Chapter 11 of the United States Bankruptcy Code is intended to allow financially stressed debtors to restructure their debt obligations through a plan of reorganization. Typically, a Chapter 11 plan places different types of claims in different classes and, subject to various requirements of the Bankruptcy Code, allows the debtor to pay only portions of the claims (and in certain circumstances not to pay certain claims at all). Moreover, the Bankruptcy Code allows a debtor the flexibility to structure a plan to defer the payment of certain claims.

In the case of In re: Exide Technologies, decided on June 1, 2010, the US Court of Appeals for the Third Circuit reversed two lower court decisions and held that a 1991 agreement between Exide Technologies and EnerSys Delaware Inc., which included a license to EnerSys for use of the “EXIDE” trademark, is not an executory contract that can be rejected by Exide in bankruptcy proceedings.

The Bankruptcy Appellate Panel for the Sixth Circuit has issued an opinion protecting and preserving a bank’s security interest in funds in the debtor’s bank account notwithstanding the fact that the bank released those funds to the trustee. In re Cumberland Molded Products, LLC, No. 09-8049 (6th Cir. B.A.P. June 23, 2010).

On July 2nd, the Sixth Circuit affirmed a bankruptcy court's finding that, under Kentucky law, a bank did not perfect its security interest in an auto loan until that security interest was noted on the title. Because perfection did not occur within 20 days after the debtor received possession of the auto, Section 547(c)(3) of the Bankruptcy Code did not protect the bank's loan from avoidance as a preferential transfer. Branch Banking and Trust Co. v. Brock.

In a recent decision, SEC v Byers,1 the Second Circuit Court of Appeals held that district courts possess the authority and discretion to bar the filing of involuntary bankruptcy petitions without the district court’s permission.

Masuda, Funai, Eifert & Mitchell routinely represents creditors in bankruptcy proceedings in order to protect their contractual and legal interests and rights to payment. The following is a list of some recent larger U.S. bankruptcy filings in various industries. To the extent you are a creditor to any of these debtors, or other entities which may have filed for bankruptcy protection, you as a creditor are entitled to certain protections under the Bankruptcy Code.

AIRLINES

Now that the American Land Title Association ("ALTA") has withdrawn the ALTA Form 21-06 Creditor's Rights Endorsement, what steps can a lender take to protect itself?

To recap, the Creditors' Rights Endorsement provided protection against loss or damage sustained by the lender in the event that the lender's mortgage was set aside due to a fraudulent conveyance or preference under the U.S. Bankruptcy Code, state insolvency statutes or other creditor's rights laws.

Intercreditor agreements between first and second lien lenders are created all the time and are therefore not usually glitzy topics for client updates. But the recent intercreditor dispute between Donald Trump and corporate raider Carl Icahn over control of Trump's Atlantic City casinos had all the drama and glamour of the gambling dens and billionaires involved, including two competing but confirmable plans and senior and junior creditors vying for ownership of a gaming empire and its attendant upside.

David Vladeck, Director of the FTC’s Bureau of Consumer Protection, recently sent a letter to creditors of XY Magazine, warning that the creditors’ acquisition of personal information about the debtor’s subscribers and readers in contravention of the debtor’s privacy promises could violate the Federal Trade Commission Act (“FTC Act”).

Bankruptcy-related developments during the first half of this year have sent shock waves
through the secured lending, derivative, and distressed debt trading communities. Several
notable decisions may significantly affect the way these entities operate and calculate risk,
and result in changes to standard documentation. Until recently, a proposed overhaul of
Bankruptcy Rule 2019 threatened to discourage distressed debt investors, including hedge
funds, from participating in bankruptcy proceedings as part of an ad hoc committee or group.