In In re Fisker Automotive Holdings, Inc., 2014 BL 13998 (Bankr. D. Del. Jan. 17, 2014), leave to app. denied, 2014 BL 33749 (D. Del. Feb. 7, 2014), certification denied, 2014 BL 37766 (D. Del. Feb. 12, 2014), a Delaware bankruptcy court limited a creditor's ability to credit bid its debt in connection with the sale of a hybrid car manufacturer's assets.

Global—On 26 October 2012, the U.S. Court of Appeals for the Second Circuit, in a ruling that may impact sovereign debt restructurings, upheld a lower court order enjoining Argentina from making payments on restructured defaulted debt without making comparable payments to bondholders who did not participate in the restructuring.

The ready availability of credit over the first seven years of the past decade fuelled a massive, property-led consumer boom. Although perhaps a long time coming, the restriction in the continuing availability of such credit since mid 2007 has resulted in a serious recession. The scale of the problems will take time to unwind but given the continuing restrictions on credit, consumers are spending less, especially on high-value discretionary items.  

Overview

Editor’s Note: This is a new one for us at The Bankruptcy Cave. We are starting a series of primers, covering a narrow range of law but with more depth than just “here’s a recent case.” And also, we have our first edition of “The Bankruptcy Cave Embedded Briefs” – top quality briefs on a certain issue, feel free to download to your own form files or come back and grab ’em when you need ’em. Let us know what you think – we are always trying to improve things around here for our readers.

Individual debtors with old tax debts relating to late-filed tax returns may be surprised to find that those tax debts may not be dischargeable under section 523(a) of the Bankruptcy Code due to the lateness of the tax filing. There is a current Circuit split regarding whether a late tax filing constitutes a “return” at all, which is critical to the dischargeability inquiry. The Ninth Circuit weighed in last week in In re Smith, 2016 WL 3749156 (9th Cir. July 13, 2016), further cementing the split.

On January 17, 2014, Chief Judge Kevin Gross of the Bankruptcy Court for the District of Delaware issued a decision  limiting the right of a holder of a secured claim to credit bid at a bankruptcy sale. In re Fisker Auto. Holdings, Inc.,  Case No. 13-13087-KG, 2014 WL 210593 (Bankr. D. Del. Jan. 17, 2014). Fisker raises significant issues for lenders who  are interested in selling their secured debt and for parties who buy secured debt with the goal of using the debt to  acquire the borrower’s assets through a credit bid.

Over recent years in this economic climate, it has been increasingly common for distressed companies to be sold in an effort to rescue the entity. On first blush, this seems a relatively simple exercise although care is required to ensure that no unexpected tax charges arise, especially if there is restructuring of the debt. The taxation rules governing the end of business life are varied and complex and the sooner that thought is given to taxation in respect of the insolvent company the better this will be for the seller, the remaining group and for any buyer.

Anyone who obtains title insurance, whether as an owner or a lender, should be aware of a recent abrupt and significant change in title insurance practices across the country. Title companies have recently stated that they will no longer delete creditors’ rights exclusions from, or add affirmative creditors’ rights coverage as an endorsement to, any of their issued title policies.

The UK’s Insolvency Act 1986 sets out in s.123 various tests to determine whether a company should be deemed unable to pay its debts. The relevance of these tests to distressed companies is obvious: deciding as they do when it is appropriate to seek an administration order or present a winding up petition. They also help determine directors’ duties, antecedent transactions and issues such as wrongful and fraudulent trading.