Going forward, lenders must take precautionary measures to protect themselves. Anticipating the risk of a U.S. bankruptcy case is a crucial first step.

For nearly 25 years, courts in the Ninth Circuit have consistently refused to sanction nonconsensual third-party releases as part of chapter 11 plans. A ruling recently handed down by the U.S. District Court for the District of Washington reaffirms and extends that proposition. In In re Fraser’s Boiler Serv., Inc., 2019 WL 1099713 (D. Wash. Mar.

On June 3, 2019, the U.S. Supreme Court ruled in Taggart v. Lorenzen, 139 S. Ct. 1795 (2019), that a bankruptcy court may hold a creditor in civil contempt for attempting to collect on a debt that has been discharged in bankruptcy "if there is no fair ground of doubt as to whether the [discharge] order barred the creditor’s conduct." In so ruling, the Court vacated and remanded a ruling by the U.S.

The recent chapter 11 filings by PG&E Corp. and its Pacific Gas & Electric Co. utility subsidiary (collectively, "PG&E") and FirstEnergy Solutions Corp. have reignited the debate over the power of a U.S. bankruptcy court to authorize the rejection of contracts regulated by the Federal Energy Regulatory Commission ("FERC"). Only a handful of courts have addressed this thorny issue to date, and with conflicting results in a controversy that may ultimately need to be resolved by the U.S. Supreme Court or legislative action.

In In re Ultra Petroleum Corp., 913 F.3d 533 (5th Cir. 2019), the U.S. Court of Appeals for the Fifth Circuit ruled that a "make-whole," or "prepayment," premium owed on unsecured notes issued by a chapter 11 debtor constituted unmatured interest disallowed by section 502(b)(2) of the Bankruptcy Code. The ruling represents a landmark decision on the allowance of such premiums in chapter 11, over which there has been considerable litigation in recent years, including at the circuit court level.

Enforceability of Make-Whole Premiums in Bankruptcy

A bankruptcy trustee exercising her or his avoidance powers under Chapter 5 of the Bankruptcy Code may seek to recover the avoidably transferred property (or its value) from “the initial transferee,” “the entity for whose benefit such transfer was made” and “any immediate or mediate transferee of such initial transferee.”[1] Despite the authorization to seek recovery from multiple sources, “[t]he trustee is entitled to only a sin

On July 30, the U.S. Court of Appeals for the 5th Circuit affirmed decisions by a bankruptcy court and a district court to dismiss a borrower’s student loan discharge request under the Bankruptcy Code, holding that Congress, not the courts, is responsible for changing the rules for discharging student loan debt in bankruptcy.

Suppose you own farmland or retail commercial space and you lease your property.

What happens to your lease if the lessee files bankruptcy? And what must be done if your lessee wants to continue to honor your lease despite the bankruptcy? In In re Collins, The United States Bankruptcy Court for the Eastern District of North Carolina recently stressed that a debtor cannot informally assume an unexpired lease. The debtor must follow the strict procedures in the Bankruptcy Code or the lease will be automatically rejected.

We’ve focused a lot on third-party releases lately, as bankruptcy courts across the country continue to evaluate whether and under what circumstances they are permissible. But, as a recent opinion of the United States Court of Appeals for the Fifth Circuit demonstrates, bankruptcy courts are not the only courts grappling with this issue.[1]

We’ve all heard it said a million times - if it sounds too good to be true, it probably is. But does that age-old maxim apply to a bankrupt customer offering to pay you 100% of your unsecured claim through a “prepackaged” bankruptcy or under a critical vendor program? The answer can be complicated.

This article explores what it means to be “unimpaired” and paid in full in prepackaged bankruptcies and under critical vendor programs and outlines some of the potential pitfalls that can be faced by unsecured creditors under these scenarios.