Creditors lacking liens to secure their claim can fare poorly in a bankruptcy case. The “absolute priority rule” is a bedrock principle of bankruptcy law and provides that a creditor at a particular rung of the claim priority hierarchy must be paid in full before any money flows down to junior creditors. Secured creditors reside near the top of the hierarchy, followed by administrative expense claimants, priority claimants and general unsecured creditors.

In a recent post, here, we wrote about a court decision that discussed deadlines for proofs of claim in a case involving a Ponzi scheme. Then, last week, another court issued a decision concerning late amendments to proofs of claim. In re James F.

In First Southern Nat’l Bank v. Sunnyslope Hous. LP (In re Sunnyslope Hous. LP), 2017 BL 216965 (9th Cir. June 23, 2017), the U.S. Court of Appeals for the Ninth Circuit held en banc that, in determining whether a chapter 11 plan may be confirmed over the objection of a secured creditor, the creditor’s collateral must be valued in accordance with the debtor’s intended use of the property, even if the property would realize more in a foreclosure sale because of the existence of restrictive covenants.

The Supreme Court of New Jersey reversed the decision of the Appellate Court, and held that a settlement that a borrower and a lender reached during mediation pursuant to the Residential Mortgage Foreclosure Mediation Program was enforceable because the borrower fulfilled all contingent terms making the agreement permanent. 

A copy of the opinion is available at: Link to Opinion.

The Illinois Appellate Court for the First District recently held that the trial court correctly affirmed a judicial sale and denied a motion to reconsider where an intervenor and alleged owner of the property claimed the mortgage was wiped out by the death of the sole mortgagor, who was only a joint tenant in the property at the time the mortgage was executed.

Employees who sue their employers must disclose that lawsuit if they file for bankruptcy—right? Maybe not. In Slater v. U.S. Steel Corp., the Eleventh Circuit overruled prior precedent and impaired a valuable defense for early dismissal or settlement with bankrupt plaintiffs. This decision will affect strategy for employers that face litigation from bankrupt plaintiffs.

Legal Background

The City Once Dubbed “New England's Rising Star” Has Fallen on Hard Times

On Tuesday, two leading credit-rating agencies again downgraded the city of Hartford: Moody’s Investors Service now rates the struggling city at Caa3, while S&P Global Ratings has lowered its rating to CC. They attribute the junk classification to the increasing likelihood of a default by Hartford on its debt service obligations to bondholders.

A Primer for Issuer Tender Offers, Debt Exchange Offers, Repurchases and Other Liability Management Matters

This primer is a one-stop comprehensive guide for any issuer seeking to restructure its non-convertible debt securities outside of bankruptcy. This publication:

• summarizes the U.S. federal securities laws, rules and regulations that apply to debt restructurings;

• describes various types of debt restructurings; and

• discusses various practical considerations arising in debt restructurings.

It is hard to peruse the internet or even mainstream media outlets without hearing about bitcoin. What is this ubiquitous bitcoin? It depends on whom you ask.

A CNN Money articled defined bitcoin as “a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto.” The IRS has recently defined bitcoin as an “intangible asset” for investors, making it subject to capital gains and loss treatment using the realization method.

(Bankr. E.D. Ky. Sep. 15, 2017)

The bankruptcy court denies the lender’s motion to dismiss the Chapter 11 bankruptcy. The lender argued that the party signing the debtor’s petition did not have the requisite authority to commence a bankruptcy case for the debtor. The bankruptcy court finds that amendments to the debtor’s operating agreement were made for the sole purpose of eliminating the debtor’s ability to file for bankruptcy without the lender’s consent. The court finds this violates Federal public policy and the provisions are unenforceable. Opinion below.

Judge: Schaaf