In 2012, the Fifth Circuit ruled in In re Chilton that inherited IRAs constituted retirement funds within the “plain meaning” of §522 of the Bankruptcy Code and were thus exempt from the bankruptcy estate, under § 522(d)(12) (the federal exemptions). See our prior discussion of this case here.
After Chilton, many thought the issue was settled.
Before the Supreme Court this term is the question of whether a beneficiary individual retirement account (an “Inherited IRA”) is exempt from a debtor’s bankruptcy estate under 11 U.S.C. § 522(b)(3)(C) and (d)(12)2 of the Bankruptcy Code. The issue turns on 1) whether the funds in an Inherited IRA are “retirement funds,” and 2) whether an Inherited IRA is considered tax exempt under the Internal Revenue Code (the “Tax Code”).
Why it matters
The Bankruptcy Code impairs lenders’ rights in various ways. Accordingly, lenders have long attempted to devise methods of preventing borrowers from filing for bankruptcy protection. Such attempts generally have not been successful -- courts hold that as a general matter, a borrower’s pre bankruptcy waiver of the right to file bankruptcy is against public policy and is void. See, e.g., Klingman v. Levinson,831 F.2d 1292, 1296 n.3 (7th Cir.
Over the years, clients have sought my advice after they have obtained a judgment against a limited liability company or a corporation, and after they have tried, without success, to collect on that judgment. All of the typical judgment enforcement methods have already failed. Because judgment debtors generally do not volunteer payment and sometimes will take steps to make it much more difficult for a creditor to collect, this scenario is somewhat common. In response, clients will ask what they can do. There are a number of options. These include putting the ju
As the economy continues to emerge from the global recession in the late 2000s, one of the prevailing trends we have seen is the continuation of challenges to distressed investors that have employed a “loan-to-own” strategy. Boiled to its basics, the loan to own strategy is a method of investing by a distressed investor — frequently a private equity or hedge fund — that acquires the secured debt of a borrower at a discount (often deep) with the hope of either being paid at par or using the par value of the secured debt to acquire the company.
On April 29, 2014, Energy Future Holdings filed what it claims is a pre-packaged chapter 11 bankruptcy in Delaware. The bankruptcy, which ranks among the largest cases ever with over $36 billion in assets and nearly $50 billion in debt, is the product of an agreement with senior bondholders on the terms of a debt-for-equity swap.
Three months ago, the U.S. District Court in Delaware upheld the bankruptcy court’s decision in In re Fisker Auto. Holdings, Inc., which limited, for “cause,” the amount that the purchaser of a secured lender’s claim could credit bid in connection with an asset sale under section 363 of the Bankruptcy Code.
Finds Bankruptcy Court to be Proper Forum for Claim Objection Despite Forum Selection Clauses in Investor Agreements
The Southern District of New York recently reiterated the critical difference between creditor claims and equity interests in the bankruptcy context. In a recent opinion arising out of the Arcapita Bank bankruptcy case, the Court was faced with an objection to a proof of claim filed by an investor, Captain Hani Alsohaibi, who characterized his right to recovery against the debtors as being based on a “corporate investment.”
In Lodge v. Kondaur Capital Corp., Case No. 13-10919 (decided May 8, 2014), the United States Court of Appeals for the Eleventh Circuit decided an issue that it never previously addressed: whether a party could recover damages under 11 U.S.C. § 362(k) for emotional distress resulting from another party’s violation of the automatic stay in bankruptcy. In Lodge, the Court held that such damages were recoverable but could not be recovered in the particular circumstances of that case.