Some victims of the now infamous Bernard L. Madoff ("Madoff") Ponzi scheme may receive a partial distribution in the next few months. On May 4, 2011, Irving H. Picard, the Trustee appointed for the liquidation of the business of Bernard L. Madoff Investment Securities LLC ("BLMIS") under the Securities Investor Protection Act, 15, U.S.C.

Recently, some bankruptcy courts in Ohio have given mortgage lenders something new to be concerned over: Is the form of your notary’s certification proper? Everyone in the mortgage industry is aware of the wave of cases challenging the validity or effectiveness of certain mortgages or mortgage assignments on account of sub-standard execution, notarization and recordation practices.

Anyone in the commercial real estate business can tell you that the past couple of years have seen a significant uptick in the number of commercial foreclosures and owner bankruptcies. While it does appear that the market is improving, we’re certainly not out of the woods. We are likely to see headlines declaring the latest big bankruptcy or foreclosure for a few more quarters. Sometimes lost in the headlines is the impact such issues have on the tenants in these commercial properties.

Under section 363 of the Bankruptcy Code, a trustee or debtor-in-possession may sell property free and clear of “any interest in such property of an entity other than the estate.” Thus, a buyer can generally acquire assets from a bankruptcy estate without subjecting itself to liability or claims based on the seller’s prior actions. InMorgan Olson, LLC v. Frederico (In re Grumman Olson Indus., Inc.), No. 02-16131, 2011 WL 766661 (Bankr. S.D.N.Y.

In general, substantive consolidation allows for the assets and liabilities of affiliated debtor entities to be consolidated and disbursed as if the assets were held and the liabilities were owed by a single legal entity. Unlike joint administration, which promotes procedural convenience and efficiency without affecting the substantive rights of creditors, substantive consolidation can force creditors of a solvent debtor to share in the debtors’ aggregate asset pool in parity with creditors of less solvent debtors.

Introduction

Judge Walsh released an amended Opinion in the NEC Holdings Corp. case on May 18, 2011. His previous opinion had an incomplete citation of 28 U.S.C. § 157(b)(2). It shows just how serious our judges are about the Bankruptcy Code.

In an effort to keep followers of this blog fully apprised of every opinion released by the Delaware Bankruptcy Court, I have linked to Judge Walsh’s newly corrected opinion here.

On April 29, 2011, the Internal Revenue Service (“IRS”) issued Private Letter Ruling (“PLR”) 201117036 denying recognition of tax-exempt status under Section 501(c)(3) of the Internal Revenue Code (“Code”) to a nonprofit credit counseling agency (“CCA”) because its primary activity would have been the provision of pre-bankruptcy certification and post-bankruptcy counseling for fees.

Introduction

In a decision that clarifies the rights of secured lenders to rents generated by a mortgaged property under New York law, a bankruptcy court in the Southern District of New York has held that rents which were assigned pre-petition pursuant to an assignment of rents executed in connection with a mortgage loan do not belong to the bankruptcy estate because the Lender took sufficient affirmative actions to perfect its rights over the rents.1