The United States Bankruptcy Court for the District of Delaware recently dismissed equitable subordination and fraudulent transfer claims filed by the Official Committee of Unsecured Creditors of Champion Enterprises, Inc. ("Champion") against more than 100 prepetition lenders to Champion (collectively, the "Defendants")1.

In the March 2008 issue, we discussed a decision from the In re Urban Communicators PCS, Ltd. Partnership1 case. In that decision, the United States Bankruptcy Court for the Southern District of New York held that under section 506(b) of the Bankruptcy Code, the Bankruptcy Court could limit the rate of postpetition interest to be paid to an over-secured creditor to an amount less than the contract interest rate.

In Aalfs v. Wirum (In re Straightline Investments, Inc.),1 the United States Court of Appeals for the Ninth Circuit considered whether a post-petition factoring of accounts receivable by the debtor was an avoidable transfer under section 549 of the Bankruptcy Code. The Court of Appeals affirmed the Bankruptcy Court, finding that the post-petition transfer had been properly avoided and that the lower court was justified in allowing the trustee both to recover the accounts receivable and their proceeds and to retain the consideration paid by the transferee.

In In re Bryan Road LLC,1 the United States Bankruptcy Court for the Southern District of Florida considered whether a waiver of the automatic stay provision included in a prepetition workout agreement is enforceable in the debtor’s subsequent bankruptcy. The Bankruptcy Court enforced the waiver and held the creditor was not bound by the automatic stay after engaging in a four-factor analysis of the agreement and the circumstances surrounding its execution. The Bankruptcy Court cautioned, however, that relief from stay provisions are neither per se enforceable nor self-executing.

A guarantor can be made bankrupt where the terms of the guarantee create a debt obligation.

An agreement with a company has gone into arrears. The vehicles may or may not have been sold. The company has placed itself into voluntary liquidation. Can the finance company take steps to protect itself if it suspects that there has been mismanagement or misappropriation of funds within the company? Yes. Where "prejudice" will be suffered by a creditor, the court can order a compulsory liquidation, where the activities of the company will be more vigorously examined than might otherwise be the case with a voluntary liquidation.

Where "prejudice" is suffered by a creditor or contributory, the court can order a compulsory liquidation despite a voluntary liquidation having already been entered into.

To avoid an asset reverting to a bankrupt after the end of his period of bankruptcy, the asset must be realised. An assignment of a beneficial interest for a future price does not amount to a realisation.

Where the entirety of a debt is not included in an agreement to settle, a creditor can continue to prove in a bankruptcy for the balance.

The absence of an intention to put assets out of the reach of creditors will thwart applications under the Insolvency Act to set declarations of trust or transfers aside.