The threat of insolvency proceedings against a corporate debtor can greatly assist a creditor's primary objective of getting paid, preferably in advance of everyone else. This is particularly so where the debtor is prevaricating but there is no genuine dispute that the sum in question is due and owing. Although the courts decry the use of the winding-up procedure as a means of debt collection, it is often a very effective tool.
Consider the following when faced with a corporate debtor who is refusing, without genuine reason, to settle its debts:
In Franses v Al Assad – Butterworths Law Direct 26.10.07 a freezing order was granted against the first respondent, principally in respect of £6.5m that formed part of the proceeds of sale of a property that had allegedly been owned by him. The first respondent applied to discharge the freezing order.
In Samsun Logix Corporation v Oceantrade Corporation; Deval Denizeilik VE Ticaret A.S. v Oceantrade Corporation and another – Butterworths Law Direct 18.10.07 the Defendant in both cases was subject to Chapter 11 proceedings in the US.
Defendants in a lawsuit didn’t waive their right to arbitrate even after moving to dismiss and answering a complaint, a court held last week. Arbitration wasn’t waived because the defendants hadn’t filed affirmative defenses or counterclaims and had taken no discovery. Trevino v. Select Portfolio Servicing, Inc. (In re Jose Sr. Trevino), Adv. Pro. No. 16-7024, 2018 Bankr. LEXIS 3605 (Bankr. S.D. Tex. Nov. 14, 2018).
The U.S. Court of Appeals for the Eleventh Circuit held that 12 U.S.C. § 1715z-20(j) did not alter or limit the lender’s right to foreclose under the terms of the valid reverse mortgage contract where the non-borrower spouse was still living in the home.
Accordingly, the Eleventh Circuit affirmed the trial court’s dismissal of the plaintiff’s petition for injunctive relief to prevent the foreclosure sale.
Summary: A recent Third Circuit decision has clarified the scope of the third-party injunction, including injunctions in favor of insurers that resolve insurance coverage in asbestos bankruptcy cases, that may be issued under Section 524(g) of the Bankruptcy Code. Liability covered by such an injunction must be “derivative” of the debtor, meaning that under state law, the third party’s liability must depend on the debtor’s liability.
In today’s chapter 11 practice, third party releases are ubiquitous. A staple of the largest and most complex cases for years, plan provisions releasing and enjoining claims against non-debtors, particularly officers and directors, are now common place in most business reorganizations. While case law permits a bankruptcy court to enjoin claims against non-debtors in limited, fact-specific circumstances, plan proponents frequently achieve far broader releases by creditor consent. In re SunEdison, Inc.
On January 24, 2017, victims of Bernard Madoff’s Ponzi scheme lost their appeal of a bankruptcy court decision barring them from suing an alleged Madoff co-conspirator because of a third-party injunction contained in a settlement between the alleged co-conspirator and the Trustee liquidating Madoff’s scheme. See A & G Goldman Partnership v. Capital Growth Company (In re Bernard L. Madoff Investment Securities LLC), 565 B.R. 510, 514-515 (S.D.N.Y. Jan.
The Bankruptcy Court for the District of Delaware recently issued a decision that will undoubtedly influence strategies in bankruptcy cases involving plugging and abandonment liabilities. The court’s ruling in Venoco, LLC v. City of Beverly Hills illuminates the Bankruptcy Code’s rehabilitative purposes by explaining that financial harm, without more, is not sufficient to enjoin a debtor’s actions.
What Happened
It is commonly understood that, upon commencement of a bankruptcy case, section 362 of the Bankruptcy Code operates as an automatic statutory injunction against a wide variety of creditor actions and activities.