A bankruptcy judge in the Southern District of New York recently held that section 546(e) of the Bankruptcy Code does not prevent a debtor’s creditors from bringing state-law fraudulent conveyance actions that challenge a leveraged buyout of the debtor. Weisfelner v. Fund 1 (In re Lyondell Chem. Co.), No. 10-4609 (REG), --- B.R. ----, 2014 WL 118036 (Bankr. S.D.N.Y. Jan. 14, 2014).
Does a lender have a duty to act in good faith when negotiating with a borrower during a commercial loan modification? In an order issued recently by the United States Bankruptcy Court for the Eastern District of North Carolina, in In re: Burcam Capital II, LLC, the court denied a lender’s motion to dismiss a borrower’s claims against the lender. The Borrower alleged that the lender’s failure to modify the terms of the loan constituted a breach of the lender’s obligation to deal with the borrower in good faith, as well as an unfair or deceptive trade practice.&nbs
Security has many advantages for creditors. Four important advantages are listed below, followed by a discussion of the results of a recent empirical study showing that creditors recognize the benefits of obtaining security from their borrowers.
Advantage 1: A Secured Creditor Will Rarely Walk Away Empty-Handed
The Bankruptcy Code provides debtors in possession and other potential plan proponents with considerable flexibility to implement a plan under chapter 11. An important consideration is the preservation of potentially valuable causes of action held by the estate and the provision of a vehicle for post-confirmation prosecution of such claims.
A parochial elementary school and high school were recently sued in the U.S. Bankruptcy Court for the Eastern District of New York by Robert Geltzer, a bankruptcy trustee. The suits, Geltzer v. Our Lady of Mt. Carmel-St. Benedicta School and Geltzer v. Xavarian High School, were brought in an effort to recover tuition payments made by a student’s parents who had later filed for bankruptcy. (Kelley Drye & Warren LLP represented Our Lady of Mt. Carmel-St.
CASE SNAPSHOT
In In re Louisiana Riverboat Gaming P’ship (Global Gaming Legends, LLC v. Legends Gaming of Louisana-1, LLC) (“Global Gaming”), the United States Bankruptcy Court for the Western District of Louisiana stayed discovery in an adversary proceeding pending decision on a party’s motion to withdraw the reference to the district court, finding too much risk that the bankruptcy court would later be found to be without authority to handle pre-trial discovery for the “Stern-governed” core claims at issue. Adv. Proc. No. 13AP-1007 (Bankr. W.D. La. Jan. 10, 2014).
In determining their preference liability exposure, creditors typically consider whether they have provided any subsequent “new value” to the debtor after they have received an alleged preferential payment. Debtors and trustees frequently take the position that creditors cannot use as a defense any new value that has been repaid to the creditor post-petition through critical vendor payments or pursuant to Section 503(b)(9) of the Bankruptcy Code. Bankruptcy courts have ruled differently on this issue.
Section 548 of the Bankruptcy Code provides that a transfer made within two years of a bankruptcy filing is fraudulent if the debtor received less than “reasonably equivalent value” in exchange for the transfer and (i) the transfer rendered the debtor insolvent or was made at a time that the debtor was already insolvent or; (ii) the debtor had an unreasonably small amount of capital; or (iii) the debtor intended to incur, or believed that it would incur, debts that it would be unable to pay as they matured. The fraudulent transfer laws of most states, made applicable in bankruptcy pro
In a recent decision, the Court of Appeals for the Ninth Circuit shocked observers by holding that bankruptcy courts have the power to recharacterize claims on account of unpaid debts as equity infusions that cannot be repaid until all creditor claims have been satisfied. In In re Fitness Holdings Int’l, Inc., 714 F.3d 1141 (9th Cir.