Settlement of collection disputes over amounts and payment terms for bond-related claims, including in bankruptcy cases, involves issues of binding minority bondholders and releasing the indenture trustee, as well as straightforward determinations of collectability economics.   Bondholders unhappy with a proposed settlement can be bound nevertheless when the deal is incorporated into a bankruptcy plan of reorganization and majority bondholders out-vote them, but only if certain requirements are met.  A recent bankruptcy court decision, In re Lower Bucks Hosp., 471 B.R.

The Eighth Circuit Court of Appeals recently held in Lewis Brothers Bakeries Incorporated and Chicago Baking Company v. Interstate Brands Corporation (In re Interstate Bakeries Corporation), 690 F.3d 1069 (8th Cir. Aug.

In Shelton v. CitiMortgage, Inc. (In re Shelton), --- B.R. --- (B.A.P. 8th Cir. Sept. 24, 2012), the Bankruptcy Appellate Panel for the Eighth Circuit Court of Appeals determined that a secured creditor’s lien cannot be avoided simply because the creditor’s claim was disallowed as being filed after the proof of claim bar date.

When being sued, corporate and individual defendants should always confirm that the plaintiff has not been previously discharged in bankruptcy and failed to disclose the claim in the proceeding as an asset of the bankruptcy estate. In Guay v. Burack, 677 F.3d 10 (1st Cir. 2012), the plaintiff brought numerous claims against various governmental entities, governmental officials and a police officer.

On August 28, 2012, the United States District Court for the Northern District of Texas vacated a series of bankruptcy court rulings that had blocked Vitro SAB’s noteholders from filing involuntary bankruptcy petitions against Vitro’s non-debtor subsidiary guarantors.  In a decision authored by Chief Judge Sidney A.

Affirming the bankruptcy and district courts below, the Third Circuit Court of Appeals, in In re Federal-Mogul Global Inc., 684 F.3d 355 (3d Cir. 2012), held that a debtor could assign insurance policies to an asbestos trust established under section 524(g) of the Bankruptcy Code, notwithstanding anti-assignment provisions in the policies and applicable state law.

Asbestos Trusts in Bankruptcy

In August 2012, the Advisory Committee on Bankruptcy Rules of the Judicial Conference of the United States (the “Advisory Committee”) announced proposed amendments to the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) and the Official Bankruptcy Forms. Changes have been proposed to Bankruptcy Rules 1014, 7004, 7008, 7012, 7016, 7054, 8001–8028, 9023, 9024, 9027, and 9033, and Official Forms 3A, 3B, 6I, 6J, 22A-1, 22A-2, 22B, 22C-1, and 22C-2, which include the “means test” forms.

In 1988, Congress added section 365(n) to the Bankruptcy Code, which grants some intellectual property licensees the right to continued use of licensed property notwithstanding rejection of the underlying executory license agreement by a debtor or bankruptcy trustee. The addition came three years after the Fourth Circuit Court of Appeals ruled in Lubrizol Enters., Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985), that if a debtor rejects an executory intellectual property license, the licensee loses the right to use any licensed copyrights, trademarks, and patents.

Before soliciting votes on its bankruptcy plan, a chapter 11 debtor that has filed for bankruptcy typically must obtain court approval of its disclosure statement. As part of the disclosure-statement approval process, interested parties are afforded the opportunity to object. For example, a party may object on the grounds that the disclosure statement lacks sufficient information about the debtor. Sometimes, however, a party objects to the disclosure statement because the chapter 11 plan described by the statement cannot be confirmed.

On September 28, 2012, Southern Air Holdings ("Southern Air" or "Debtor"), along with various related entities, filed chapter 11 petitions in the United States Bankruptcy Court for the District of Delaware.  As stated in its Declarations in Support of Chapter 11 Petitions and First Day Relief (the "Declaration" or "Decl."), Southern Air describes itself as a "long-haul, wide-body air cargo" provider for governments and commercial users.  Decl.