Facts

In Andrew Fender (Administrator of FG Collier & Sons Limited) - v - National Westminster Bank Plc, a company went into administration. The administrator applied to the court to establish whether he had to treat NatWest bank as a secured or unsecured creditor of the company.

The court will not assist a former bankrupt to enforce his interests under an unlawful trust where the purpose of the trust initially had been to deprive the trustee in bankruptcy of the bankrupt's interest.

Law 1676 of 2013 (Secured Interest Law), which came into effect in 2014, has substantially affected the legal scope of creditors’ rights in the context of insolvency proceedings (reorganization and liquidation). In particular, the law has potentially created a new type of creditor; the secured creditor, which has rights that differ from those creditors included in the creditor hierarchy in the Civil Code and the Corporate Insolvency Law.

Lenders contemplating potential claims against insurers of insolvent professionals will welcome the fact that the Third Parties (Rights Against Insurers) Act 2010 (2010 Act) is to finally come into force from 1 August 2016, having been updated by the Third Parties (Rights Against Insurers) Regulations 2016.

It used to be the case that mortgage creditors could rest easy knowing they held a mortgage, and that they would be repaid with the proceeds of the sale of the mortgaged asset, even in the event of an insolvency.

“[T]he debtor … did not retain sufficient rights in the assigned rents under Michigan law for those rents to be included in the bankruptcy estate,” held the U.S. Court of Appeals for the Sixth Circuit on May 2, 2017. In re Town Center Flats LLC, 201 U.S. App. LEXIS 7733, *2 (6th Cir. May 2, 2017). Relying on Michigan law and the language of the relevant documents, the court reversed the bankruptcy court’s holding that gave the Chapter 11 debtor access to the assigned rents as operating funds during its reorganization.

Relevance

“[T]he price received at a California tax sale” properly held under state law “conclusively establishes ‘reasonably equivalent value’ for purposes of” the Bankruptcy Code’s (“Code”) fraudulent transfer section (§ 548(a)(1)), held the U.S. Court of Appeals for the Ninth Circuit on Sept. 8, 2016. In re Tracht Gut LLC, 2016 WL4698300, at *1 (9th Cir. Sept. 8, 2016). Affirming the lower courts, the Ninth Circuit reasoned that “California tax sales have the same procedural safeguards as the California mortgage foreclosure sale” approved by the U.S. Supreme Court in BFP v.

The U.S. Court of Appeals for the Fourth Circuit, on Feb. 21, 2014, affirmed the dismissal of a bankruptcy trustee’s fraudulent transfer complaint against a “warehouse” lender who had been paid by a distressed home mortgage originator several months prior to the originator’s bankruptcy. Gold v. First Tennessee Bank, N.A., 2014 U.S. App. LEXIS 3279 (4th Cir. Feb. 21, 2014) (2-1). Affirming the lower courts, the Fourth Circuit held that “the bank accepted the payments” from its borrower “in good faith.” Id., at *2.

In a decision to be hailed by buyers of distressed debt and bankruptcy claims on the secondary loan market, on Oct. 15, 2009, the New York Court of Appeals (the “Court”), in a fact-specific ruling, held that an assignment of claim does not violate New York’s champerty statute (forbidding trading in litigation claims) if the purpose of the assignment is to collect damages by means of a lawsuit for losses on a debt instrument in which the assignee holds a pre-existing proprietary interest. Trust for the Certificate Holders of the Merrill Lynch Mortgage Investors, Inc.

The U.S. Court of Appeals for the Tenth Circuit held on July 15, 2008, that a major creditor with a seat on the debtor’s board of directors and a 10.6% equity interest was not an insider in a bankruptcy preference suit. In re U.S. Medical, Inc., 2008 WL2736658 (10th Cir. 7/15/08).