In an effort to protect the property of a bankruptcy estate, Section 362(a) of the U.S. Bankruptcy Code imposes an automatic stay on most proceedings against a debtor in bankruptcy. The policy of this section is to grant relief to a debtor from creditors, and to prevent a "disorganized" dissipation of the debtor's assets. (See, e.g., U.S. Securities and Exchange Commission v. Brennan, 230 F.3d 65, 70 (2d Cir. 2000).) However, the scope of the automatic stay is not all-encompassing.
A recent Delaware District Court decision concerning an appeal of a bankruptcy settlement clearly provides support for the use of tender offers or other exchange, or settlement mechanics permitted under applicable federal securities laws prior to and outside a plan of reorganization. In essence, this decision permits debtors to utilize exchange offers to repurchase outstanding securities at a discount, or obtain more favorable terms during a bankruptcy proceeding and prior to confirmation of a plan of reorganization.
Case Summary
How will filing bankruptcy affect my credit score?
All’s fair in love bankruptcy and war . . . except when one side decides to keep fighting after there’s been a truce. The petitioning creditors in In re BG Petroleum, LLC, a recent decision from the Bankruptcy Court for the Western District of Pennsylvania, apparently forgot this rule.
E ven well-intentioned people run into financial difficulty. Unfortunately, falling behind on one’s taxes often leads to a downward spiral, and it is not uncommon for a taxpayer who cannot pay her tax obligations to decide not to file a return. Not only does such a failure to file expose the taxpayer to additional penalties and criminal liability, but it may have devastating ramifications if she subsequently files for bankruptcy.
The Bankruptcy and Creditors' Rights Bulletin provides an analysis of legal issues, recent court decisions and significant changes in bankruptcy and creditors' rights law. This edition highlights two key bankruptcy issues related to general civil litigation.
What Litigators Need to Know About Bankruptcy: The Automatic Stay - First in a Series
Sales of assets pursuant to Section 363 of the Bankruptcy Code or pursuant to a plan of reorganization provide a number of benefits to a purchaser, but they also present a number of potential impediments, particularly to purchasers who are not familiar with the bankruptcy sale process.
Undersecured creditors may breathe a little easier. In a recent decision, the United States Bankruptcy Court for the Northern District of Illinois denied the debtors’ request to use an undersecured creditor’s cash collateral, in the form of postpetition rents, to pay estate professional fees, holding that the undersecured creditor was not adequately protected even though the value of its collateral was stable and possibly increasing.
On May 30, 2014, hedge fund Moore Capital (Moore) brought suit against the Lehman Brothers bankruptcy estate (Lehman) in the Southern District of New York bankruptcy court, seeking a declaratory judgment that it acted properly when it terminated swap agreements and setoff termination amounts in the time between the filing of the parent company Lehman Brothers Holdings Inc. (LBHI) and the eve of bankruptcy filings weeks later of Moore’s Lehman counterparties1.