In In re B.R. Brookfield Commons No. 1 LLC, 735 F.3d 596 (7th Cir. 2013) (No.
On January 14, 2014, Judge Robert E.
On January 14, 2014, Judge Robert E. Gerber of the United States Bankruptcy Court for the Southern District of New York in Weisfelner v. Fund 1. (In re Lyondell Chemical Co.), Adv. Proc. No. 10-4609 (REG), 2014 WL 118036 (Bankr. S.D.N.Y. Jan.
The “new value” defense used by creditors in preference actions requires a creditor to determine the pre-petition amounts of unpaid “new value” it gave to a debtor after the debtor paid the creditor for goods/services provided. Debtors often argue that creditors can’t use this defense for pre-petition new value that has been repaid on a post-petition basis. Such repayments include critical vendor payments and payments for goods/services provided to the debtor within the 20 days prior to a bankruptcy filing.
Not-for-profit entities are not immune from the business cycles, risk of lawsuits and other threats to solvency. Managing the collapse of an organization has always required diligence, but recent IRS enforcement initiatives and a recent District Court decision have made these situations even more troublesome. During the wind-down of a failed organization, there has generally been no personal liability for managers who have chosen to pay some vendors over others (except for certain limited statutory exceptions such as trust fund taxes).
The United States Bankruptcy Court for the District of Delaware recently limited the ability of a secured creditor to credit bid for substantially all of the debtors’ assets because (i) the credit bid would chill, or even freeze, the bidding process, (ii) the proposed expedited private sale pursuant to a credit bid would be inconsistent with notions of fairness in the bankruptcy process, and (iii) the amount of the secured claim was uncertain. In re Fisker Automotive Holdings, Inc., Case No. 13-13087 (Bankr. D. Del. Jan. 17, 2014).
On Jan. 10, 2014, the United States Bankruptcy Court for the District of Delaware (the “Court”) in In re Fisker Automotive Holdings, Inc., et al., capped a secured creditor’s right to credit bid its $168 million claim at only $25 million (the amount it paid to purchase the claim). The decision is on appeal. While the Court stated that its decision is non-precedential, it serves as a cautionary tale for secured lenders who also are potential acquirers of a debtor’s assets in bankruptcy sales.
Facts
Loan to Fisker
Northern District of Oklahoma Chief Bankruptcy Judge Terrence L. Michael’s introduction to the opinion in In re Harrison (2013 WL 6859303) serves as a good introduction to this post:
As we predicted when it was filed, Judge Rhodes of the U.S. Bankruptcy Court for the Eastern District of Michigan denied today several creditors’ motion to appoint an independent commission to appraise the collection of the Detroit Institute of Arts (owned by the city of Detroit) as part of the city’s ongoing bankruptcy.