Chapter 11 creditors' committees and debtors continue to challenge lenders' prepayment premiums, commitment fees and post-bankruptcy interest claims in reorganization cases. Nevertheless, courts regularly reject these challenges in well-reasoned decisions. This Alert focuses on two of these recent decisions:In re Fleetwood Enterprises, Inc., 2012 WL 2017952 (9th Cir.
In Loop 76, LLC, the Bankruptcy Appellate Panel for the Ninth Circuit (the “BAP”) recently held that a bankruptcy court may consider whether a creditor received a third party source of payment (e.g., a guaranty) when determining whether that creditor’s claim is “substantially similar” to other claims for purposes of plan classification under 11 U.S.C. § 1122(a). In re Loop 76, LLC, 465 B.R. 525 (B.A.P. 9th Cir. 2012).
The absolute priority rule of Section 1129(b) of the Bankruptcy Code is a fundamental creditor protection in a Chapter 11 bankruptcy case. In general terms, the rule provides that if a class of unsecured creditors rejects a debtor’s reorganization plan and is not paid in full, junior creditors and equity interestholders may not receive or retain any property under the plan. The rule thus implements the general state-law principle that creditors are entitled to payment before shareholders, unless creditors agree to a different result.
Heide v. Juve, (In re David L. Juve and Mona L. Juve), No. 11-6006, (8th Cir. BAP 09/16/2011) (Judges Schermer, Federman, and Nail).
In a recent appeal to the Sixth Circuit Bankruptcy Appellate Panel, Inre Collins, 2011 WL 4445451 (6th Cir. BAP Aug. 12, 2011), the trustee sought a declaratory judgment to determine the validity, extent, and priority of liens on the debtor’s real property held by four defendants. The trustee appealed the district court’s dismissal of his complaint as to purported holders of the debtor’s first and second mortgages on the debtor’s property.
The Bankruptcy Appellate Panel of the Ninth Circuit has ruled that assignments of equipment lease payment streams were not automatically perfected. Because the debtor failed to perfect the assignees’ interests in the payment streams, the bankruptcy trustee could bring an action to avoid those interests.
Lender Had Duty To Investigate Claim to Promissory Note
In a harsh decision for the lender, the U.S. Court of Appeals for the Tenth Circuit has determined that a debtor’s loan may be discharged in chapter 7 bankruptcy— despite the borrower’s admission that his personal financial statement contained materially false representations about his financial condition.
In Litton Loan Servicing, LP v. Garvida, No. 04-17846 (9th Cir. BAP July 31, 2006), the Bankruptcy Appellate Panel of the U.S. Court of Appeals for Ninth Circuit addressed two independent but related questions: (1) what procedure is necessary to object to a properly filed proof of claim, and (2) who bears the burden of proof, and the correlative risk of nonpersuasion, with regard to a disputed claim.
For attorneys, the phrase “Don’t be a jerk” starts any class on professionalism or ethics. Not taking another attorney’s phone calls and failing to return those calls certainly qualifies as “being a jerk”. It is frankly, quite rude. But while being rude can be aggravating to opposing counsel, is it sanctionable? A Puerto Rican lawyer and her firm found out to the tune of $14,270.60 that it is.