc.

USA, Delaware, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Bankruptcy, United States bankruptcy court
Distressed municipal debt-considerations for local governments

A confluence of factors, including high debt, spiraling pension obligations, and lower sales and property tax revenues, has forced more municipalities to face insolvency than any time since the 1930s. The two largest municipal bankruptcies in history — Jefferson County, Ala., and Detroit, Mich. — recently ended. With the economy improving, we may never see the wave of municipal bankruptcies some commentators predicted.

USA, Insolvency & Restructuring, Bradley Arant Boult Cummings LLP, Bankruptcy, Debtor, Property tax, Debt
Losing at dodge ball: understanding the Supreme Court’s implied authorization of consent in Executive Benefits Insurance Agancy v. Arkinson and why revision of 28 U.S.C. § 157(b) is critical for clarity

On June 9, 2014, the U.S. Supreme Court issued the latest installmentin the jurisdictional saga of bankruptcy courts. As the highly anticipatedsequel to Stern v.

USA, Insolvency & Restructuring, Litigation, Bradley Arant Boult Cummings LLP
Second Circuit holds that equitable mootness doctrine applies to appeals from orders confirming liquidating chapter 11 plans

On October 29, 2014, the United States Court of Appeals for the Second Circuit affirmed the decision of the District Court for the Southern District of New York dismissing as equitably moot appeals filed by three individuals (the “Appellants”) in the chapter 11 case of In re BGI Inc. f/k/a Borders Group, Inc.

USA, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Liquidation, Second Circuit, United States bankruptcy court
District of Delaware attributes value to Debtor’s credit facility in denying a fraudulent transfer claim based on unreasonably small capital despite existing basis for lenders to terminate and subsequent termination of the facility

On September 30, 2014, in In re SemCrude, L.P.,1 the United States District Court for the District of Delaware, affirming the Bankruptcy Court’s decision, held that direct partnership distributions by debtor SemGroup, L.P. (the “Debtor”) and indirect partnership distributions by its general partner, SemGroup G.P., L.L.C., to certain limited and general partners could not be avoided as constructive fraudulent transfers.

USA, Delaware, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Line of credit
Quadrant v. Vertin: duty to maximize value of an insolvent enterprise—business judgment rule applies to interested directors’ “risky” strategy to increase value, even though creditors bear the downside and the controller stands to benefit

In Quadrant Structured Products Company, Ltd. v. Vertin (October 1, 2014), Vice Chancellor Laster clarified the Delaware Chancery Court’s approach to breach of fiduciary duty derivative actions brought by creditors against the directors of an insolvent corporation.

USA, Delaware, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Business judgement rule, Delaware Court of Chancery
Second Circuit holds that a sale by a chapter 15 debtor in a foreign main proceeding of a claim against an obligor located in the U.S. must be reviewed by the U.S. Bankruptcy Court under section 363 of the Bankruptcy Code

On September 26, 2014, the United States Court of Appeals for the Second Circuit, overturning decisions by the Bankruptcy Court and the District Court for the Southern District of New York, held that the Bankruptcy Court was required to review under section 363 of the Bankruptcy Code the transfer of a claim by a chapter 15 debtor with a recognized foreign main proceeding pending in the British Virgin Islands (the “BVI”).1     In a case under chapter 15 of the Bankruptcy Code in which a foreign main proceeding has been recognized, section 1520(a)(2) of the Bankr

USA, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Debtor, Title 11 of the US Code, Second Circuit, United States bankruptcy court