IN RE: GOLF 255, INC. (July 22, 2011)
The Bottom Line:
In January, we reported that the Supreme Court had resolved a split among the Circuit Courts of Appeals regarding property seized from a debtor pre-petition, holding that “merely retaining possession of estate property does not violate the automatic stay.”[1] The under
As financial distress grows due to the pandemic, charitable organizations are faced with two immovable forces–increased demand from hard hit communities and decreased funding due to both the economic hardships facing many donors and the cancellation of most live fundraising events. The increased demand and decreased resources of many nonprofit and charitable organizations have caused such organizations to consider filing for chapter 11 protection.
The United States Supreme Court unanimously reversed the Seventh Circuit and resolved a split among the circuits in a ruling issued on January 14, 2021, concluding “that mere retention of property does not violate the [automatic stay in] § 362(a)(3).” City of Chicago v. Fulton, 19-357 (Sup. Ct., Jan. 14, 2021). Consequently, a creditor that has properly repossessed or otherwise obtained possession of a debtor’s property prior to the debtor’s bankruptcy filing will not violate the automatic stay afforded to the debtor under the bankruptcy laws.
In a case litigated by the authors, the United States Court of Appeals for the Seventh Circuit held in In re Marzieh Bastanipour, Case No. 20-1373 (7th Cir. June 10, 2020) that Chapter 13 debtors are not permitted in forma pauperis fee waivers absent a showing of extraordinary circumstances.
In 2018, the Debtor, Marzieh Bastanipour, filed a Chapter 13 bankruptcy petition in the U.S. Bankruptcy Court for the Northern District of Illinois. This was the third Chapter 13 petition filed by the Debtor since 2013.
The Bottom Line
In Whirlpool Corp. v. Wells Fargo Bank (In re hhgregg Inc.), Case No. 18-3363 (7th Cir. Feb. 11, 2020), the Seventh Circuit held that a trade creditor’s later-in-time reclamation claim was subordinate to lenders’ pre-petition and debtor-in-possession (“DIP”) financing liens. The Seventh Circuit found that Sction 546(c) of the Bankruptcy Code creates a “federal priority rule,” making clear that a reclamation claim is subordinate to prior rights of a secured creditor.
What Happened?
Executive Summary
In any bankruptcy, there are inevitably winners and losers. The winners do not always do virtuous acts to win and the losers are not necessarily evil. Rather, dividing up a limited pie, the bankruptcy courts must leave some creditors short-changed. A good example is the recent 7th Circuit case involving a supplier and a lender. (hhgregg, Inc. et al. (Debtor). Whirlpool Corporation v. Wells Fargo Bank, National Association, and GACP Finance Co., LLC, 7th Circuit Court of Appeals, No. 18-3363, February 11, 2020) |
In Whirlpool Corporation v. Wells Fargo Bank, N.A., et al. (In re hhgregg, Inc.), No. 18-3363 (7th Cir. Feb. 11, 2020), the Seventh Circuit Court of Appeals recently held that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA“) created a federal priority rule rendering a secured lender’s first-priority, floating liens on inventory superior to the reclamation claims of a trade vendor. The facts in the case are typical, and the holding does not mark a demonstrative shift in common practice.
Facts
In Whirlpool Corp. v. Wells Fargo Bank, National Association (In re hhgregg, Inc.), (7th Cir. Feb. 11. 2020), the United States Court of Appeals for the Seventh Circuit held that the current enactment of the United States Bankruptcy Code (the “Bankruptcy Code”), specifically 11 U.S.C. §546(c), expressly subordinates a seller’s reclamation claim to the prior rights of a lienholder. This is good news for secured lenders.