When the Fifth Circuit, in a case of first impression for that circuit and all of its sister circuit, last year ruled in In re Chilton, 11-40377, 2012 WL 762924 (5th Cir. Mar. 12, 2012) 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), many thought the issue was settled.

Given the commonality in today’s marketplace of complex corporate capital structures that employ multiple layers of secured debt, existing and potential creditors need to be increasingly aware of the rights and limitations provided for in subordination or intercreditor agreements. These agreements are often entered into between the existing lender or debt holder and a new lender. They often restrict the actions of subordinated lenders upon the debtor’s filing for bankruptcy protection, including denying their right to vote on the debtor’s plan of reorganization.

Buyers of assets through the bankruptcy court process seek comfort and solace in the entry of a sale order providing for the transfer of assets “free and clear” of all liabilities. Except for those liabilities expressly assumed by the buyer and new owner, the bankruptcy court order typically includes exacting and precise language transferring those assets, under the imprimatur of the United States Bankruptcy Court, free and clear of all liabilities.

In April, the Seventh Circuit Court of Appeals split with the Fifth Circuit – and other lower courts – on an issue at the intersection of bankruptcy and trusts and estate law. InIn re Clark, 714 F.3d 559 (7th Cir. 2013), the court held that funds in an individual retirement account inherited from someone other than the bankrupt debtor’s spouse are not “retirement funds” within the meaning of the United States Bankruptcy Code and are, therefore, available to pay creditors of the debtor-heir.

On June 26, 2013, US Bankruptcy Judge Martin Glenn, overseeing the chapter 11 case of Residential Capital, LLC (ResCap), unsealed a 1,900-page report produced by court-appointed examiner, Arthur J. Gonzalez, and his professionals, Chadbourne & Parke LLP and Mesirow Financial Consulting, LLC. The Examiner Report was the culmination of a ten-month investigation that identified amyriad of causes of action, potentially worth billions of dollars, arising fromdozens of transactions involving ResCap's parent, Ally Financial Inc., its subsidiary Ally Bank, and Cerberus.

Pre-financial crisis, interest rate derivatives were widely recognized as a valuable part of the municipal issuer’s financial toolkit. Post-crisis, they have been a thorn in the side of many issuers, resulting in expensive litigation with failed swap providers – most notably the Lehman and Ambac derivatives trading subsidiaries – and public criticism of municipal issuers said to have fallen prey to more sophisticated providers.

The US District Court for the Southern District of New York affirmed an order rejecting an objection to the confirmation of a Chapter 11 Plan of Reorganization for Dynegy, Inc. and Dynegy Holdings, LLC (together, Dynegy) for a lack of standing.

Irving Picard, the trustee appointed under the Securities Investor Protection Act (the “Trustee”), 15 U.S.C. § 78aaa et seq. (“SIPA”), to administer the estate of Bernard L. Madoff Investment Securities, LLC, has brought hundreds of actions seeking to avoid transfers that were purportedly fraudulent or preferential (the “Avoidance Actions”). Some of the Avoidance Action defendants sought to withdraw the reference to the Bankruptcy Court, basing their motions on the Supreme Court’s decision in Stern v. Marshall, 131 S. Ct. 2594 (2011).

Ad Hoc Group of Vitro Noteholders v. Vitro S.A.B. de C.V., 701 F.3d 1031 (5th Cir. 2012)

CASE SNAPSHOT

Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, 686 F.3d 372 (7th Cir. 2012)

CASE SNAPSHOT

In a matter of first impression in the Seventh Circuit, the court held that a chapter 7 trustee’s rejection of an executory contract did not terminate the trademark license contained therein.

FACTUAL BACKGROUND