This past quarter end once again reminded us that the economy remains weak and borrowers who have managed to hang on for the past three or four years are running out of staying power. The topic again arose - what to do when a borrower files bankruptcy? Faced with the prospect of throwing good money after bad, some lenders bury their head in the sand and simply wait it out, often with terrible results. Others charge ahead aggressively and run up large legal bills that are not justified by the amount of the obligation or the difficulty of recovery.
(6th Cir. B.A.P. Apr. 26, 2016)
The United States District Court for the Southern District of Texas, applying federal law, has reversed a bankruptcy court's ruling that the proceeds of an E&O liability policy were property of a bankruptcy estate. In re Burr Wolff, LP, 2007 WL 2964835 (S.D. Tex. Oct. 10, 2007). The court held instead that the issue was not ripe for adjudication because a declaratory judgment action concerning the insurer's obligations under the policy was pending, and thus "no proceeds" were currently available.
As a general rule, absent an express agreement to the contrary, expenses associated with administering the bankruptcy estate, including pledged assets, are not chargeable to a secured creditor’s collateral or claim but must be paid out of the estate’s unencumbered assets. Recognizing, however, that the bankruptcy estate may be called upon to bear significant expense in connection with preserving or disposing of encumbered assets as part of an overall reorganization (or liquidation) strategy, U.S.
In In re City of Vallejo,1 the United States Bankruptcy Court for the Eastern District of California held recently that the City of Vallejo has the authority to reject its collective bargaining agreements with the city’s firefighters and electrical workers as part of its chapter 9 bankruptcy proceeding without going through the process detailed in section 1113 of the Bankruptcy Code. The bankruptcy court determined that a municipality does not need to comply with the stringent requirements that corporations face when seeking to reject a collective bargaining agreement (a “CBA”).
REEDSBURG UTILITY COMMISSION v. GREDE FOUNDRIES (July 13, 2011)
As a general rule, absent an express agreement to the contrary, expenses associated with administering the bankruptcy estate, including pledged assets, are not chargeable to a secured creditor’s collateral or claim but must be paid out of the estate’s unencumbered assets. Recognizing, however, that the bankruptcy estate may be called upon to bear significant expense in connection with preserving or disposing of encumbered assets as part of an overall reorganization (or liquidation) strategy, U.S.
The United States District Court for the Southern District of Texas, applying federal law, has reversed a bankruptcy court's ruling that the proceeds of an E&O liability policy were property of a bankruptcy estate. In re Burr Wolff, LP, 2007 WL 2964835 (S.D. Tex. Oct. 10, 2007). The court held instead that the issue was not ripe for adjudication because a declaratory judgment action concerning the insurer's obligations under the policy was pending, and thus "no proceeds" were currently available.
REEDSBURG UTILITY COMMISSION v. GREDE FOUNDRIES (July 13, 2011)