Commercial lessors have long enjoyed certain individualized protections under section 365 of the Bankruptcy Code. The Third Circuit’s recent decision in In re Goody’s Family Clothing, Inc., __ F.3d ___, 2010 WL 2671929 (3d Cir. June 29, 2010), makes it clear that commercial lessors also can take advantage of the more general protections available to creditors to obtain payment for goods and services they provide to a debtor after it files for bankruptcy where the specific protections are not applicable.

Section 365(d)(3)

On August 4, 2010, the New Jersey Superior Court, Appellate Division extended equitable principles previously applied in mortgage foreclosure cases to how far an unsecured judgment creditor could go to satisfy its lien against a debtor, deciding to follow a line of cases standing for the principal that “even in the absence of express statutory authorization, a court has inherent equitable authority to allow a fair market value credit in order to prevent a double recovery by a creditor against a debtor.” Moreover, in the case, MMU of New York, Inc. v.

On October 28, 2010, Banning Lewis Ranch Co. LLC and Banning Lewis Ranch Development I & II, LLC (collectively, "Banning"), filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. A copy of one of the Banning bankruptcy petition is available here for review. Banning owns over 21,000 acres of land situated on the east side of Colorado Springs, Colorado.

When defaults spiked for loans underwritten by commercial mortgage-backed securities (CMBS), many Texas attorneys sought state court-appointed receivers for commercial real estate assets.

Placing a struggling property in receivership has long been a remedy available for lenders, but Texas' relatively expedited and inexpensive nonjudicial foreclosure process limited the remedy's practical value for traditional lenders.

The Bankruptcy Appellate Panel for the Sixth Circuit (BAP) recently held that a mortgagee that held a collateral assignment of rents on property in which the debtor had no equity was not adequately protected by cash collateral orders entered by the bankruptcy court that granted the lender a "replacement lien" on post-petition rents.

The current "Great Recession," which began in late 2007 with a maelstrom in the debt capital markets, has necessitated a rethinking of the federal income tax rules governing debt restructurings. The harsh rules2 promulgated by the Internal Revenue Service (IRS) in reaction to the 1991 taxpayer-favorable decision in Cottage Savings v. Commissioner,3 have been inhibiting restructurings. Instead, rules that did not trigger adverse tax results have been needed to induce lenders and borrowers to restructure obligations that can no longer be paid according to their terms.

On December 23, 2010, the Bankruptcy Appellate Panel of the 6th Circuit, upheld the Eastern District of Kentucky’s Bankruptcy Court’s order that post petition rents, revenues or other funds derived from leased real property is property of the estate under 11 U.S.C. §541 and can be used as cash collateral under 11 U.S.C. §363. However, post petition rents can be used as cash collateral only if the debtor can provide adequate protection for the use of those rents through an existing equity cushion in the property.

The Bankruptcy Appellate Panel for the Sixth Circuit Court of Appeals1 recently issued an opinion of importance in bankruptcy cases involving commercial real estate as the debtor’s only asset, such as a shopping center or office building.

Introduction

In January of this year, George L Miller, the chapter 7 trustee (the "Trustee") in the WL Homes bankruptcy, began filing avoidance actions against various creditors. As alleged in the complaints, the Trustee seeks the recovery of what he deems are "preferential transfers" pursuant to 11 U.S.C. section 547(b) of the Bankruptcy Code. This post will look briefly at the WL Homes bankruptcy, as well as provide information on common issues that arise in preference litigation.

Background on the Bankruptcy Proceeding

In a welcome bit of good news for lenders, US District Court Judge Gold (Southern District of Florida) reversed the portion of the 2009 bankruptcy court decision in the TOUSA, Inc. bankruptcy cases that had ordered the disgorgement of $403 million plus interest based on the holding that the amounts were received by certain lenders to the TOUSA parent in connection with a pre-petition transaction that constituted a fraudulent transfer.