In the course of the next few weeks, Omega Navigation Enterprises, Inc. and its affiliates (collectively, “Omega”), an international shipping enterprise, will find out if motions by certain of their lenders to, among other things, dismiss Omega’s chapter 11 bankruptcy proceedings have been granted by the U.S. Bankruptcy Court for the Southern District of Texas.1 If not, then Omega may be permitted to continue its attempt to reorganize its business under chapter 11 of the Bankruptcy Code.
In re General Growth Props., Inc., Case No. 09-11977 (ALG), 2011 BL 189724 (Bankr. S.D.N.Y. July 20, 2011)
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Giuliano v. Shorenstein Company, LLC (In re Sunset Aviation, Inc.), Adv. No. 11- 50965, Bankr. No. 09-10778, 2011 WL 4002429 (Bankr. D. Del. Sept. 7, 2011)
CASE SNAPSHOT
The U.S. Supreme Court will rule this term in RadLAX Gateway Hotel Inc. v. Amalgamated Bank on whether the Bankruptcy Code permits a debtor in a chapter 11 case to sell encumbered assets without providing the secured lender an opportunity to credit bid its debt. Determination of this question will require the Court essentially to choose between two opposing approaches to statutory interpretation, and decide whether the so-called “plain meaning” of a highly formalistic reading of the Bankruptcy Code should trump decades of established commercial practice.
New bankruptcy forms and rules that took effect December 1, 2011, require secured creditors either to attach evidence of perfection of their security interest to the proof of claim form that they file, or attach a statement of why the documents are not available.
On November 29, 2011, AMR Corporation, the parent company of American Airlines and American Eagle, and certain of its U.S. affiliates, including American Airlines and American Eagle, filed voluntary petitions for chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York.
A “fraudulent conveyance” connotes to the layperson an intentional effort to defraud someone, but in bankruptcy law this is just one type of fraudulent conveyance. Another type, sometimes referred to as constructive fraud, involves a transfer for less than “reasonably equivalent value” or, in other words, a “gift.” In bankruptcy proceedings, a trustee is chosen to administer the debtor’s estate and, to the extent feasible, to “avoid” transfers of the debtor’s assets out of the estate that place assets beyond the creditors’ reach.
In the course of their business, bankers routinely encounter single member limited liability companies ("SMLLCs"), entities commonly used in real estate and small businesses. Despite the prevalence of SMLLCs, there is a fundamental legal uncertainty as to whether the assets of an SMLLC share the same level of protection from its member's creditors as is provided to the assets of a multi-member LLC through the charging order remedy.
New amendments to the Bankruptcy Rules became effective on December 1, 2011. These amendments add new requirements and potentially harsh penalties for failure to comply. An overview of those amendments follows.
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From time immemorial, banks and other secured lenders have relied on their ability to "credit bid" for their collateral as a key source of protection and negotiating leverage against debtors and competing bankruptcy acquirors. Credit bidding secured debt rather than paying cash for collateral has been an effective counterweight against a debtor’s protections of the automatic stay and its exclusive right to control the plan formulation process and bankruptcy sales under Section 363 of the Bankruptcy Code.