One of the significant changes brought about by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA") was the treatment of loans secured by automobiles in Chapter 13 cases. Prior to BAPCPA, debtors were permitted to "cram down" the secured portions of automobile loans to the fair market value of the collateral. This often resulted in significant reductions to claims secured by automobiles.

A recent ruling in the Delphi Corporation, et al. ("Delphi") bankruptcy case calls into question the effectiveness of power of attorney provisions found in many claim purchase agreements. Specifically, on February 26, 2008, United States Bankruptcy Judge Robert D. Drain, presiding over the Delphi bankruptcy proceeding, held that claims purchasers could not submit cure notices in reliance on powers of attorney.

Delphi Sent Cure Notices Only to Contract Counterparties

On March 26, 2008, the United States Supreme Court heard oral argument in the case of State of Florida Department of Revenue v. Piccadilly Cafeterias, Inc. to consider the United States Court of Appeals for the Eleventh Circuit's ruling that a bankruptcy court may exempt certain state and local taxes in a sale approved prior to confirmation of a chapter 11 plan under § 1146(c) of the Bankruptcy Code.

Introduction

Section 1146(a) (formerly, and for the purposes of this case § 1146(c)) of the Bankruptcy Code provides:

The United States District Court for the Central District of California has reversed a bankruptcy court ruling allowing two law firms—Snyder Miller & Orton LLP (SMO) and Morgan Lewis & Bockius LLP (MLB)—to serve as "special insurance counsel" to address insurance and insurance-coverage-litigation-related matters under the narrow special purpose standards of § 327(e). In re Thorpe Insulation Co., No. CV08-00246-DSF (C.D. Cal. Apr. 22, 2008). Citing In re Congoleum Corp., 426 F.3d 675 (3d Cir.

With US Circuit Courts split on the issue of whether bankruptcy courts have the power to release third parties from creditors’ claims without the creditors’ consent, a move known as non-consensual third-party release, the Seventh Circuit recently weighed in the affirmative in In re Airadigm Communications, Inc.1 With the split widening between the circuits on this matter, it seems more likely than ever that the Supreme Court could weigh in on and decide this critical issue to lenders and others.2

One of the hallmarks of chapter 11, and bankruptcy jurisprudence in general in the U.S., is the fundamental right of creditors and other stakeholders to have a meaningful voice in the proceedings concerning matters that affect their economic interests.

Principles of corporate governance that determine how a company functions outside of bankruptcy are transformed and in some cases abrogated once the company files for chapter 11 protection, when the debtor's board and management act as a "debtor-in-possession" ("DIP") that bears fiduciary obligations to the chapter 11 estate and all stakeholders involved in the bankruptcy case.

On January 31, 2008, less than two years after the institution of their bankruptcy cases, Dana Corporation and its affiliated debtor companies became one of the first large manufacturing entities with fully funded exit financing to emerge from chapter 11 under the recently revised Bankruptcy Code.

Valuation is a critical and indispensable part of the bankruptcy process. How collateral and other estate assets (and even creditor claims) are valued will determine a wide range of issues, from a secured creditor’s right to adequate protection, post-petition interest, or relief from the automatic stay to a proposed chapter 11 plan’s satisfaction of the “best interests” test or whether a “cram-down” plan can be confirmed despite the objections of dissenting creditors.

In a May 23, 2008 decision, the United States Bankruptcy Court for the District of Delaware ruled that BBB-rated mortgage-backed notes are eligible for the Bankruptcy Code's repurchase agreement safe harbor as “interests in mortgage loans”. The court also held that a repurchase agreement constituted a sale, as opposed to a financing governed by UCC Article 9 -- the first decision on this topic since the financial contract safe harbors were expanded under the 2005 amendments to the Bankruptcy Code.