On March 4, 2014, the Supreme Court issued a unanimous opinion in Law v. Seigel, Case No. 12-5196, 571 U.S.

The debtor in Law listed his house on his bankruptcy schedules, claiming a homestead exemption in the amount of $75,000 under Cal. Civ. Proc. Code § 704.730(a)(1). The debtor represented that the house was encumbered by two liens: a note and deed of trust for $147,156.52 in favor of Washington Mutual Bank, and a second note and deed of trust for $156,929.04 in favor of “Lin’s Mortgage & Associates.” Based on these representations, the debtor made it appear as if there was no nonexempt value in the house that the trustee could realize for the benefit of the estate.

Introduction

It seems that most bankruptcy decisions by the U.S. Supreme Court involve individual debtors, and the Supreme Court’s latest opinion is no exception. Even though the decision is not in a business bankruptcy case, it examines the bankruptcy court’s powers under Section 105(a) of the Bankruptcy Code.

A new decision in Ash v. North American Title Co. holds that (1) contract damages based upon a bankruptcy were not foreseeable, and (2) an escrow holder was  entitled to a jury instruction  as to intervening or superceding causes (i.e., the bankruptcy).  The decision also highlights a potential for some judges to try to impose greater responsibilities on escrow holders.

In a recent decision in a Delaware Chapter 11 case, the court took the unusual step of capping the amount of a secured lender’s loan that could be used in the lender’s credit bid in a Section 363 sale.

If you have negotiated an intercreditor agreement, you are familiar with the lengthy bankruptcy waivers typically drafted by counsel for first-lien lenders.

Although property obtained by a debtor after filing for bankruptcy is usually safe from creditors, a recent case from the Ninth Circuit Bankruptcy Appellate Panel allowed a Chapter 7 Trustee to sell real property obtained by the debtors post-petition.

The Delaware State Legislature recently amended Article IV, section 11 of the Delaware Constitution to add United States Bankruptcy Courts to the expanding list of courts and agencies that may certify questions to the Delaware Supreme Court. The list already included other Delaware courts, the United States Supreme Court, a Court of Appeals of the United States, a United States District Court, the United States Securities and Exchange Commission, or the highest appellate court of any other state. See Del. Const. art. IV, § 11(8).

A recent decision in the bankruptcy case of Fisker Automotive Holdings, Inc., et al. has called into question a long-held belief that secured creditors hold dear: that debt purchased at a discount can nonetheless be credit bid at its full face amount at a collateral sale. While it remains to be seen how other courts will interpret Fisker, this decision has the potential to restrict participation in Bankruptcy Code section 363 sales and dampen liquidity in the robust secondary markets.