A recent decision out of a New Jersey Bankruptcy Court highlights a loophole in the Bankruptcy Code which may allow Chapter 7 debtors to keep significant assets out of the hands of trustees and creditors.
Chapter 15 of the U.S. Bankruptcy Code, 11 U.S.C. §§ 1501 et seq., provides the legal framework by which U.S. bankruptcy courts recognize foreign insolvency proceedings of companies that have assets and operations in more than one country. Congress added Chapter 15 to the Bankruptcy Code with the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Like any new law, the application and limits of Chapter 15 are developing through jurisprudence.
Creditors are often compelled to commence expensive and time consuming litigation to first prosecute their claims and then locate and seize a debtor's assets. During this lengthy and costly process, the debtor's assets are dissipated and the creditor may realize only a fraction of its claim. The Bankruptcy Code1 allows a trustee to liquidate a debtor's assets in a cost-effective, expeditious manner. Because of this, involuntary bankruptcy is a powerful tool that can expedite and maximize payments to affected creditors.
Freight brokers are well-accustomed to bankruptcy preference actions. Those actions, which are permitted under the Bankruptcy Code, allow a debtor, trustee or other bankruptcy estate representative to claw back payments made on account of antecedent debt in the 90 days prior to a bankruptcy filing. Trade creditors, especially those in the transportation industry, are often faced with significant preference claims because they provide service to debtors up until (and sometimes after) the debtor’s bankruptcy filing.
The preparation and filing of a debtor’s schedules of assets and liabilities is a routine but important aspect of nearly every bankruptcy case. A debtor’s schedules provide critical information to creditors and other parties in interest, the Office of the United States Trustee, and the bankruptcy court.
Smart Summary for Creditors
Although it has been over ten years since a hurricane made landfall in Florida, now is the time for those involved in bankruptcy filings to consider the impact a hurricane can have on proceedings and take the necessary steps to avoid getting caught in a storm of financial disarray.
This month marks the five year anniversary of the Los Angeles Dodgers’ chapter 11 filings. As a changeup from the world of oil and gas, we’ve prepared a light lookback to the ball club’s bankruptcy.
Courts have applied various standards for determining when a “claim” arises for the purposes of the Bankruptcy Code, particularly in the tort context. A recent decision from the United States Bankruptcy Court for the Western District of Pennsylvania illustrates that the standard may differ depending on whether the claim in question is a creditor’s claim against the debtor’s estate or a debtor’s claim against a third-party.
A Delaware bankruptcy court has joined what appears to be a recent trend toward invalidating limited liability company operating agreement provisions that effectively afford lenders veto power over the LLC’s authority to file for bankruptcy protection; the court found one such provision void as contrary to federal public policy. In re Intervention Energy Holdings, LLC, et al., Case No. 16-11247 (KJC) (D.I. 69), 2016 W.L. ___________ (Bankr. D. Del. June 3, 2016).