In Clear Channel Outdoor, Inc. v.Knupfer (In re PW, LLC),1 the United States Bankruptcy Appellate Panel for the Ninth Circuit (the “BAP”) addressed the issue of whether a secured creditor had purchased estate property free and clear of liens, claims and encumbrances outside of a plan of reorganization.

Creditors often consider filing an involuntary bankruptcy petition against their financially distressed debtors. Before using this extraordinary remedy, a creditor should evaluate whether it will achieve a valid business objective. Additionally, each creditor should evaluate whether there is a valid basis to support the filing. When the debtor's bankruptcy is appropriate, it can be a valuable step in maximizing a creditor's recovery. But the stakes are high.

On Friday, November 14, 2008, the Executive Office for United States Trustees ("EOUST") issued for public comment a notice of proposed rulemaking setting forth procedures and criteria U.S. Trustees will use when considering applicants seeking to become approved providers of a personal financial management instructional course (the "Proposed Rule"). Comments are due by January 13, 2009.

Summary of Key Aspects of the Proposed Rule

Plaintiff, the trustee of the Chapter 7 estate of Security Asset Capital Corporation (SACC), a corporate debtor, brought an action against the debtor’s officers and directors, alleging that they breached their fiduciary duties by failing to commence Chapter 7 liquidation once SACC became insolvent.

As our economy slides into what could be a long and severe recession, retail bankruptcies are expected to increase. Landlords are presented with a myriad of problems when one of their tenants files for bankruptcy. Although many of the obligations and rights of landlords are well established by current bankruptcy law, a novel question arises when a tenant files for bankruptcy while a landlord is in the process of constructing tenant improvements or is on the verge of providing a tenant allowance. Given the tenant’s right to reject its lease, a landlord is faced with a difficult decision.

The “Ades” and “Berg” groups of investors (the “Ades Berg Group”), were parties who joined in the bankruptcy proceedings of the Bennett Funding Group, Inc. and related companies (the “Bennett Group”), based on claims that, among other things, the Bennett Group had defrauded them in an investment scheme. The Bennett Group was insured under a reinsurance contract issued by Sphere Drake Insurance PLC (“Sphere Drake”). A settlement was reached in the course of the bankruptcy proceedings between some groups of investors and Sphere Drake.

Beginning on September 15, 2008, Lehman Brothers Holdings Inc. (“LBHI”) and 16 of its affiliates (the “Debtors”) filed voluntary Chapter 11 bankruptcy petitions with the United States Bankruptcy Court for the Southern District of New York. The resulting bankruptcy cases are jointly administered by the bankruptcy court for procedural purposes (collectively, the “Chapter 11 Proceeding”), but to date, the Debtors remain separate legal entities.  

When a creditor seeks equitable relief in a bankruptcy court, must the court always follow common law principles of equity? Not according to several courts, including the Second Circuit. Concluding that the granting of equitable remedies may circumvent the Bankruptcy Code's equitable distribution system, courts have limited the application of equitable remedies in the bankruptcy context.

Last year, the Ninth Circuit BAP determined that the Bankruptcy Code does not permit a secured creditor to credit bid its debt, and purchase estate property free and clear of non-consenting junior liens, outside a plan of reorganization. Uncertainty resulting from the decision in Clear Channel Outdoor, Inc. v. Nancy Knupfer (In re PW, LLC), 391 B.R. 25 (9th Cir. B.A.P. 2008) may chill bidding and asset sales in the Ninth Circuit.

In a case that has broad implications for trustees and taxing authorities embroiled in preference avoidance actions, the Bankruptcy Court for the Western District of Missouri weighed in on the parameters of a trustee’s ability to avoid preferential sales and use tax payments under section 547 of the Bankruptcy Code.  

Overdue Tax Payments