The ability of a secured creditor to credit bid its debt in connection with a sale of a debtor’s assets received a strong boost in a decision last month in the Chapter 11 case of Aeropostale from U.S. Bankruptcy Judge Sean Lane of the Southern District of New York.
Massachusetts bankruptcy courts have invalidated mortgages containing defects, including the failure of lenders to observe strict formalities in the execution of mortgage acknowledgements. See our prior post on this very topic at Lender Beware: The Tragic Consequences of Defective Mortgage Acknowledgements.
(Bankr. W.D. Ky. Sep. 1, 2016)
The bankruptcy court addresses the issue of whether the debtor’s prepetition claim for a surcharge before the Public Service Commission is property of the estate. The pre-petition receiver for the debtor argued that it was not, because the debtor abandoned its assets prepetition in the PSC action. The court disagrees, finding that legal title was not severed in the prepetition proceedings, and thus the bankruptcy trustee has control and authority over the surcharge claim. Opinion below.
Judge: Lloyd
As most readers are aware, Hanjin Shipping Co. Ltd. (“Hanjin”) commenced insolvency proceedings in South Korea on August 31, 2016. Shippers, motor carriers, transportation intermediaries, and others are scrambling to react to fluid circumstances surrounding these unfolding developments. For instance, container terminals in Virginia, Los Angeles/Long Beach, and Seattle are reportedly no longer accepting delivery of Hanjin import, export, or empty containers.
In the recent decision of Lehman Bros. Special Fin. Inc. v. Bank of Am. Nat’l Assoc. (In re Lehman Bros. Holdings Inc.), 2016 WL 3621180 (Bankr. S.D.N.Y. June 28, 2016), the U.S.
On August 29, 2016, the Third Circuit released a precedential opinion (the “Opinion”) which opined on whether filing an involuntary bankruptcy petition could qualify as tortious interference under state law. The Third Circuit’s Opinion is available here. This Opinion was issued in Rosenberg v. DVI Receivables XVII, LLC, Case No. 15-2622. The District Court had ruled that the tortious interference claim was preempted by § 303(i) of the Bankruptcy Code.
The Wall Street Journal has recently observed that if Hanjin Shipping Co. Ltd. fails in its attempts to reorganize and emerge from bankruptcy proceedings in Korea, it would represent the largest container shipping company to date to collapse. In the meantime, its creditors have apparently been active in Chinese, Singaporean, and American ports.
When should debt be recharacterized as equity? The answer to this question will have an enormous impact upon expected recovery in bankruptcy since equity does not begin to get paid until all prior classes of claims are paid in full. In a recent unpublished opinion, the Fourth Circuit Court of Appeals provided some guidance on when and in what circumstances recharacterization is appropriate. The Court’s decision also serves as warning to purchasers of debt that they may not be able to hide behind the original debt transaction in a recharacterization fight.
The U.S. Court of Appeals for the Third Circuit recently held that the Bankruptcy Code does not preempt state law claims brought by non-debtors for damages related to the filing of an involuntary bankruptcy proceeding.
A copy of the opinion is available at: Link to Opinion.