Going forward, lenders must take precautionary measures to protect themselves. Anticipating the risk of a U.S. bankruptcy case is a crucial first step.

For nearly 25 years, courts in the Ninth Circuit have consistently refused to sanction nonconsensual third-party releases as part of chapter 11 plans. A ruling recently handed down by the U.S. District Court for the District of Washington reaffirms and extends that proposition. In In re Fraser’s Boiler Serv., Inc., 2019 WL 1099713 (D. Wash. Mar.

On June 3, 2019, the U.S. Supreme Court ruled in Taggart v. Lorenzen, 139 S. Ct. 1795 (2019), that a bankruptcy court may hold a creditor in civil contempt for attempting to collect on a debt that has been discharged in bankruptcy "if there is no fair ground of doubt as to whether the [discharge] order barred the creditor’s conduct." In so ruling, the Court vacated and remanded a ruling by the U.S.

The recent chapter 11 filings by PG&E Corp. and its Pacific Gas & Electric Co. utility subsidiary (collectively, "PG&E") and FirstEnergy Solutions Corp. have reignited the debate over the power of a U.S. bankruptcy court to authorize the rejection of contracts regulated by the Federal Energy Regulatory Commission ("FERC"). Only a handful of courts have addressed this thorny issue to date, and with conflicting results in a controversy that may ultimately need to be resolved by the U.S. Supreme Court or legislative action.

In In re Ultra Petroleum Corp., 913 F.3d 533 (5th Cir. 2019), the U.S. Court of Appeals for the Fifth Circuit ruled that a "make-whole," or "prepayment," premium owed on unsecured notes issued by a chapter 11 debtor constituted unmatured interest disallowed by section 502(b)(2) of the Bankruptcy Code. The ruling represents a landmark decision on the allowance of such premiums in chapter 11, over which there has been considerable litigation in recent years, including at the circuit court level.

Enforceability of Make-Whole Premiums in Bankruptcy

This article originally was published in the February 2019 issue of the ABI Journal.

We previously discussed Bankruptcy Judge Martin Glenn’s analysis of the Wagoner Rule in the Feltman v. Kossoff & Kossoff LLP (In re TS Empl., Inc.)case.[1] The bankruptcy trustee (the “Trustee”) had asserted a fraud claim against the debtor’s outside accountant and its principal (the “Defendants”). The Defendants moved to dismiss the complaint, citing the Wagoner Rule.

Over the past several years, much has been written about how numerous bankruptcy courts have interpreted and enforced bankruptcy and insolvency-related provisions in intercreditor agreements, subordination agreements and other “agreements among lenders” when they may affect a debtor and its estate.

Pacific Gas and Electric Company's Chapter 11 filing earlier this year has highlighted an issue that is well settled but sometimes overlooked: Unsecured creditors generally have no right to receive immediate payment of their legal fees from a bankrupt borrower, regardless of any contractual rights they might otherwise have absent the bankruptcy.

Anyone who hasn’t heard about the “student loan crisis” in the U.S. hasn’t been paying attention. U.S. student loan debt is estimated to range from between $1.2 and $1.6 trillion with more than seven million borrowers in default. On an individual level, a graduate of a four-year college who took out a loan to get through currently owes, on average, $28,000. Average debt for a student who completed graduate school, as you would expect, is greater, and can range from $50,000 to more than $100,000.