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?
I. Introduction
On April 22, 2013, the U.S. Bankruptcy Court for the District of Delaware in In re School Specialty upheld the enforceability of a make-whole premium triggered by the pre-petition acceleration of a secured term loan.1 The decision re-affirms that bankruptcy courts will respect properly drafted make-whole premiums that pass muster under applicable state law.
In bankruptcy proceedings, is a class action superior to the claims administration process as a vehicle for resolving claims under the federal and New York State Workers Adjustment and Retraining Notification Act (the “WARN Act”)? In Schuman v. The Connaught Grp., Ltd. (In re The Connaught Grp., Ltd.), Case No. 12-01051, Slip Op. (Apr.
In re Big M, Inc., No. 13-10233 (DHS), 2013 WL 1681489 (Bankr. D.N.J. April 17, 2013). In Big M, the Bankruptcy Court for the District of New Jersey (the “Bankruptcy Court”) held that the debtor’s privilege did not pass to the creditors’ committee, even though the creditors’ committee obtained authority to investigate certain of the debtor’s causes of action, because the committee was acting as a fiduciary to creditors as opposed to the debtor’s estate.
The United States Bankruptcy Court for the District of Delaware recently upheld a secured lender’s claim for a $23.5 million “makewhole” premium (the “Makewhole Claim”) over the heavily litigated objection raised by the unsecured creditors’ committee in In re School Specialty, Inc., No. 13-10125 (KJC) (Apr. 22, 2013).
Conventional wisdom says that it is nearly impossible to obtain a discharge of student loan debt in bankruptcy. Indeed, Section 523(a)(8) expressly excepts student loans from discharge, unless the exception of such indebtedness from discharge would impose an undue hardship upon the debtor.