Residential Communities: Calderon Process for HOAs Likely to Be Extended Again

For secured lenders, a consumer debtor’s chapter 13 bankruptcy filing can be a mixed bag.

Practitioners generally identify “excusable neglect” as the standard that bankruptcy courts apply in determining whether to allow a creditor’s untimely proof of claim. A creditor who lets the bar date pass finds itself in the undesirable position of having to persuade the bankruptcy court that its neglect to file a timely proof of claim was excusable.

When is a claim contingent? When is a claim subject to a bona fide dispute and who has the burden of proof? When is a claim against a person? When is a claim too small to count? When is an alleged debtor generally not paying his debts as they come due? Are we there yet?

The recent decision from the United States District Court for the Eastern District of Michigan, ECP Commercial II LLC v. Town Center Flats, LLC (In re Town Center Flats, LLC), gives us at the Weil Bankruptcy Blog a reason to revisit the issue of “absolute” assignments of rent.

“We’re riding down the boulevard,
We’re riding through the dark night,
With half the tank and empty heart,
Pretending we’re in love, when it’s never enough, nah.”

The Seventh Circuit Court of Appeals recently handed down a decision with significant implications for landlords contemplating lease termination agreements with distressed tenants. Ruling on a direct appeal in the chapter 11 case In re Great Lakes Quick Lube LP, the court held that a lease termination agreement between a landlord and a financially distressed tenant can be voided as either a fraudulent conveyance or a preferential transfer in the tenant’s subsequent bankruptcy case.

A Chapter 11 debtor’s pre-bankruptcy “surrender of [two] … leases to [its landlord] could be regarded as a preferential transfer,” held the U.S. Court of Appeals for the Seventh Circuit on March 11, 2016. In re Great Lakes Quick Lube LP, 2016 WL 930298, at *2 (7th Cir. March 11, 2016).

In a case of first impression, the Seventh Circuit recently issued an opinion that may cause landlords and their advisors to re-evaluate the consequences of terminating a financially distressed commercial tenant’s lease prior to bankruptcy. Official Comm. of Unsecured Creditors of Great Lakes Quick Lube LP v. T.D. Investments I, LLP (In re Great Lakes Quick Lube LP), --- F.3d ---, 2016 WL 930298 (7th Cir. Mar. 11, 2016) (Posner, J.).

A recent bankruptcy court decision could have wide-reaching implications for pipeline operators. Judge Shelley C.