The U.S. Supreme Court resolved a split among the circuits, holding that assets in non-spousal inherited individual retirement accounts are not exempt or protected from claims of the heir’s creditors. Clark v. Rameker, 573 U.S. ___ (2014) (No. 13-299; June 12, 2014).
“Inherited” IRAs hold funds from persons who established Individual Retirement Accounts for their own use and died before depleting the funds in those accounts. The U.S. Supreme Court affirmed the judgment by the Seventh Circuit Court of Appeals {In re Clark, 714 F.3d 559 (7th Cir. 2013)}.
Readers may recall that, according to at least one bankruptcy court, chapter 9 debtors are not required to obtain bankruptcy court approval of compromises and settlements.
One of the more effective risk-mitigation legal tools used by senior real estate lenders is the single purpose entity borrower. Among other things, having a single purpose, bankruptcy remote borrower makes avoiding the risks of bankruptcy easier. Even in bankruptcy, if the borrower is truly single purpose, and it keeps the universe of creditors small, the senior secured lender will have an easier time defeating any plan of reorganization proposed by the borrower because it will control all of the legitimate classes of creditors by virtue of th
In the approach to bankruptcy, struggling businesses may experience problems performing their contracts, and counterparties often see trouble on the horizon. What can a non-debtor counterparty do to protect itself? And how are its rights impaired when the debtor finally commences a bankruptcy case?
In In re Physiotherapy Holdings, Inc., 506 B.R. 619 (Bankr. D. Del. 2014) (No.
Lenders and their attorneys are conditioned to believe that being over-secured is as good as life gets for a creditor. Lenders want to secure repayment with collateral that is valuable and liquid, while their attorneys ensure that the security interest is properly perfected. But, post-closing confidence in a job well done can quickly evaporate if the borrower files a bankruptcy case intending to sell the collateral.
As one bankruptcy court has said, “[b]ecause deals are the heart and soul of the [c]hapter 11 process, bankruptcy courts enforce them as cut by the parties.” Unfortunately, however, deals do not always turn out as the parties expected and there is sometimes litigation to determine what exactly was bargained for in a chapter 11 plan.
Secured creditors naturally want to be repaid. Sometimes secured creditors go as far as asking a debtor to waive its right to seek bankruptcy protection. Although such clauses are frequently held to be unenforceable, we previously have discussed exceptions for LLCs.
In In re Residential Capital, LLC, the U.S. Bankruptcy Court for the Southern District of New York recently granted an oversecured creditor's request for postpetition interest at the contractual default rate, even though the debtor was insolvent. In doing so, the Bankruptcy Court rejected an argument that awarding postpetition interest at the default rate (which was 4% higher than the non-default rate) would provide an undue windfall to the oversecured creditor and harm unsecured creditors.
Why This Decision Is Important