In nearly every bankruptcy proceeding there is some constituency that ends up having its claim or interest impaired. Not surprisingly, therefore, these same constituencies would like to avoid that outcome by restricting the debtor’s ability to commence bankruptcy in the first place.

The Bankruptcy Appellate Panel for the Sixth Circuit (BAP) recently held that a mortgagee that held a collateral assignment of rents on property in which the debtor had no equity was not adequately protected by cash collateral orders entered by the bankruptcy court that granted the lender a "replacement lien" on post-petition rents.

Title II of the Dodd-Frank Act establishes a receivership process by which the FDIC can engage in an orderly liquidation process to wind down the affairs of and liquidate the assets of certain failing financial companies that pose a significant risk to the financial stability of the United States.

The Bankruptcy Code sets forth the relative priority of claims against a debtor and the waterfall in which such claims are typically paid. In order for a court to confirm a plan over a dissenting class of creditors – what is commonly called a “cram-down” – the Bankruptcy Code demands thateither (i) the dissenting class receives the full value of its claim, or (ii) no classes junior to that class receive any property under the plan on account of their junior claims or interests. This is known as the “absolute priority rule.”

Recently, the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board (FRB) each issued rules related to different aspects of the Dodd-Frank Act. The FDIC published in the Federal Register an interim final rule clarifying how it will treat certain creditor claims under the new orderly liquidation authority (OLA) granted under Title II of the Dodd-Frank Act.

The Internal Revenue Service (IRS) recently issued rulings regarding the availability of tax losses after a bankruptcy,1 the ability to take a loss under Sections 165(a) and 165(g),2 and the characterization of a loss after an ownership change.3 There are few rulings or other sources of authority for these types of issues, and thus, a review of these rulings provides insight into the IRS’s current thinking on the issues addressed.

PLR 201051020

In a long-awaited decision released on February 22, 2011, Judge James M. Peck of the United States Bankruptcy Court for the Southern District of New York ruled in favor of Barclays Capital in Lehman Brothers Holding Inc.’s multi-billion-dollar lawsuit arising out of the sale of Lehman’s investment banking and brokerage assets, which occurred in September of 2008.

Reprinted with permission from the March 18, 2011 issue of The Legal Intelligencer © 2010 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

Over the last couple of years, the predominant goal in many business bankruptcy proceedings has been the sale of substantially all of the estate's assets. Such bankruptcy sales are often favored by buyers under Section 363(f), which enables a "free and clear" transfer of the assets.

© 2011 Bloomberg Finance L.P. All rights reserved. Originally published by Bloomberg Finance L.P. in the Vol. 5, No. 12 edition of the Bloomberg Law Reports—Bankruptcy Law. Reprinted with permission. Bloomberg Law Reports® is a registered trademark and service mark of Bloomberg Finance L.P.

© 2011 Bloomberg Finance L.P. All rights reserved. Originally published by Bloomberg Finance L.P. in the Vol. 5, No. 13 edition of the Bloomberg Law Reports—Bankruptcy Law. Reprinted with permission. Bloomberg Law Reports® is a registered trademark and service mark of Bloomberg Finance L.P.