The collapse of marine fuel trader OW Bunker & Trading A/S (“OW Bunker”) and its affiliates, in November 2014, has resulted in a blizzard of legal proceedings in the United States. Bunker suppliers and creditors of insolvent OW Bunker entities have sought to secure their claims by arresting vessels or proceeding directly against vessel owners and operators who contracted with OW Bunker entities to supply their vessels with bunkers.
Under Section 363(f) of the Bankruptcy Code, a debtor or trustee can sell estate assets “free and clear of any interest” in such assets. This short, simple string of six words represents one of the most powerful tools in the bankruptcy professional’s arsenal.
The scope of the Bankruptcy Code’s safe harbor for certain financial contracts has been tested again, this time in the United States Bankruptcy Court for the Western District of Louisiana. The question this time was whether an ipso facto provision continues to be safe harbored if enforcement of that provision is conditioned on other factors – in this case, the debtor’s failure to perform under the contract.
Imagine a creditor filing a claim in a chapter 13 bankruptcy case where neither the debtor nor the bankruptcy trustee objects to the claim. Imagine the chapter 13 plan is confirmed, including the claimed debt, though the creditor receives little to nothing in return for its claim. Can the debtor later bring a separate action under the Fair Debt Collection Practices Act or does res judicata bar the FDCPA claim?
This is the first of three follow-up blogs to our earlier publication Assignment for the Benefit of Creditors: General Overview. This blog explores ABC’s lack of statutory automatic stay and whether there is a functional and practical equivalent. The next blog will discuss whether a creditor may file a claim after the statutory 120-day deadline.
We have written on other occasions on Civic Partners Sioux City, LLC.
The bankruptcy courts have a long history of being willing to use their judicial power under the Bankruptcy Code to prevent perceived efforts by debtors to inappropriately shield their assets from creditors. This is true even when the debtors employ structures and devices that are complex and crafted in seeming compliance with applicable law.
A bankruptcy court’s asset sale order limiting specific pre-bankruptcy product liability claims required prior “actual or direct mail notice” to claimants when the debtor “knew or reasonably should have known about the claims,” held the U.S. Court of Appeals for the Second Circuit on July 13, 2016. In re Motors Liquidation Co., 2016 U.S. App. LEXIS 12848, *46-47 (2d Cir. July 13, 2016).
You might wonder whether lenders can enforce a guaranty of a loan from an individual or entity that has no formal connection with the borrower, i.e. someone who is not an owner or affiliated company. Generally, the answer is yes with some qualifications for potentially insolvent guarantors discussed below. However, lenders are well-advised to take the steps outlined at the end of this post to minimize the risk of a subsequent challenge by the guarantor.
Pursuant to a provision of the Bankruptcy Code familiar to readers of Weil’s Bankruptcy Blog (see our prior post, To Assume or Not to Assume, that Is the Question: What Act Constitutes “Assumption” Under Section 365(d)(4) of the Bankruptcy Code?), the United States District Court for the District of Delaware recently affirmed a bankruptcy c