In In re Rodriguez, No. 09-2724 (3rd Cir. Dec 23, 2010), a three-judge panel for the Third Circuit considered whether an automatic stay under the Bankruptcy Code prevented a mortgage servicer from accounting for a pre-petition shortage on a mortgage escrow account in its post-petition calculation of the bankrupt debtors’ future monthly escrow payments. The majority held that the bankruptcy stay did prohibit such conduct by the loan servicer.

Section 507(b) of the Bankruptcy Code provides that if a secured creditor receives “adequate protection” for its interest in collateral held by a debtor, but that adequate protection ultimately proves insufficient, then the creditor is entitled to a “superpriority” administrative expense claim sufficient to cover any uncompensated diminution in the value of that collateral.

So what do railroad barons, second lien lenders and satellites have in common? Strangely, the derailment of the gifting doctrine for cram-down plans, at least, in the Second Circuit. In an Opinion filed on February 7, 2011, the Second Circuit issued what amounted to a teaser for bankruptcy professionals. It started with a decision by Bankruptcy Judge Gerber of the Southern District of New York to confirm a Chapter 11 plan that included a “gift” from the second lien lenders to equity, even though unsecured creditors were not being paid in full.

While there has not been much good news for the mortgage banking industry coming out of bankruptcy courts in years, a recent opinion issued by the United States Court of Appeals for the Fifth Circuit provides not just good news, but very good news for mortgage lenders. The Fifth Circuit's opinion in Wilborn v. Wells Fargo Bank, N.A. (In re Wilborn), 609 F.3d 748 (5th Cir.

On November 4, 2010, the United States Bankruptcy Court for the Northern District of Illinois certified the appeal of debtors River Road Hotel Partners, LLC, et al. of the court’s Order Denying Debtors’ Bid Procedures Motion (the Order) entered October 5, 2010. In its Order, the bankruptcy court expressly denied the debtors’ attempts to prevent their secured creditors from credit bidding in a proposed sale of assets under a chapter 11 plan.

The second priority lien held by a junior lien holder is a property interest sufficient to trigger the protection of the automatic stay.In re Three Strokes L.P., 379 B.R. 804 (Bankr. N.D. Tex. 2008). Inasmuch as a senior lien holder’s foreclosure proceedings would have the effect of extinguishing the debtor’s second lien interest, a court may only lift the stay and permit the foreclosure to proceed upon such senior lien holder’s showing of adequate protection.

Most employers know that it is unlawful to terminate the employment of or to discriminate against an individual who has previously filed bankruptcy because of his or her status as a debtor in a bankruptcy proceeding. A recent Federal Court of Appeals decision, however, highlights the distinction between denying employment to an individual based on prior bankruptcy filing and terminating the individual’s employment because of it.

As revealed in a recent bankruptcy case, purchasers of contaminated property need to have a very clear understanding of their contractual remedies before proceeding with self-help. The case (In re Evans Industries, Inc., No.

A theme running through many apparent-authority cases is the question of who loses: for example, the LLC whose property was used to secure unauthorized, personal borrowings by a member or manager, or the bank that in good faith made the loan to the malefactor? Often the recipient of the funds has used the money for personal matters and is essentially judgment proof.

On June 28, 2011, the Court of Appeals for the Seventh Circuit rejected the views of the Third Circuit and the Fifth Circuit and held that a reorganization plan which proposes the sale of encumbered assets free and clear of liens must honor the secured creditor’s right to credit bid its claim in order to be confirmed under the “fair and equitable” standard of the Bankruptcy Code. In the combined appeals of In re River Road Hotel Partners, LLC, et al. andIn re Radlax Gateway Hotel, LLC, et al.