In re Lehman Bros. Holdings Inc., 513 B.R. 624 (Bankr. S.D.N.Y. 2014)
A purchaser of residential mortgage-backed securities filed proofs of claim based on alleged misrepresentations by the debtors in offering materials distributed in connection with sale of the securities. The debtors objected and sought to subordinate the claims as claims arising from securities “of” the debtors.
Secured creditors often oppose plans where the only accepting class appears to be one created by the debtor through separate classification of claims when the claims have little in common but their acceptance of the plan and have more in common with other claims. A recent decision by the United States District Court for the Eastern District of North Carolina provides such creditors with additional support in their fight against separate classification.
In an effort to minimize the risk of loss in connection with a loan default, lenders often employ creative means to make it difficult, if not impossible, for a borrower to file bankruptcy. Lenders are generally aware that the right to seek bankruptcy protection is a fundamental constitutional right, given the inclusion of Congressional power to establish uniform laws on bankruptcy set forth in Article 8 of the U.S. Constitution.
BACKGROUND
The ability of a foreign debtor to avail itself of the protections of the Bankruptcy Code, such as the automatic stay, with respect to its property located within the United States is one of the most fundamental and valuable tools available to foreign debtors with domestically located property. When a foreign debtor obtains “recognition” of its principal insolvency proceeding by U.S.
Chapter 15 of the Bankruptcy Code provides mechanisms for dealing with cases of cross-border insolvency. On Oct. 6, 2014, the U.S. Supreme Court, in Jaffé v. Samsung Electronics Co., Ltd., denied review of a decision of the U.S. Court of Appeals for the Fourth Circuit, upholding a bankruptcy court’s determination that a foreign debtor in a Chapter 15 case could not terminate its intellectual property licenses under German law, where such action would deprive the licensees of the debtor’s U.S.
As many areas continue to rebound slightly from the real-estate downturn, much litigation still exists related to the exposure of guarantors for corporate-entity real estate loans. In many instances a corporation or Limited Liability Company (LLC) may have filed for Chapter 11 in an effort to stave off a foreclosure and restructure the secured debt. However, it is well settled that a corporate bankruptcy case does not operate to discharge a guaranty from a guarantor who is not in bankruptcy.
Consumer debtors file bankruptcy for many of reasons, but all ultimately want the same thing: a discharge of their debts. Stated very generally, a bankruptcy discharge operates to remove the personal liability of a consumer debtor from his or her pre-petition debts. Depending on whether a debtor files Chapter 7 or Chapter 13 bankruptcy, they can obtain a discharge within a few months after filing bankruptcy or following the completion of a five year plan of reorganization. During bankruptcy, a debtor is protected by the automatic stay.
On September 26, 2014, the United States Court of Appeals for the Second Circuit, overturning decisions by the Bankruptcy Court and the District Court for the Southern District of New York, held that the Bankruptcy Court was required to review under section 363 of the Bankruptcy Code the transfer of a claim by a chapter 15 debtor with a recognized foreign main proceeding pending in the British Virgin Islands (the “BVI”).1 In a case under chapter 15 of the Bankruptcy Code in which a foreign main proceeding has been recognized, section 1520(a)(2) of the Bankr
Though often overlooked, bankruptcy sales can be a real boon to businesses looking for a great deal. Prospective purchasers must, of course, interface with the bankruptcy court, so these companies must understand the lay of the land when looking for a bargain.