The Bottom Line

It should be common knowledge that a secured creditor, having received proper notice in a Chapter 11 bankruptcy case, faces the risk that its lien will be extinguished if it fails to object to a reorganization plan that does not specifically preserve the lien. Apparently, however, not all secured lenders realize this risk, and some fall prey to a trap for the unwary in §1141(c) of the Bankruptcy Code by failing to protect their liens and place their collateral at risk.

Is anyone ready for a test on bankruptcy appellate jurisdiction?  For the second time in a week, the Sixth Circuit addressed its appellate jurisdiction in bankruptcy appeals, this time in the context of orders denying the substantive consolidation of two separate chapter 7 bankruptcy estates, In re Cyberco Holdings and Teleservices Group.   On the heels of its decision in Lindsey v.

A Florida-based import-export company has filed for Chapter 7 protection in bankruptcy court, listing more than $204 million in liabilities from litigation over its role in the import from China of powdered milk contaminated with melamine. In re Exim Brickell, LLC, No. 13-28502 (U.S. Bankruptcy Ct., S.D. Fla., filed August 3, 2013). Exim Brickell, LLC declared $300 in office furniture as its only asset.

The U.S. Court of Appeals for the Fifth Circuit held on August 5 that a secured lender’s disputed “lien on [the debtor’s] principal asset survived . . . confirmation of [the debtor’s] Chapter 11 . . . reorganization plan” because the lender had not participated in the bankruptcy case.S. White Transportation, Inc. v. Acceptance Loan Co., 2013 WL 3983343, *1,*3 (5th Cir. Aug. 5, 2013). Had the lender participated in the case, the court reasoned, its lien might have been avoided.Id., at *1, citingIn re Ahern Enterprises, Inc., 507 F.3d 817, 822 (5th Cir.

The “safe harbor” provisions of the Bankruptcy Code protect firms that trade derivatives, and other participants in financial and commodity markets, from the rigidity that bankruptcy law imposes on most parties. Since their inception in 1982, the safe harbor statutes have gradually grown broader, to reflect a Congressional intent of protecting against secondary shocks reverberating through those markets after a major bankruptcy. The liberalizing of safe harbors traces – and may well be explained by – the rapidly expanding use of derivatives contracts generally.

In re Majestic Star Casino, LLC, F.3d 736 (3rd Cir. 2013), the U.S. Court of Appeals for the Third Circuit broke from other courts by holding that S corporation status (or "qualified subchapter S subsidiary" or "QSub" status) is not property of the estate of the S corporation's bankruptcy estate. Other Circuits have routinely held that entity tax status is property of the estate.

The recentfiling by the City of Detroit for bankruptcy—the largest such municipal filing in history—has brought with it an unexpected art law twist.  Namely: to what extent can, or should the collection of the Detroit Institute of Arts be used to satisfy the city’s creditors.  As one might expect, the differences between what the city can do, what it should do