arnoldporter.com PIECES OF THE PUZZLE A Newsletter from Arnold & Porter’s Private Client Services Team Bankruptcy 101 for Investors: Acquiring a Debtor’s Assets in a Bankruptcy Case By Lisa Hill Fenning The first article in this series discussed the immediate impact of a bankruptcy filing on investors and creditors, including the scope of the automatic stay and early case events. This article focuses upon the disposition of a debtor’s assets and business as the result of a bankruptcy filing: how and when the assets or business may be sold, and what to do if you want to buy them.

Last week’s decision by the U. S. Court of Appeals for the Third Circuit in In re: Forever Green Athletic Fields, Inc., No. 14-3906 (3d Cir. Oct. 16, 2015) held that an involuntary bankruptcy petition filed under 11 U.S.C. § 303 may be dismissed for bad faith. The decision places another hurdle for creditors to surmount when considering whether to put a debtor in bankruptcy and creates another means for debtors to oppose such filings. It also enumerates the standard for evaluating whether a filing is in bad faith.

When a bankruptcy case is dismissed for cause pursuant to section 1112(b) of the Bankruptcy Code, the effect of the dismissal on orders entered during the case is not always clear.  A recent District of Delaware decision, 

Lenders make secured loans expecting to recover the collateral in the event of a default. The collateral is sold to satisfy the debt. Experienced secured lenders understand that the automatic stay in bankruptcy stops recovery of collateral recovery without permission of the court. However, many secured lenders do not understand rights related to the statement of intention every debtor is required to send to each secured creditor.

There are no secrets in bankruptcy, or at least only in very limited circumstances, according to a recent decision in 

Bankruptcy courts in the U.S. are widely viewed as favorable fora for debtors, trustees and creditors’ committees to pursue creative and difficult causes of actions against deep-pockets lenders and others in an attempt to augment the resources available for distributions to creditors. In yet another case, however, the District Court for the Southern District of New York (after withdrawing the litigation from the bankruptcy court), recently dismissed many of the claims asserted by the Lehman debtors against J.P. Morgan Chase Bank, N.A.

Technology companies can preserve both significant sums of money and valuable intellectual property rights if they take action when a customer or business partner files for bankruptcy protection. Far less effort is usually required to preserve these rights than what may be involved in a major piece of litigation; but, in almost every case, the company must take timely steps to ensure that its interests are protected.

The retail industry appears to be reaching the crossroads of complete transformation due to a significant shift in consumer sentiment.  Those companies that can embrace the change quickly enough will likely survive.  Those that cannot may simply become legends.  Indeed, we have seen well-known companies such as RadioShack, Brookstone,

Individuals filing for bankruptcy pursuant to Chapter 7 of Title 11 of the United States Code (the "Bankruptcy Code") generally do so to have their debts discharged and receive the proverbial "fresh start."2 The same, however, is not true for corporations.

There has been a relatively recent uptick in plaintiffs’ counsel filing putative class actions in multiple state and federal courts for alleged violations of a debtor’s bankruptcy discharge injunction based upon the debtor’s receipt of post-discharge mortgage-related communications. These claims assert putative class action challenges to post-discharge communications alleged to be attempts at personal collection of the discharged mortgage debt.