In the March/April 2013 edition of the Business Restructuring Review, we reported on an opinion by the U.S. Bankruptcy Court for the Southern District of New York concluding that a chapter 15 debtor’s sale of claims against Bernard Madoff’s defunct brokerage company was not subject to review as an asset sale under section 363(b) of the Bankruptcy Code.

The ability of a trustee or chapter 11 debtor in possession ("DIP") to sell bankruptcy estate assets "free and clear" of liens on the property under section 363(f) of the Bankruptcy Code has long been recognized as one of the most powerful tools for restructuring a debtor’s balance sheet and generating value in bankruptcy.

Recent Developments

Even before Congress added section 365(c)(3) to the Bankruptcy Code in 1984, it was generally understood that a nonresidential real property lease which has been validly terminated under applicable law prior to a bankruptcy filing by the debtor-former tenant cannot be assumed or assigned in bankruptcy. Moreover, the terminated leasehold interest is excluded from the debtor’s bankruptcy estate, and any action by the landlord to obtain possession of the formerly leased premises is not prohibited by the automatic stay.

Over the past 21 years, two U.S. district court judges in the Southern District of New York have held that the avoidance powers conferred on a bankruptcy trustee or chapter 11 debtor-in-possession under the Bankruptcy Code do not apply to pre-bankruptcy transfers made by a debtor outside the United States. However, a U.S. bankruptcy court judge in the same district recently reached the opposite conclusion in Weisfelner v. Blavatnik (In re Lyondell), 543 B.R. 127 (Bankr. S.D.N.Y. 2016). In Lyondell, bankruptcy judge Robert E.

In a recent decision, the United States Court of Appeals for the Eleventh Circuit reaffirmed its position sanctioning, under appropriate circumstances, nonconsensual third party release provisions in chapter 11 plans. In SE Prop. Holdings, LLC v. Seaside Eng’g & Surveying, Inc.(In re Seaside Eng’g & Surveying, Inc.), 780 F.3d 1070 (11th Cir. 2015), the Eleventh Circuit affirmed bankruptcy and district court decisions approving a debtor’s chapter 11 plan that released the debtor’s former principals over the objection of a noninsider equity holder.

It is well recognized that, in keeping with the "fresh start" or "rehabilitative" policy, the Bankruptcy Code invalidates after-acquired property clauses in prepetition security agreements, but also includes an exception to the general rule for prepetition liens on the proceeds, products, offspring, or profits of prepetition collateral. Less well understood is that there is an "exception to the exception" if a bankruptcy court determines that the "equities of the case" suggest that property acquired by the estate should be free of such liens.

On January 14, 2021, the U.S. Supreme Court held in City of Chicago v. Fulton, 592 U.S. __ (2021), that a creditor in possession of a debtor's property does not violate the automatic stay, specifically section 362(a)(3) of the Bankruptcy Code, by retaining the property after the filing of a bankruptcy petition. The Court's decision provides important guidance to bankruptcy courts, practitioners, and parties on the scope of the automatic stay's requirements.

Section 365(h) of the Bankruptcy Code provides special protection for tenants if a trustee or chapter 11 debtor-in-possession ("DIP") rejects an unexpired lease under which the debtor was the lessor by giving the tenant the option of retaining possession of the leased premises. Although the provision clearly describes what rights a tenant has if it makes such an election, it does not unequivocally address the extent of the electing tenant's obligations under the rejected lease or any related agreements. The U.S.

Under the "single-satisfaction rule," although a bankruptcy trustee or a chapter 11 debtor-in-possession ("DIP") may seek to avoid and recover avoidable transfers of a debtor's property from more than one transferee, the aggregate recovery is limited to the value of the property transferred. The U.S. Court of Appeals for the Second Circuit examined this rule in Jones v. Brand Law Firm PA (In re Belmonte), 931 F.3d 147 (2d Cir. 2019).