One of the hallmarks of the U.S. bankruptcy system is ready access to information concerning any entity that files for bankruptcy protection. The integrity of that system is premised upon the presumption that not only creditors and other interested parties in a bankruptcy case, but also the public at large, should have the ability to examine any document filed with the bankruptcy court.

October 17, 2013, will mark the eighth anniversary of the enactment of chapter 15 of the U.S. Bankruptcy Code as part of the comprehensive U.S. bankruptcy-law reforms implemented in 2005. Chapter 15, which governs cross-border bankruptcy and insolvency cases, is patterned after the Model Law on Cross-Border Insolvency (the “Model Law”), a framework of legal principles formulated by the United Nations Commission on International Trade Law (“UNCITRAL”) in 1997 to deal with the rapidly expanding volume of international insolvency cases.

Fifth Circuit’s Decision in In re Village at Camp Bowie I L.P.

Appellate panel affirms that creditor’s failure to seek adequate protection before turning collateral over to trustee terminates possessory lien.

On March 25, 2013, the Eighth Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court’s order in In re WEB2B Payment Solutions, Inc., holding that a creditor loses its possessory lien when it turns collateral over to the bankruptcy trustee without first seeking adequate protection from the bankruptcy court.

FACTS

A new Illinois law will close a loophole through which some mortgages could be subject to avoidance in bankruptcy.  The loophole, created by U.S. Bankruptcy Court’s (C.D. Illinois) 2012 In re Crane opinion, allowed a bankruptcy trustee to avoid a mortgage under 11 U.S.C. § 544(a)(3) unless it contained, among other provisions: 1) the amount owed, 2) the debt’s maturity date and 3) the underlying interest rate. 

On April 29, 2013, the Supreme Court of the United States declined to hear an appeal of the Second Circuit's decision dismissing, as equitably moot, appeals arising out of the bankruptcy of Charter Communications and let stand the opinion in In re Charter Communications, Inc., 691 F.3d 476 (2d Cir. 2012). As a result, the application of the equitable mootness doctrine, as it applies to bankruptcy appeals, will continue to vary among jurisdictions.

It is no surprise to anyone in the business of secured lending that valuation matters.  It is worth noting, however, that collateral valuation may be outcome-determinative in litigation over a plan of reorganization in bankruptcy.  Although valuation was not the central focus of the Fifth Circuit’s recent decision in Western Real Estate Equities, L.L.C. v. Village at Camp Bowie I, L.P. (Matter of Village at Camp Bowie I, L.P.), No. 12-10271, 2013 U.S. App. LEXIS 3949 (5th Cir. Feb.

The Ninth Circuit held on April 30, 2013 that a bankruptcy court “has the authority to determine whether a transaction creates a debt or an equity interest for purposes of [Bankruptcy Code] § 548, and that a transaction creates a debt if it creates a ‘right to payment’ under state law.” In re Fitness Holdings International, Inc., 2013 WL 1800000, *1 (9th Cir. April 30, 2013). The court agreed with five other circuits, but explicitly followed the reasoning of the Fifth Circuit’s recent In re Lothian Oil, Inc. decision. 650 F.3d 539, 543-44 (5th Cir.

It was just an old jalopy legally repossessed by his credit union . . . until he filed a bankruptcy petition and the red lights of the automatic stay started flashing. Smokey pulled the lender over and started issuing citations so be forewarned, put your hazard lights on and drive carefully through the postpetition fog, because this decision is relevant to all secured creditors under all Bankruptcy Code Chapters, not just car lenders under Chapter 13.

An important decision by Judge Kevin Carey of the United States Bankruptcy Court for the District of Delaware recently focused the distressed debt market (and financial creditors in general) on the proper legal characterization of a common financing provision — the “make-whole premium.”¹ Judge Carey allowed a lender’s claim in bankruptcy for the full amount of a large make-whole premium, after denying a motion by the Unsecured Creditors’ Committee to disallow the claim.

 WHY DOES THIS DECISION MATTER?