In recent months, U.S. bankruptcy filings – such as Omega Navigation (filed July 8 in Houston) and Marco Polo Seatrade (filed July 29 in New York) – have caught the attention of the worldwide shipping community. It is no surprise that some shipping companies have sought bankruptcy protection resulting from financial distress. Rather, the cause for surprise is that non-U.S. shipping companies have sought protection in U.S. bankruptcy courts. High-profile secured creditors in these cases have contested the exercise of the jurisdiction of U.S.
In re Zais Investment Grade Ltd. VII1 is the latest in a recent line of bankruptcy cases challenging bedrock assumptions regarding securitization special purpose entities (SPEs) and bankruptcy considerations in securitization transactions.2 Zais establishes precedent allowing a senior noteholder of a collateralized debt obligation (CDO) to place the CDO issuer in an involuntary chapter 11 bankruptcy in order to advance an asset management plan that would otherwise require supermajority approval of all noteholders (including all junior classes) under the related indenture.
Bankruptcy Judge Michael Lynn of the Northern District of Texas recently issued a noteworthy opinion in In re Village at Camp Bowie I, L.P. that addresses two important Chapter 11 confirmation issues. Judge Lynn determined that a plan that artificially impaired a class of claims in order to meet the requirements of section 1129(a)(10) had not been proposed in bad faith and did not violate the requirements of section 1129(a). In his ruling, Judge Lynn also applied the Supreme Court’s cram-down “interest”1 rate teachings in Till v.
The U.S. Supreme Court has issued two bankruptcy rulings so far in 2007. On February 21, 2007, the Court ruled in Marrama v. Citizens Bank of Massachusetts that a debtor who acts in bad faith in connection with filing a chapter 7 petition may forfeit the right to convert his case to a chapter 13 case. On March 20, 2007, the Court ruled in Travelers Casualty & Surety Co. v. Pacific Gas & Electric Co.
The Supreme Court unanimously held on March 20, 2007, that an unsecured lender could recover contractbased legal fees “incurred in [post-bankruptcy] litigation” on “issues of bankruptcy law.” Travelers Casualty & Surety Co. of America v. Pacific Gas & Elec. Co., __ U.S. __ (March 20, 2007). Op., at 1, 3. In doing so, the court vacated a summary ruling by the Ninth Circuit last year. 167 Fed. Appx. 593 (9th Cir. 2006) (held, “attorney fees… not recoverable in bankruptcy for litigating issues ‘peculiar to federal bankruptcy law.’“), citing In re Fobian, 951 F.2d 1149, 1153 (9th Cir.
The ability of a creditor whose claim is “impaired” to vote on a chapter 11 plan is one of the most important rights conferred on creditors under the Bankruptcy Code. The voting process is an indispensable aspect of safeguards built into the statute designed to ensure that any plan ultimately confirmed by the bankruptcy court meets with the approval of requisite majorities of a debtor’s creditors and shareholders and satisfies certain minimum standards of fairness.
Last week’s decision by the U. S. Court of Appeals for the Third Circuit in In re: Forever Green Athletic Fields, Inc., No. 14-3906 (3d Cir. Oct. 16, 2015) held that an involuntary bankruptcy petition filed under 11 U.S.C. § 303 may be dismissed for bad faith. The decision places another hurdle for creditors to surmount when considering whether to put a debtor in bankruptcy and creates another means for debtors to oppose such filings. It also enumerates the standard for evaluating whether a filing is in bad faith.
Section 303(b)(1) of the Bankruptcy Code allows an involuntary petition to be filed by three or more creditors who hold non-contingent claims totaling at least $15,325 more than the liens on the debtor’s property. Those creditors then must prove that the debtor was generally not paying its debts as they came due within the guidelines
Desperate times call for desperate measures. It is not surprising then that a less than scrupulous debtor might be less than candid when disclosing assets and liabilities to a bankruptcy court. But what happens if an individual debtor is discovered to have concealed assets – possibly fraudulently or in bad faith – and then seeks to exercise his or her statutory right under the Bankruptcy Code to exempt all or a portion of the discovered assets from being available to satisfy creditors? Can a bankruptcy court in that circumstance look to the bad acts of the debtor as a basi