Most people think that bankruptcy is bad and try to avoid it. However, bankruptcy is a powerful legal tool and if using it the right way, it can solve your problems, whether you are a creditor or a debtor.
If you are a creditor, why should you file for bankruptcy?
The implementation of restrictions on stock and/or claims trading has become almost routine in large chapter 11 cases involving public companies on the basis that such restrictions are vital to prevent forfeiture of favorable tax attributes that can be triggered by a change in control. Continued reliance on stock trading injunctions as a means of preserving net operating loss carry forwards, however, may be problematic, after the controversial ruling handed down in 2005 by the Seventh Circuit Court of Appeals in In re UAL Corp.
October 17, 2006 marked the one year anniversary of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the "Reform Act"). The Reform Act has provided some much needed relief to commercial landlords, and the reported decisions of bankruptcy courts during the first year of the Reform Act confirm the effectiveness of the new landlord-friendly provisions.
On 18 March 2014, the State Bank of Vietnam (SBV) issued Circular No. 09/2014/TT-NHNN (Circular 09) to amend and supplement a number of articles in Circular No. 02/2013/TT-NHNN regulating the classification of debt, the establishment and levels of risk reserves, and the use of reserves for dealing with risks during the operation of credit institutions and foreign bank branches.
Entities doing business with a customer that files for bankruptcy protection generally have the right to refuse to continue providing goods or services to the chapter 11 debtor, unless such goods or services are covered by a continuing contract, in which case any forfeiture of the debtor’s rights under the agreement is generally prohibited to afford the debtor a reasonable opportunity to decide what to do with the contract.
A debtor’s exclusive right to formulate and solicit acceptances for a plan of reorganization during the initial stages of a chapter 11 case is one of the most important benefits conferred under the Bankruptcy Code as a means of facilitating the successful restructuring of an ailing enterprise. By giving a chapter 11 debtor-in-possession time to devise a solution to balance sheet and operational problems without being burdened by the competing agendas of other stakeholders in the bankruptcy case, exclusivity levels the playing field, at least temporarily.
An appeals court in Kentucky has issued a reminder to secured lenders of the importance of drawing up control agreements that establish a lender’s interest in a debtor’s assets contained in depository accounts.
Delaware companies take note: a state court has ruled that companies in apparent good financial health may not use the bankruptcy process to avoid shareholder approval of an asset sale—even in situations in which a shareholder vote may be difficult to obtain.
The Bankruptcy Appellate Panel of the Ninth Circuit has ruled that assignments of equipment lease payment streams were not automatically perfected. Because the debtor failed to perfect the assignees’ interests in the payment streams, the bankruptcy trustee could bring an action to avoid those interests.
The U.S. Court of Appeals for the Sixth Circuit has held that as the assignee of a debtors’ mortgage loan, a bank’s security interest was superior to the Chapter 13 Trustee’s interest as a judicial lien creditor. The ruling in Rogan v. Bank One, National Association (In re Cook), 457 F.3d 561 (6th Cir. 2006) affirmed the holdings of two lower courts. In December 2000, the debtors entered into a loan transaction with NCS Mortgage Lending Company (“NCS”), which was secured by a properly recorded mortgage.