Section 108 of the Bankruptcy Code grants a two-year extension of time for a trustee in bankruptcy (or a debtor in possession) to bring law suits, provided that the applicable period to sue didn’t expire before the petition date. It also gives a short extension to the trustee for filing pleadings, curing defaults, and performing other acts on behalf of the debtor. These provisions afford a trustee and debtor in possession valuable time to discover and evaluate potential causes of action and to perform other acts to preserve the debtor’s rights.
Introduction
Last week, Visteon Corporation began filing preference complaints against hundreds of current and former creditors of the company. This post will look briefly at the nature of Visteon’s business, why the company filed for bankruptcy, as well some of the likely “next steps” now that the company has filed its preference complaints.
The Bankruptcy Filing
Introduction
UNITED STATES OF AMERICA v. ROGAN (May 12, 2011)
The well known travails of Fred Wilpon, the principal owner of the New York Mets, have all converged this past week. He, his partner Saul Katz and their families and affiliated enterprises (the “Wilpon/Katz Group”) lost several hundred million dollars when Bernard Madoff’s long running Ponzi scheme finally unraveled at the height of the financial crisis in 2008.
Section 503(b) of the Bankruptcy Code delineates categories of claims that are entitled to elevated priority as “administrative expenses.” Under section 503(b)(3)(D), administrative expenses include “actual, necessary expenses” incurred by a creditor, indenture trustee, equity holder, or unofficial committee “in making a substantial contribution” in a chapter 11 case.
Although it has been described as an “extraordinary remedy,” the ability of a bankruptcy court to order the substantive consolidation of related debtor-entities in bankruptcy (if circumstances so dictate) is relatively uncontroversial, as an appropriate exercise of a bankruptcy court’s broad (albeit nonstatutory) equitable powers. By contrast, considerable controversy surrounds the far less common practice of ordering consolidation of a debtor in bankruptcy with a nondebtor.
Last month, the United States Court of Appeals in two separate circuits held that liability insurers have standing as parties in interest to appear and be heard in an insured's Chapter 11 case where the insurer might be liable to indemnify the claims of the insured's creditors.
Prior to the 1984 Amendments to the Bankruptcy Code1 (BAFJA), there was a split as to whether a transfer of title to real estate by virtue of a mortgage foreclosure constituted a transfer as defined in §101 of the Bankruptcy Code.2, 3 However, BAFJA made it clear that a “transfer” included “the foreclosure of a debtor’s equity of redemption.”4 This change in definition has a significant impact on the application of both §547 (preference) and §548 (fraudulent transfer).
In two recent decisions, the United States Bankruptcy Court for the Southern District of New York has interpreted narrowly certain of the Bankruptcy Code’s safe harbor provisions.