A draft of the U.S. Treasury’s proposed debt restructuring legislation began circulating earlier today. The draft legislation would give Puerto Rico, as well as other U.S. territories, and their municipalities access to U.S. bankruptcy court under a new chapter of the U.S. Bankruptcy Code (so-called “Super Chapter 9”) as well as making Puerto Rico’s instrumentalities (but not Puerto Rico itself) potentially eligible to file for bankruptcy under existing Chapter 9.
In a decision that may have implications for holders of community development district bonds and other similar “dirt bonds,” a Florida bankruptcy court has ruled that holders of community development district bonds do not always have plan voting rights when the underlying developer — as opposed to the development district itself — is the bankruptcy debtor.
Lending credence to the old adage “if it’s too good to be true, then it probably is,” the Seventh Circuit Court of Appeals recently held that a secured lender was on inquiry notice of possible fraud by its borrower in impermissibly pledging customers’ assets to secure loans. And the penalty was steep—the Court determined the pledge to be a fraudulent transfer to the lender and the lender’s failure to act upon inquiry notice destroyed the lender’s good faith defense. As a result, the lender’s $300 million secured claim was reduced to a near-worthless general unsecured claim.
In a decision that may have significant practical implications to the practice of bankruptcy law, the U.S. Supreme Court recently declared, on constitutional grounds, that a bankruptcy court cannot exercise jurisdiction over a debtor’s state law counterclaims, thus considerably limiting the ability of the bankruptcy court to fully and finally adjudicate claims in a bankruptcy case. Stern v. Marshall, No. 10-179 (June 23, 2011).
It is a familiar scenario: a company is on the verge of bankruptcy, bound by the terms of a collective bargaining agreement (CBA), and unable to negotiate a new agreement. However, this time, an analysis of this distressed scenario prompted a new question: does it matter if the CBA is already expired, i.e., does the Bankruptcy Code distinguish between a CBA that expires pre-petition versus one that has not lapsed?
It is a familiar scenario: a company is on the verge of bankruptcy, bound by the terms of a collective bargaining agreement (CBA), and unable to negotiate a new agreement. However, this time, an analysis of this distressed scenario prompted a new question: does it matter if the CBA is already expired, i.e., does the Bankruptcy Code distinguish between a CBA that expires pre-petition versus one that has not lapsed?
In a recent bench decision in In re MPM Silicones, LLC et al., Case No. 14-22503-RDD (Bankr. S.D.N.Y. August 26, 2014), the Bankruptcy Court considered bondholders’ right to recover make-whole premiums (premiums paid for early repayment of debt) upon the payment of accelerated debt following the borrower’s bankruptcy default. The Court ruled that the governing loan documents lacked specific language requiring a make-whole premium upon acceleration.
On October 28, 2011, the United States Bankruptcy Court for the Eastern District of Virginia issued an opinion with significant ramifications for any holder of a patent license that operates internationally. At issue was an important protection afforded to patent licensees under the United States Bankruptcy Code, § 365(n), which limits a debtor's right to reject intellectual property licenses in bankruptcy and generally provides that, in the event of a rejection, the licensee may elect either to treat the license as terminated or retain its rights for the duration of the license.
United States Supreme Court
Washington, D.C.
November 3, 2009
Bankruptcy Judge Judith Fitzgerald ruled last week that a debtor's insurance policies are assets of the estate and, therefore, can be properly transferred to a § 524(g) trust notwithstanding any applicable anti-assignment clauses. In re Federal-Mogul Global Inc., 01-10578 (Bankr. D. Del. March 19, 2008).