The bank took a charge on the borrowers’ property. In January 1992, it demanded payment of the balance due under the secured facilities. In June 1992, it made a further formal demand specifically relying on the mortgage. One of the borrowers was subsequently made bankrupt. Periodically, the bank informed the borrowers that they continued to be liable and made demands for payment and referred to the mortgage.

The claimant obtained a judgment against the defendant for breach of a guarantee. The defendant entered into an IVA with his creditors, which included his liability to the claimant. The defendant paid the judgment sum to the claimant, but not the interest awarded on it. The claimant contended that the award of interest was a post-IVA claim, and threatened to bankrupt the defendant which would lead to a termination of the IVA. The defendant applied for a stay of execution of the interest part of the judgment, on the ground that it was within the IVA.

Although this case is about a trustee in bankruptcy’s fight to realise his interest in a property by virtue of a debtor’s bankruptcy, the facts (though extreme) are not untypical of a finance company’s position when a hirer refuses to return goods to it despite the fact the court has ordered the hirer to do so.

In this case Mr Canty was made bankrupt in relation to a relatively small debt and he never accepted the position. There followed a number of appeals and challenges over the following years in which he attempted to reopen and relitigate earlier proceedings.

The claimant appealed against a decision that her former husband’s one third interest in the matrimonial home vested in his trustee in bankruptcy (the first defendant) free from any rights asserted by her, so permitting an order for possession and sale of the property. The claimant argued that pursuant to a matrimonial consent order made prior to the bankruptcy, she had a right of exclusive occupation of the property until remarriage, cohabitation or death.

A trustee in bankruptcy applied for an order for sale of a property owned jointly by the bankrupt and his wife, the claimant. The claimant, who suffered chronic ill health, resided in the property. She also jointly owned another property with her brother, and in order to suspend orders for possession and sale of the matrimonial property, offered charges over that other property. This was not accepted by the trustee on the basis that the husband’s creditors would be unlikely to receive payment in the near future.

The economic fallout from the COVID-19 pandemic will leave in its wake a significant increase in commercial chapter 11 filings. Many of these cases will feature extensive litigation involving breach of contract claims, business interruption insurance disputes, and common law causes of action based on novel interpretations of long-standing legal doctrines such as force majeure.

When Financial Stress Turns to Distress–Restructuring Tools to Avoid Disaster

Parts 1 and 2: Chapter 11 Checklist and What Else Is in the Toolbox

Introduction

A recent decision from the United States District Court for the Southern District of New York (the District Court) in the bankruptcy cases of Sears Holdings Corp. may loom large in a day and age when shopping mall operators are seeking creative alternatives to the traditional, retail-oriented anchor-store business model.

On March 27, 2020, the President signed into law the historic Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or “Act”), a $2.2 trillion stimulus package designed to mitigate the widespread economic effects of the novel coronavirus (“COVID-19”). The Act includes several temporary modifications to chapter 7 and chapter 13 of the U.S. Bankruptcy Code.^[1] This alert details these modifications as follows:

Certain Federal Payments Excluded From Definition of “Income”

As the nation hunkers down to combat the novel coronavirus (COVID-19), bankruptcy courts throughout the country have moved quickly to implement procedures to preserve access to the courts while limiting in-person interaction during the crisis. Each court’s specific COVID-19 procedures are different, but they largely prohibit in-person hearings, recognize the need for flexibility and adjournments for non-emergent matters whenever possible, and encourage the creative use of technology to allow as many matters to go forward as scheduled, including evidentiary hearings.