Holding: A debtor in a chapter 7 bankruptcy proceeding may not avoid a junior mortgage lien under Section 506(d), even if the amount of debt owed on a senior mortgage lien exceeds the current value of the collateral.

On May 21, 2015, the United States Court of Appeals for the Third Circuit affirmed a decision of the United States Bankruptcy Court for the District of Delaware, which had approved the structured dismissal of the Chapter 11 cases of Jevic Holding Corp., et al. The Court of Appeals first held that structured dismissals are not prohibited by the Bankruptcy Code, and then upheld the structured dismissal in the Jevic case, despite the fact that the settlement embodied in the structured dismissal order deviated from the Bankruptcy Code’s priority scheme.

On May 4, 2015, the Supreme Court of the United States issued an opinion regarding a Chapter 13 bankruptcy case from the United States Court of Appeals for the First Circuit (the “First Circuit”).1 The question on appeal was whether debtor Louis Bullard (“Bullard”) could immediately appeal the bankruptcy court’s order denying confirmation of his proposed Chapter 13 payment plan (the “Plan”).2 The Court held that denial of confirmation of a debtor’s plan is not a final, appealable order.3  

Case Background

Yesterday the United States Supreme Court, in Bank of America v.

On June 1st, the Supreme Court of the United States released an opinion which settles a controversy in the lower courts over lien stripping in Chapter 7 bankruptcy cases.  With Bank of America, N.A. v.

In a 6-3 ruling, the U.S. Supreme Court held that bankruptcy courts have the authority to adjudicate Stern claims so long as the litigant parties provide “knowing and voluntary consent.”  This decision in Wellness International Network, et. al. v. Richard Sharif  provides much needed guidance as to the breadth and applicability of the Supreme Court’s 2011 decision in Stern v.

This morning, the United States Supreme Court ruled that debtors in Chapter 7 bankruptcy cases cannot “strip off,” or completely void, junior mortgages that—based on the value of the property and the amount of claims secured by senior mortgages—are completely underwater.

Much has been written in the past several years regarding the scope of a bankruptcy court’s jurisdiction in the wake of the Supreme Court’s decisions in Stern v. Marshall, 564 U.S. ___ (2011) and Executive Benefits Ins. Agency v. Arkison, 573 U.S. ___ (2014). Now, the Supreme Court has weighed in again in the case of Wellness Int’l Network, Ltd., et al v. Sharif, 575 U.S. ___ (2015) in an attempt to clarify the confusion created by Stern.

Another of Kentucky’s rural hospitals just filed bankruptcy, stating that it has been exploring sale options for a year, and that it has recently decided that a sale through the bankruptcy court process is its best option.

No matter your industry or line of business, insolvency is not a pleasant process. Debts stack up, paperwork starts flying back and forth, and creditors circle their wagons. But it may surprise even a seasoned corporate attorney when one debtor in particular comes calling: The federal government.

The law that makes it possible — and pushes Uncle Sam to the front of the creditor line — is the Federal Priority Act. The statute dates back centuries, but is little-known among today’s practitioners. And that’s not a good thing.