Creditors lacking liens to secure their claim can fare poorly in a bankruptcy case. The “absolute priority rule” is a bedrock principle of bankruptcy law and provides that a creditor at a particular rung of the claim priority hierarchy must be paid in full before any money flows down to junior creditors. Secured creditors reside near the top of the hierarchy, followed by administrative expense claimants, priority claimants and general unsecured creditors.
In a recent post, here, we wrote about a court decision that discussed deadlines for proofs of claim in a case involving a Ponzi scheme. Then, last week, another court issued a decision concerning late amendments to proofs of claim. In re James F.
The next few years are expected to see a significant increase in the volume of bankruptcy cases filed by health care providers. Thus far in 2017, the number of bankruptcies in health care-related sectors, including hospitals, physicians’ offices and clinics, specialty outpatient facilities, assisted-living facilities, and other providers, has been surpassed only by bankruptcies in the oil and gas, finance, and retail industries.
(Bankr. W.D. Ky. Sep. 28, 2017)
In First Southern Nat’l Bank v. Sunnyslope Hous. LP (In re Sunnyslope Hous. LP), 2017 BL 216965 (9th Cir. June 23, 2017), the U.S. Court of Appeals for the Ninth Circuit held en banc that, in determining whether a chapter 11 plan may be confirmed over the objection of a secured creditor, the creditor’s collateral must be valued in accordance with the debtor’s intended use of the property, even if the property would realize more in a foreclosure sale because of the existence of restrictive covenants.
Undersecured creditors face unique challenges because they are neither fully secured nor fully unsecured. Beyond the obviously undesirable issue of being upside-down on their deal, undersecured creditors often are exposed to preference liability for those payments they received in the 90 days prior to the debtor filing bankruptcy. This is especially true where an aggressive trustee is looking to create value or where an opportunistic trustee sees a chance to make a quick buck.
The new receivership and assignment for benefit of creditors statutes took effect in 2012. See Minn. Stat. §§ 576 and 577. The statutes codified existing common law and best practices, and provided a comprehensive reference point for practitioners and judges. See e.g. Minn. Stat. § 576.22(d). It was anticipated that the receivership and ABC law would become more accessible and usable. While concrete statistics are not available, receiverships and ABCs appear to be used with greater frequency.
The Supreme Court of New Jersey reversed the decision of the Appellate Court, and held that a settlement that a borrower and a lender reached during mediation pursuant to the Residential Mortgage Foreclosure Mediation Program was enforceable because the borrower fulfilled all contingent terms making the agreement permanent.
A copy of the opinion is available at: Link to Opinion.
In one of the most important bankruptcy court decisions of all time, Northern Pipeline Construction Co. v. Marathon Pipe Line Co., the United States Supreme Court held that the 1979 Bankruptcy Code was unconstitutional because it lodged too much judicial power in bankruptcy judges who were not given “Article III” status, which grants lifetime tenure and salary protection and helps assure judicial independence.
On March 22, 2017, the Supreme Court decided Czyzewski v. Jevic Holding Corp., holding that a bankruptcy court may not approve a structured dismissal of a Chapter 11 bankruptcy case if the order does not comply with the priority rules of the Bankruptcy Code. 580 U.S. __ (2017).