A series of cases decided by the federal district court in Chicago holds that a properly perfected secured creditor can waive its right of priority in collateral in favor of a judgment lien creditor if it fails to properly act against its collateral following a borrower’s default.
“[T]he debtor … did not retain sufficient rights in the assigned rents under Michigan law for those rents to be included in the bankruptcy estate,” held the U.S. Court of Appeals for the Sixth Circuit on May 2, 2017. In re Town Center Flats LLC, 201 U.S. App. LEXIS 7733, *2 (6th Cir. May 2, 2017). Relying on Michigan law and the language of the relevant documents, the court reversed the bankruptcy court’s holding that gave the Chapter 11 debtor access to the assigned rents as operating funds during its reorganization.
Relevance
In a significant ruling impacting commercial real estate lenders in Michigan, the Sixth Circuit Court of Appeals has ruled that an absolute assignment of rents that had been fully perfected (by demanding payment from tenants to the lender and related recording) precludes a debtor from asserting that such rents can be used as cash collateral in bankruptcy. The reasoning is that these rents do not constitute property of the bankruptcy estate. As such, the debtor could not proceed with its Chapter 11 case.
Background
Ten Cardinal Rules for a Proper Repossession Author: Franklin Drake Smith Debnam Narron Drake Saintsing & Myers LLP Raleigh, North Carolina WHITEPAPER TEN CARDINAL RULES FOR A PROPER REPOSSESSION by Franklin Drake Introduction: Creditors too often expose themselves needlessly to disgruntled debtors' claims for wrongful repossession. Avoiding the legal expense of defending such claims is just a matter of correct procedures and common sense. Here are 10 common sins and how to stay righteous. I. BE SURE YOU REALLY DO HAVE AN ENFORCEABLE LIEN ON THE GOODS! A.
The United States District Court for the District of Massachusetts (the District Court) recently issued an opinion in the Paul Sagendorph bankruptcy case reversing the Bankruptcy Court's holding that a debtor can force a secured creditor to take title to its collateral in complete satisfaction of the creditor's secured claim.1 In reversing the decision of the Bankruptcy Court, the District Court held that the plain language of Sections 1322(b)(9) and 1325(a)(5)(C)2 does not empower a debtor to force a secured creditor to accept title to its collateral over that creditor's objection.3
What is “redemption” in bankruptcy?
In a recent decision in the Southern District of New York, the court addressed a challenge to a secured-for-unsecured debt exchange offer that raised and answered a host of questions on the potential vulnerability of offers of this type. In Waxman v. Cliffs Natural Resources (SDNY December 6, 2016), the court dealt with standing to pursue a challenge; TIA §316(b) after Marblegate and MeehanCombs/Caesars; the no-action clause and allegations of conflict of interest of the trustee; the remedies clause; and discrimination against non-QIBs.
In the recent decision of Lehman Bros. Special Fin. Inc. v. Bank of Am. Nat’l Assoc. (In re Lehman Bros. Holdings Inc.), 2016 WL 3621180 (Bankr. S.D.N.Y. June 28, 2016), the U.S.
On June 28, 2016, Judge Chapman of the U.S. Bankruptcy Court for the Southern District of New York ruled in Lehman Brothers Special Financing Inc. v. Bank of America National Association, et al.(Adv. Proc. No. 10-03547 (Bankr. S.D.N.Y.
In a pair of decisions in 2015, the United States Bankruptcy Court of the District of Delaware determined that neither the first lien notes trustee nor the second lien notes trustee of Energy Future Intermediate Holdings Corp. (“EFIH”), a subsidiary of Energy Future Holdings (“EFH”), was entitled to receive a make-whole on the repayment of the corresponding indebtedness resulting from the acceleration of that debt in the EFH bankruptcy case.