On June 21, 2022, Congress and the President (i) extend the $7.5 million debt limit for Subchapter V eligibility, and (ii) adjust other Subchapter V rules.[Fn. 1]

One of the adjustments is this:

In New York, it is a standard practice to name all tenants residing in a building when foreclosing upon the property.

A February 16, 2021 decision of the United States District Court for the Southern District of New York held, in In re Citibank August 11, 2020 Wire Transfers, 520 F. Supp. 3d 390, that lenders who received almost $900 million mistakenly wired to them by Citibank (the administrative agent for a $1.8-billion syndicated seven-year term loan to Revlon [2016 Loan]) were entitled to keep the money.

In a decision last month in Whyte v. SemGroup Litig. Trust (In re Semcrude L.P.), No. 14-4356, 2016 U.S. App. LEXIS 7690 (3d Cir. Apr. 28, 2016), the United States Court of Appeals for the Third Circuit held that proving that a debtor was left with unreasonably small capital will not turn on either hindsight or a “speculative exercise” based on what might have happened if certain things were known at the time.

Introduction

The interest rate mis-selling scandal took another twist recently when a landmark legal case was dismissed by the High Court. Had the case been successful it would have challenged the banks’ £2.1bn compensation scheme set-up to settle inappropriate interest rate swaps – however the decision only brings temporary relief for the banks.

Background

In a move signaling the end of 6 years of litigation, the bankruptcy trustee for the holding company of failed mortgage lender IndyMac Bancorp, Inc. (“Bancorp”) negotiated a settlement agreement with the FDIC regarding the ownership of nearly $60 million of tax refunds.  If approved by the bankruptcy court, the settlement would resolve one of the most highly publicized tax refund disputes involving the FDIC, a number of which arose in the wake of 2008’s financial crisis.

Under the Bankruptcy Code, a reorganization plan may be approved if (1) proposed in “good faith” under  § 1129(a)(3), and (2) accepted by at least one class of creditors whose interests are impaired by the plan, see 11 U.S.C. § 1129(a)(10). In Village Green I, GP v. Fed.

Most lawyers are generally familiar with the concept of a floating lien under the Uniform Commercial Code. A secured creditor takes a lien in a collateral category that changes from time to time as items are added or subtracted. A common example is a working capital loan, in which financed inventory is produced and sold, then becoming an account, which is collected to provide the funds to produce new inventory.  A secured creditor may perfect a lien in the changing mass of inventory and receivables, as each category exists from time to time.

When can a bank be at risk of unknowingly receiving a fraudulent transfer? How much information does a bank need to have before it is on “inquiry notice”? A recent decision from the Seventh Circuit Court of Appeals highlights the risks that a bank takes when it ignores red flags and fails to investigate. This decision should be required reading for all lenders since, in the matter before the Seventh Circuit, the banks’ failure to investigate their borrower’s questionable activity caused the banks to lose their security and have their secured loans reduced to unsecured claims.