Last month, Jeoffrey Burtch (the "Trustee"), as Chapter 7 Trustee for the Opus South Bankruptcy, began filing preference complaints seeking to recover what the Trustee alleges are avoidable transfers under the Bankruptcy Code.  For those unfamiliar with the Opus South bankruptcy, the company filed petitions for bankruptcy in the Delaware Bankruptcy Court on April 22, 2009.  The Opus South bankruptcy began as a chapter 11 reorganization.  However,  on August 27, 2010, the Bankruptcy Court entered an order converting the case to a chapter 7 liquidation.  The Trustee w

The United States Bankruptcy Court for the Central District of California recently held that the filing of a bankruptcy petition by a borrower can void a trustee sale even where the petition is filed after the trustee sale, so long as the borrower files the petition before the execution of the trustee's deed upon sale. In re: Gonzales 2011 WL3328508 (Bkrtcy. C.D.Cal. August 1, 2011).

For secured lenders, a consumer debtor’s chapter 13 bankruptcy filing can be a mixed bag.

In re Primes, 518 B.R. 466 (Bankr. N.D. Ill. 2014) –

A mortgagee moved for relief from the automatic stay, arguing that it acquired title to property prior to the bankruptcy under a quit claim deed given to it by the debtor. However, the bankruptcy court agreed with the debtor that the deed, which was given in connection with a forbearance agreement, should be treated as an equitable mortgage.

For more than 10 years, the courts in New Jersey were split as to whether, under the Bankruptcy Code, a chapter 13 debtor’s right to cure a default on a mortgage loan secured by the debtor’s primary residence expired at the foreclosure sale, or at the time the deed to the foreclosed property was delivered to the purchaser. That split now has been resolved by the U.S. Court of Appeals for the Third Circuit in favor of the line of cases cutting off the right to cure at the time of the foreclosure sale. In re Connors, No. 06-3321 (3d Cir., Aug. 3, 2007).

In the chapter 1 1 cases of Adelphia Communications Corporation and its subsidiaries, Adelphia sought to assume and assign more than 2,000 franchise agreements in connection with the proposed transfer of its cable operations to affiliates of Comcast Corporation and Time Warner Cable. Numerous local franchising authorities objected, arguing, among other things, that they had a right of first refusal under the agreements, and in some cases also under a local ordinance, to purchase the franchise on substantially the same terms and conditions.

Sometimes the interpretation of the Bankruptcy Code leads to unexpected results. In a recent case, the US Bankruptcy Appellate Panel of the Ninth Circuit (BAP) has ruled that section 510(b) of the Bankruptcy Code requires the subordination of certain claims against a debtor to all equity interests in the debtor, even though such subordination may mean that the holders of the claims will receive nothing on the claims.

In Kendrick v. Deutsche National Trust Company (In re Saint Clair), 380 B.R. 478 (B.A.P. 6th Cir. Jan. 16, 2008), the Chapter 7 Trustee appealed the decision of the United States Bankruptcy Court for the Eastern District of Kentucky to the Sixth Circuit Bankruptcy Appellate Panel (“BAP”). The issue on appeal was whether summary judgment was warranted against the Appellee-Mortgagor (“Mortgagor”) on the Appellant- Trustee’s (“Trustee”) complaint seeking to avoid a mortgage on the Debtors’ real property. 

In Burkhart v. Coleman, (In re Tippett) --- F.3d ---, 2008 WL 4070690 (9th Cir. Sept. 4, 2008), the Ninth Circuit held that an unauthorized post-petition sale of real property may be upheld where: 1) the bankruptcy trustee failed to record the bankruptcy petition with the county recorder; and 2) a bona fide purchaser thereafter bought and recorded title in the property.

With the country officially in a recession and the lack of available refinancing options continuing, more and more businesses are faced with the realities of foreclosure. While foreclosure often allows a business to wipe the debt slate clean with respect to the foreclosed property, it can also create unintended tax consequences as well as tax planning opportunities.  

Recourse v. Non-Recourse Debt