Bankruptcy Court holds that Section 521(a)(2) is more than a mere notice statute and that a chapter 7 debtor’s stated intent to surrender real property under that provision means that a debtor must allow the mortgagee to take possession through foreclosurewWithout interference or impediment

Under section 365(d)(4) of the Bankruptcy Code, an unexpired lease of nonresidential real property is automatically deemed rejected if a debtor-lessee does not assume such lease within 120 days of its bankruptcy filing, or within 210 days with court permission.

A recent decision by the U.S. District Court for the Western District of Washington found that certain distressed debt funds were not “financial institutions” under the definition of “Eligible Assignee” in the applicable loan agreement and thus were not entitled to vote on the debtor’s chapter 11 plan of reorganization. The District Court decision affirmed a bankruptcy court decision enjoining loan assignments to the funds and recently denied the funds’ motion to vacate the decision.”¹

A nightmare scenario for a lender: you lend $1.2 million to a debtor to purchase equipment; you take a first priority security interest in the equipment; one day another company calls to tell you it purchased the equipment at a bankruptcy auction you never knew about, for 10-20% of what you’re owed; you try to overturn the sale, but cannot, because the sale is consummated and your appeal is now “statutorily moot.”  Could this happen?  It happened in a recent Oregon case.

Recent Developments in Bankruptcy and Restructuring
Volume 13 l No. 3 l May–June 2014 JONES DAY
Business
Restructuring
Review
Eighth Circuit Expands Subsequent New Value
Preference Defense in Cases Involving Three-Party
Relationships
Charles M Oellermann and Mark G. Douglas
A bankruptcy trustee or chapter 11 debtor-in-possession has the power under section
547 of the Bankruptcy Code to avoid a transfer made immediately prior to
bankruptcy if the transfer unfairly prefers one or more creditors over the rest of

A brewing hot topic in bankruptcy law is how a Debtor deals with property that is collateral for a secured creditor which is surrendered but has not yet been legally foreclosed or repossessed by the creditor. The Debtor’s interest is obvious: to avoid accruing post petition obligations, such as taxes, insurance, and homeowner’s association dues.

The Bankruptcy Code impairs lenders’ rights in various ways.  Accordingly, lenders have long attempted to devise methods of preventing borrowers from filing for bankruptcy protection.  Such attempts generally have not been successful -- courts hold that as a general matter, a borrower’s pre bankruptcy waiver of the right to file bankruptcy is against public policy and is void.  See, e.g., Klingman v. Levinson,831 F.2d 1292, 1296 n.3 (7th Cir.

Over the years, clients have sought my advice after they have obtained a judgment against a limited liability company or a corporation, and after they have tried, without success, to collect on that judgment.  All of the typical judgment enforcement methods have already failed.  Because judgment debtors generally do not volunteer payment and sometimes will take steps to make it much more difficult for a creditor to collect, this scenario is somewhat common.  In response, clients will ask what they can do.  There are a number of options.  These include putting the ju

Three months ago, the U.S. District Court in Delaware upheld the bankruptcy court’s decision in In re Fisker Auto. Holdings, Inc., which limited, for “cause,” the amount that the purchaser of a secured lender’s claim could credit bid in connection with an asset sale under section 363 of the Bankruptcy Code.

Finds Bankruptcy Court to be Proper Forum for Claim Objection Despite Forum Selection Clauses in Investor Agreements

The Southern District of New York recently reiterated the critical difference between creditor claims and equity interests in the bankruptcy context.  In a recent opinion arising out of the Arcapita Bank bankruptcy case, the Court was faced with an objection to a proof of claim filed by an investor, Captain Hani Alsohaibi, who characterized his right to recovery against the debtors as being based on a “corporate investment.”