The United States Bankruptcy Court for the District of New Jersey recently overruled a creditor’s objection to the debtors’ proposed chapter 13 plan, rejecting the association’s argument that its claim is secured by a consensual lien and may not be modified pursuant to 11 U.S.C. 1322(b)(2). Specifically, the Court found that a lien held by a New Jersey condominium or homeowners’ association can be either a statutory lien (subject to modification) or a consensual lien (not subject to modification) depending upon the circumstances presented. In re Keise, 564 B.R. 255 (Bankr. D.N.J.

An important aspect of the Puerto Rico Oversight, Management, and Economic Stability Act, 48 U.S.C. §§ 2101–2241 ("PROMESA")—the temporary stay of creditor collection efforts that came into effect upon its enactment—was the subject of a ruling handed down by the U.S. Court of Appeals for the First Circuit. In Peaje Investments LLC v. García-Padilla, 845 F.3d 505 (1st Cir. 2017), the First Circuit affirmed in part and vacated in part a lower court order denying two motions for relief from the PROMESA stay.

ASARCO Standard

When the real estate market and financial markets tumbled during 2007-2008, the fallout was felt by financial institutions from large multi-billion dollar banks to small Community Banks. As these banks struggled to stay alive, a trend emerged for bank holding companies to market and sell a distressed bank through Section 363 of the Bankruptcy Code. This alternative was utilized in many instances as opposed to a traditional “reorganization plan” or takeover by the FDIC.

The U.S. Court of Appeals for the Eleventh Circuit recently held that a court cannot extinguish a secured creditor’s state-law security interests for failure to file a proof of claim during the administration of an equity receivership over entities involved in a Ponzi scheme.

A copy of the opinion in Securities and Exchange Commission v. Wells Fargo Bank is available at: Link to Opinion.

Over the last several decades, the enforcement of intercreditor agreements ("ICAs") that purport to affect voting rights and the rights to receive payments of cash or other property in respect of secured claims have played an increasingly prominent role in bankruptcy cases. Although the Bankruptcy Code provides that "subordination agreement[s]" are enforceable in bankruptcy to the same extent such agreements are enforceable under applicable nonbankruptcy law, the handling of creditor disputes regarding such agreements has been inconsistent.i

The U.S. Court of Appeals for the Ninth Circuit recently reversed a ruling that disallowed an unsecured creditor’s claim filed in a California bankruptcy court based on the forum state’s statute of limitations.

In so ruling, the Ninth Circuit held that, although courts typically apply the forum state’s statute of limitations if the contract is silent on the issue, exceptional circumstances warranted the application of a longer statute of limitations here, because the creditor had no option but to enforce its claim in the forum based on where the bankruptcy petition was filed.

The Supreme Court of Indiana recently confirmed a mortgagee’s ability to seek an in rem judgment against property for which there was an outstanding lien balance after the borrowers obtained a discharge of their Chapter 7 bankruptcy.

In so ruling, the Court distinguished the difference between an in rem and in personam judgment, and rejected the borrowers’ unsupported argument that the debt was paid in full by the time the mortgagee initiated foreclosure proceedings against the borrowers.

As we have noted in another post, Non-Final Finality: Does One Interlocutory Issue Resolved in a Bankruptcy Court Order Render All Issues Addressed in the Order Non-Appealable?, not all orders in bankruptcy cases are immediately appealable as a matter of right. Only those orders deemed sufficiently “final” may be appealed without additional court authorization.

In 2015, Distressing Matters reported on the Third Circuit’s decision in In re Jevic Holding Corp., wherein that panel ruled that, in rare circumstances, bankruptcy courts may approve the distribution of settlement proceeds in a manner that violates the Bankruptcy Code’s statutory priority scheme.