The Bankruptcy Code invalidates "ipso facto" clauses in executory contracts or unexpired leases that purport to modify or terminate the contract or lease (or the debtor's rights or obligations under the contract or lease) based solely on the debtor's financial condition or the commencement of a bankruptcy case for the debtor. It also invalidates state law, rather than a contract, that purports to alter the property interests of the debtor. A more difficult situation arises when those interests are on the outer bounds of "property of the estate."

The Bankruptcy Code provides that, in chapter 11 cases where the court does not find "cause" for the appointment of a trustee, the court "shall" appoint an examiner, upon a request from the Office of the U.S. Trustee (the "UST") or any party-in-interest prior to confirmation of a chapter 11 plan. The examiner's role is to investigate the debtor's affairs or allegations of management misconduct, if either: (i) the court determines that the appointment would be in the best interests of stakeholders and the estate; or (ii) the debtor has qualifying unsecured debt exceeding $5 million.

Two recent cases out of the Third Circuit and the Southern District of New York highlight some of the developing formulas US courts are using when engaging with foreign debtors. In a case out of the Third Circuit, Vertivv. Wayne Burt, the court expanded on factors to be considered when deciding whether international comity requires the dismissal of US civil claims that impact foreign insolvency proceedings.

The Singapore International Commercial Court ("SICC") has handed down its first insolvency-related ruling. The court granted recognition and full force and effect to Indonesia's flagship airline's restructuring plan. That plan had been approved in accordance with Indonesian law. In granting recognition to the Indonesian plan under Singapore's version of the UNCITRAL Model Law on Cross-Border Insolvency, the SICC overruled objections to recognition from aircraft lessors.

Chapter 15 of the Bankruptcy Code provides a valuable tool for non-US entities going through foreign insolvency proceedings when they have assets located in the United States. Chapter 15 can protect the value of US assets by granting a stay of actions against those assets during the concurrent administration of a complementary US insolvency process with that of the original foreign insolvency proceeding.

General

As a general rule, Law No. 37 of 2004 on Bankruptcy and Delay of Payment (“Law No. 37/2004”) provides that a delay of payment of petition should be granted by the relevant commercial court’s judges if it meets the following requirements:

a. The debtor has two or more creditors; and

b. At least one of the debts is due and payable.

Introduction

Over the years, I’ve heard lots of people say, “Bankruptcy abuse is a huge problem,” as a self-evident and undeniable proposition.

But here’s the thing. Debtors who try to abuse the bankruptcy system rarely get away with it. That’s because there are too many gatekeepers—and no debtor can fool them all!

The gatekeepers are debtor’s counsel, creditors and their attorneys, U.S. Trustees, bankruptcy courts, and appellate courts.

This is the third of a multi-part series of articles on how gatekeepers prevent abuse. This article focuses on U.S. Trustees.

Motions to Transfer Venue Filed More Than a Year Postpetition and after Chapter 11 Plan Confirmed Deemed Untimely

Mareva orders, also known as freezing orders, may be granted when there is a risk that a defendant might move its assets out of reach of the court’s jurisdiction. Mareva can orders freeze assets owned directly or indirectly by the defendants. Oftentimes a defendant subject to a freezing order has other creditors seeking repayment. Can a creditor enforce its claim against the frozen assets? Yes, but the creditor must come to the court with clean hands and should not make loans to the defendant if it has notice of the order.