The claim of an insider lender (“L”) who invested “in a venture with substantial risk” and who loaned it additional funds on a secured basis to salvage its business should not be recharacterized as equity or subordinated on equitable grounds, held the U.S. Court of Appeals for the Tenth Circuit on June 12, 2015. In re Alternate Fuels, Inc., 2015 WL 3635366 (10th Cir. June 12, 2015) (2-1) (“AFI”).

Can a nondischargeability suit survive after a claim is deemed “satisfied in full” under a confirmed plan?  The Tenth Circuit recently considered this question in Bank of Commerce & Trust Co. v.

The ability to borrow money during the course of a bankruptcy case is an important tool available to a chapter 11 debtor-in-possession (“DIP”). Often times, the debtor’s most logical choice for a lender is one with an existing pre-bankruptcy relationship with the debtor. As a condition to making new loans, however, lenders commonly require the debtor to waive its right to pursue avoidance or lender liability actions against the lender based upon pre-bankruptcy events.

The solicitation of creditor votes on a plan is a crucial part of the chapter 11 process. At a minimum, a chapter 11 plan can be confirmed only if at least one class of impaired creditors (or interest holders) votes to accept the plan. A plan proponent’s efforts to solicit an adequate number of plan acceptances, however, may be complicated if creditors or other enfranchised stakeholders neglect (or choose not) to vote.

The U.S. Court of Appeals for the Tenth Circuit held on July 15, 2008, that a major creditor with a seat on the debtor’s board of directors and a 10.6% equity interest was not an insider in a bankruptcy preference suit. In re U.S. Medical, Inc., 2008 WL2736658 (10th Cir. 7/15/08).

The U.S. Court of Appeals for the Tenth Circuit held on Nov. 3, 2009, that a district court had improperly dismissed, on mootness grounds, an appeal from a bankruptcy court’s order confirming a reorganization plan. According to the Tenth Circuit, the appeal was reviewable because reversal of the plan confirmation order (1) would not unduly affect innocent third parties, and (2) would not undo any complex transactions.

 No. 09-6063 (8th Cir. BAP 11/24/09)

When creditors succeed in obtaining an order for relief in an involuntary Chapter 11 case and the appointment of a Chapter 11 trustee, who controls the appeals for those orders? According to an April 28, 2011 order of the U.S. District Court for the District of Nevada, the correct answer is the Chapter 11 trustee.

Section 544(b)(1) of the Bankruptcy Code enables a trustee to step into the shoes of a creditor and avoid a transfer “of an interest of the debtor in property” that an unsecured creditor could avoid under applicable state law. See 11 U.S.C. § 544(b)(1). Thus, for example, if outside of bankruptcy a creditor could avoid a transaction entered by a debtor as a fraudulent transfer, in bankruptcy, the trustee acquires the power to avoid such a transaction.

On April 19, 2023, the Supreme Court, in a unanimous opinion written by Justice Ketanji Brown Jackson in MOAC Mall Holdings LLC, ruled Bankruptcy Code section 363(m) to be non-jurisdictional, i.e. just a “mere restriction on the effects of a valid exercise” of judicial power “when a party successfully appeals a covered authorization.” Before MOAC, the Third, Sixth, Seventh, Ninth, Tenth and Eleventh Circuits held section 363(m) to be non-jurisdictional, but the Fifth and Second Circuits had diverged.

Reasoning