A New York state court recently denied a motion to dismiss an action brought by a reorganized debtor against the former chair of the official committee of unsecured creditors in the debtor's chapter 11 case.¹  The decision is noteworthy for its holding that the reorganized debtor had standing to commence an action against the former committee member even though the claim was not expressly listed as an asset of the estate in the debtor's chapter 11 disclosure statement.

Background

Due to the substantial time and effort involved in negotiating and confirming a Chapter 11 reorganization plan, and the potential for improperly solicited votes to be disqualified, plan proponents generally are well advised to adhere strictly to the plan voting and disclosure requirements of the Bankruptcy Code.  A recent Delaware bankruptcy court decision, In re Indianapolis Downs, LLC,¹ indicates that creditors who actively negotiate the terms of a debtor's reorganization can, under certain circumstances, enter into a formal plan support agreement with the debtor

On occasion, an owner files a chapter 7 bankruptcy during or in connection with an association’s foreclosure.  While that chapter 7 bankruptcy may slow that foreclosure, it will absolutely not end it.  A chapter 7 bankruptcy ‘stays’ that foreclosure, sure.  That chapter 7 bankruptcy stay remains in effect with respect to “property of the estate” until it that property (the unit) is no longer property of the estate.  During the course of a chapter 7 bankruptcy, the bankruptcy trustee eventually ‘abandons’ the property of the estate.  Once that ‘abando

Public policy in New York prompted the establishment of, and recent increase to the Homestead Exemption (the “Exemption”), codified in the CPLR at §5206.  The Exemption, a statutorily created right, affords property owners (and their surviving heirs) certain protections from a creditor’s right to levy against a judgment debtor’s real property for the purpose of satisfying a personal money judgment.  The rationale behind the need for the Exemption is to ensure that a property owner is not left wholly insolvent once his primary residence is taken from him.

A recent case¹ decided by Judge Stuart Bernstein of the United States Bankruptcy Court for the Southern District of New York demonstrates that a developer's properly crafted chapter 11 plan of reorganization can effectively "restore" trust funds that it previously had "diverted" under the New York Lien Law.

A decision issued earlier this year by a Florida bankruptcy court¹ provides comfort to those who accept payment from a debtor-in-possession in return for goods or services. The court held that to invoke the jurisdiction of a bankruptcy court in a lawsuit to recover an alleged impermissible post-petition transfer by a debtor, the plaintiff must establish that the debtor's estate was diminished as a result of the transfer to the defendant.

Congratulations!  You just successfully negotiated a prepackaged chapter 11 plan of reorganization for a multi-billion dollar enterprise which leaves general unsecured creditors unimpaired and has been unanimously approved by the debtors' creditors.  It's smooth sailing from here, right?

In Radlax Gateway Hotel, LLC v.

A recent opinion from the United States Bankruptcy Court for the Western District of New York shows that even the best laid strategies can return to haunt the insiders of a debtor.  In Wallach v.

Prepayment provisions are intended, in part, to protect lenders in a depressed market from losses resulting from the costs of replacing their loans sooner than expected and having to relend at rates lower than those originally charged.  A New York federal district court recently upheld a bankruptcy judge's ruling denying a lender's claim for a $7.5 million prepayment premium against a borrower-debtor.¹ The lender must have been both surprised and disappointed to learn from the courts' decisions that this result could have been avoided had the lender's loan documents included