Imagine that you are an unsecured lender who has learned that a borrower has filed for bankruptcy and has little to no assets available to pay creditors. Is there any way to prevent your debt from being extinguished? This is a common question and often the answer unfortunately is no; however, if the debtor is an individual and the debt meets certain requirements established by the Bankruptcy Code, the court may declare the debt nondischargeable (in other words, the debt will remain with the debtor after the bankruptcy case is closed).
In Wong v. PNC Bank, No BER-C-335-15 (Ch. Div. Apr. 26, 2016), the New Jersey Chancery Division discussed what constitutes reasonable notice of an adjournment to a sheriff’s sale in New Jersey. In 2014, in a predecessor action, the Court entered Final Judgment in favor of defendant PNC Bank (“PNC”), with respect to real property located in Franklin, New Jersey (the “Property”). 69 North Franklin Turnpike Limited Liability Company (“Debtor”) owned a 10% interest in the property and plaintiff Grace Wong owned 90% (“Plaintiff”).
One of the goals of the Bankruptcy Code is to provide a debtor with a fresh start. The discharge of prepetition debts at the conclusion of a bankruptcy case is one of the most important ways to attain this fresh start. On May 16, 2016, the Supreme Court made it harder for debtors to obtain a fresh start by broadening an exception to discharge.
Perhaps Next Time the Debtor Will Speak Up a Little Sooner
A common query with D&O insurance coverage is whether post-insolvency claims against the insolvent company’s directors and officers trigger the Insured vs. Insured exclusion found in most D&O policies. This issue arises when claims are brought on behalf of the insolvent company against directors in an attempt to recover money for creditors.
(Bankr. S.D. Ind. May 23, 2016)
The bankruptcy court sustains the creditor’s objection to the proposed Chapter 13 plan, finding the creditor’s expert more credible than the debtor’s expert as to valuation of the debtor’s mobile home. Thus, the the creditor’s secured claim was higher than the amount provided for in the plan. The court also holds that certain of the appliances in the home are not accessions and thus are not subject to the creditor’s lien. Opinion below.
Judge: Moberly
On March 11, 2016, the Seventh Circuit ruled that a distressed company’s termination of a lease pursuant to an agreement with its landlord and the relinquishment of its leasehold interest to its landlord constituted “transfers” that may be avoidable as fraudulent transfers and preferences under the Bankruptcy Code. The decision, Official Comm. Of Unsecured Creditors v. T.D. Invs. I, LLP (In re Great Lakes Quick Lube LP, 816 F.3d 482 (7th Cir. 2016)), serves as a cautionary tale for landlords dealing with distressed tenants.
Background
On May 16, 2016, the United States Supreme Court decided the term “actual fraud” in Bankruptcy Code § 523(a)(2)(A) encompasses forms of fraud, like fraudulent conveyance schemes, that can be effected without a false representation by a debtor. Importantly, the Husky International Electronics, Inc. v. Ritz, No. 15-145, 2016 WL 2842452 (U.S. May 16, 2016) opinion clears up a split among the lower courts on the question of whether the phrase “actual fraud” requires a false representation to be made to a creditor.
When Can a Subsidiary Be Liable for the Actions of Its Owners?
(Bankr. W.D. Ky. May 19, 2016)