Given the current state of the economy, it should come as no surprise that business related bankruptcy filings increased 41.6 percent and non-business bankruptcies increased 28.4 percent between June 30, 2007, and June 30, 2008, with more than one million Americans filing for bankruptcy during calendar year 2007, according to the Administrative Office of the U.S. Courts.

There is a sense of inevitability that Congress will pass legislation allowing a Chapter 13 bankruptcy plan (also referred to as a wage-earner’s plan) to "cram-down" the value of a mortgage on a consumer's principal residence to its market value and/or reset debtor interest rate and monthly payments to an amount that permits them to remain in their homes. This alert summarizes the latest version of H.R.

In recent opinions, the United States Courts of Appeals for the Fifth and Seventh Circuits have revisited the doctrine of equitable subordination and have underscored the requirement that, before a court can equitably subordinate a creditor’s claim, the court must find that other creditors have been harmed by the actions of the creditor. Importantly, both decisions stress that equitable subordination is meant to be remedial and not punitive, and may not be imposed merely because a creditor has engaged in misconduct.

In these uncertain times, boards of directors face many important decisions about a company’s present and future actions, including reduction or suspension of dividends, layoffs, asset sales, unsolicited takeover offers, liquidation and even insolvency proceedings. In making these decisions, directors should remember their overarching responsibility for continuing oversight and informed decision-making.

On February 23, 2009, Pennsylvania became the second state to recognize an "ordinary course of business" exception to preference actions brought under a state insolvency statute where the defense is not expressly provided for in the statute. In Joel S. Ario, Insurance Commissioner of the Commonwealth of Pennsylvania, in His Official Capacity as Liquidator of Reliance Insurance Company, Appellant v. H.J. Heinz Company, H.J. Heinz Company, L.P., H.J. Heinz Finance Company, and Portion Pac, Inc., et al., Appellees, No. 21 MAP 2006 (Pa. Feb.

This morning, March 2, 2009, American International Group, Inc. ("AIG") announced a loss of $61.7 billion for the fourth quarter of 2008, a total net loss for 2008 of $99.29 billion, and a major restructuring of its operations, including a new federal infusion of $30 billion, forgiveness of certain debts, and relaxation of prior bailout terms. For comparison purposes, all insured losses for all insurance companies (not just AIG) relating to Hurricane Katrina are estimated at slightly more than $40 billion.

In Thabalt v Chait (Nov. 2008), the U.S. Court of Appeals for the Third Circuit upheld an award of damages against PriceWaterhouseCoopers LLP (PWC) based on PWC’s alleged negligent audit of the Ambassador Insurance Company. Plaintiff, the Vermont Insurance

Recent declines in the trading prices of many companies' debt securities has created opportunities for those companies to reacquire a portion or all of that debt at substantial discounts through open market repurchases, privately negotiated transactions and tender offers. In some cases, the opportunities for discounted repurchases come to companies directly from investors seeking to sell the debt back in order to meet their own cash needs or otherwise obtain liquidity for thinly-traded securities.

One of the most significant tax provisions contained in the recently enacted American Recovery and Reinvestment Act of 2009 (“ARRA”) might prove helpful to certain taxpayers looking to restructure their balance sheets.

When an insurance company becomes insolvent, one key issue is the extent to which the insurer's liquidator may recover prior payments made by the insurer. On February 23, 2009, the Supreme Court of Pennsylvania issued a significant decision limiting such recoveries. The court held that payments made by a failed Pennsylvania insurance company in the ordinary course of business are not recoverable by the statutory liquidator of the insolvent insurer.