Assignments for the benefit of creditors (ABC's as they are called) are known for their speed and flexibility. In California, the practice of an ABC occurring followed seconds later by a sale of the assignor's assets is well established. The buyer's ability to take over the failing business quickly in a seamless transition is a principal benefit of the ABC process. The speed and the seamless transition help preserve going concern values for the benefit of creditors.
The United States Court of Appeals for the Eighth Circuit held on Aug. 3, 2012, that equitable considerations could not prevent a creditor's recouping amounts owed to it by a chapter 7 debtor. Terry v. Standard Ins. Co. (In re Terry), 2012 WL 3139364, *4 (8th Cir. Aug. 3, 2012). Reversing the bankruptcy court and the Bankruptcy Appellate Panel ("BAP"), the Eighth Circuit explained that "once a party meets the same-transaction test . . . a court should not impose an additional 'balancing of the equities' requirement" on the doctrine of recoupment. Id.
Federal Rule of Bankruptcy Procedure 3003(c)(3) provides that "the [bankruptcy] court shall fix and for cause shown may extend the time within which proofs of claim or interest may be filed." For various reasons, creditors sometimes miss the claims "bar date" and need to seek permission from the court to file a late filed claim or deem the late-filed claim allowed. In order to succeed, the creditor must convince the court that the late claim was the result of excusable neglect. In re Garden Ridge Corp., 348 B.R. 642, 645 (Bankr. D. Del.
On August, 15, 2012, Bankruptcy Judge Sean H. Lane of the Southern District of New York denied American’s motion to reject its collective bargaining agreement with the Allied Pilots Association (“APA”) on narrow grounds. The Court held that American had not demonstrated that its proposals to eliminate contractual restrictions on pilot furloughs and enter into essentially unlimited codesharing arrangements were necessary to its reorganization.
There are generally three types of claims in a bankruptcy proceeding: unsecured claims, secured claims and administrative expense claims. Section 503 of the Bankruptcy Code governs the allowance of administrative expense claims. Section 503 provides that "after notice and a hearing, there shall be allowed administrative expenses…, including the actual and necessary costs and expenses of preserving the estate." 11 U.S.C. § 503(b)(1)(A).
Pursuant to Bankruptcy Code § 363(f), a bankruptcy judge may authorize the sale of a debtor’s assets free and clear of liens, claims, and interests. This is meant to allow a buyer to acquire assets without the risk of future claims being asserted with respect to the purchased assets and to maximize the value of a debtors assets, thereby maximizing creditors' recovery.
In a recent decision authored by Chief Judge Easterbrook, the United States Court of Appeals for the Seventh Circuit (Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, Docket No. 11-3920 (7th Cir. July 9, 2012)) held that the licensee of a trademark does not necessarily lose the right to use the licensed marks when a debtor-licensor rejects the underlying license agreement in its bankruptcy case. In so holding, the Court rejected a contrary decision reached by the United States Court of Appeals for the Fourth Circuit in Lubrizol Enterprises, Inc. v.
On May 29, 2012, the United States Supreme Court issued an opinion in the Radlax Gateway Hotel bankruptcy proceeding regarding the viability of a plan of reorganization that prohibited a bank from credit-bidding on the debtors’ assets. See Radlax Gateway Hotel, LLC, et al., v. Amalgamated Bank, __S.Ct.__ No. 11-166, 2012 WL 1912197 (U.S. May 29, 2012)(hereinafter “Opinion at * ___”). The debtors in Radlax (“Debtors”) purchased a hotel at the Los Angeles International Airport, along with an adjacent property.