The COVID pandemic is going to increase bankruptcy filings in 2020 and 2021. Therefore, it is important to know some bankruptcy basics in order to maximize recovery. It is also important to retain bankruptcy counsel, but only after ensuring the likelihood of recovery and if the case/claims necessitate engagement of a bankruptcy specialist.
What kind of bankruptcy has been filed?
Commission for Lawyer Discipline v. Cantu Supreme Court of Texas, No. 18-0879 (October 25, 2019) Per Curiam (opinion available here)
The Supreme Court’s Decision in Mission Product Holdings, Inc. v. Tempnology
Many Chapter 11 debtors have reorganization plans that reject contracts in droves and they never look back. Why? Rejection is part of the debtor’s “fresh start”. A debtor “monetizes” its old contracts into prepetition claims, often paying only cents on the dollar in damages. But where does that leave counterparties? If that contract was a trademark license, the licensee might be in the catbird seat.
Amendments to the Federal Rules of Bankruptcy Procedure became effective on December 1, 2017, which impose affirmative obligations on secured creditors to protect their rights to distributions in a bankruptcy case. Previously, Bankruptcy Rule 3002(a) required only unsecured creditors and equity security holders to file proofs of claim or proofs of interest in a bankruptcy. Although often recommended, it was not statutorily necessary for a secured creditor to file a proof of claim in order to protect its rights.
Amendments to the Federal Rules of Bankruptcy Procedure became effective on December 1, 2017, which impose affirmative obligations on secured creditors to protect their rights to distributions in a bankruptcy case. Previously, Bankruptcy Rule 3002(a) required only unsecured creditors and equity security holders to file proofs of claim or proofs of interest in a bankruptcy. Although often recommended, it was not statutorily necessary for a secured creditor to file a proof of claim in order to protect its rights.
Many of us in the restructuring industry worked on Chapter 9 matters in the late 80’s and early to mid-90’s. Some were involved in large, exotic matters like Orange County, California. Most of us earned our stripes in repairing the state of affairs for numerous, smaller municipal improvement districts, levy improvement districts, road districts, and the like, both in and out of court. Recently, the City of Detroit caught a lot of attention in what appears to have been a successful restructuring.
The United States Supreme Court recently held in Husky International Electronics, Inc., v. Ritz1 that the term actual fraud, as used in 11 U.S.C. § 523(a)(2)(A), encompasses all forms of fraud and does not require a false representation. Several commentators tout this holding as a good result for lenders, as it may except certain debts from discharge in bankruptcy when there is evidence of intentional misconduct by the individual debtor.
UNITED STATES SUPREME COURT
Wellness Int'l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015)
Key Issue: Post-Stern v. Marshall, whether a Bankruptcy Court (as an Art. I court) has a proper delegation of authority from the District Court (as an Art. III court) to enter findings of fact and final orders on non-core issues upon the consent of the parties and, if so, whether consent must be express or may be implied?
UNITED STATES SUPREME COURT Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015) Key Issue: Post-Stern v. Marshall, whether a Bankruptcy Court (as an Art. I court) has a proper delegation of authority from the District Court (as an Art. III court) to enter findings of fact and final orders on non-core issues upon the consent of the parties and, if so, whether consent must be express or may be implied? Holding: In a 5/1/3 opinion, relying heavily on Commodity Futures Trading Comm’n v. Schor, 478 U. S.
Shore Chan Depumpo LLP v. Thrasher
Dallas Court of Appeals, No. 05-14-0697-CV (January 13, 2016)
Justices Fillmore, Stoddart (Opinion), and O’Neill