Lenders and mortgage holders may be surprised to learn that a New York bankruptcy court voided the foreclosure sale of non-debtor property where the debtor filed for bankruptcy with no legitimate intent to reorganize. In a case of first impression, In re Ebadi1 addresses a common scenario: a foreclosure action against multiple parties, including a borrower not in bankruptcy and a guarantor in bankruptcy.
Bankruptcy Judge Michael Lynn of the Northern District of Texas recently issued a noteworthy opinion in In re Village at Camp Bowie I, L.P. that addresses two important Chapter 11 confirmation issues. Judge Lynn determined that a plan that artificially impaired a class of claims in order to meet the requirements of section 1129(a)(10) had not been proposed in bad faith and did not violate the requirements of section 1129(a). In his ruling, Judge Lynn also applied the Supreme Court’s cram-down “interest”1 rate teachings in Till v.
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.
Lender Had Duty To Investigate Claim to Promissory Note
In a harsh decision for the lender, the U.S. Court of Appeals for the Tenth Circuit has determined that a debtor’s loan may be discharged in chapter 7 bankruptcy— despite the borrower’s admission that his personal financial statement contained materially false representations about his financial condition.
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.
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.
Coping with the Insolvent Business Partner
CentsAbility: Creditors' Rights Law Update
The Fourth Circuit has held that in a case where the rate of interest on a residential mortgage loan had been increased upon default, a Chapter 13 Plan proposing to “cure” default under 11 U.S.C. §1322(b) is an impermissible modification barred by §1322(b)(2).
Insider creditors “waived [the] right to charge default interest on” their claims and “failed to prove” their claim for non-default interest, held the U.S. Bankruptcy Appellate Panel for the Tenth Circuit (“BAP”) on Nov. 6, 2015. In re Autterson, 2015 WL 6789168, at *4 (10th Cir. BAP, Nov. 6, 2015).
In 1994, Congress amended the Bankruptcy Code to, among other things, add section 1123(d), which provides that, if a chapter 11 plan proposes to “cure” a default under a contract, the cure amount must be determined in accordance with the underlying agreement and applicable nonbankruptcy law. Since then, a majority of courts have held that such a cure amount must include any default-rate interest required under either the contract or applicable nonbankruptcy law. A ruling recently handed down by the U.S. Court of Appeals for the Eleventh Circuit endorses this view.