Chapter 11 of the United States Bankruptcy Code is a useful tool available to businesses (and even some high-net-worth individuals) to restructure their debt, shed their liabilities, and reorganize. Chapter 11 is also used by companies to sell all or substantially all of their assets "free and clear" of liens, claims, and interests relatively quickly. Buyers recognize the value of being able to acquire assets free and clear pursuant to 11 U.S.C.
No equipment lessor wants to find itself a creditor of a lessee in a reorganization case under chapter 11 of the U.S. Bankruptcy Code (the Bankruptcy Code). However, when such a situation arises, a lessor is not without recourse – even where the facts give rise to situations not specifically addressed by the Bankruptcy Code.
The U.S. Justice Department (“DOJ”) has said that an Oregon woman who is employed by a marijuana staffing agency cannot use bankruptcy protection because of her firm’s ties to the cannabis industry. The U.S. Trustee—a DOJ bankruptcy administrator—objected to confirmation of the debtor’s Chapter 13 plan and moved to dismiss on the grounds that her income is earned in violation of the federal Controlled Substances Act (“CSA”).
Two weeks ago, we discussed asset sales under Bankruptcy Code section 363. As that post noted, section 363 requires court approval for asset sales outside the ordinary course of business, with courts ensuring that sales reflect a reasonable business judgment and have an articulated business justification. Debtors may choose to sell assets via a public auction or through a private sale.
Despite recent decisions in the U.S. Courts of Appeals for the Second Circuit (Momentive) and the Fifth Circuit (Ultra) questioning the enforceability of make-whole provisions in bankruptcy, on March 18, 2019, the Bankruptcy Court for the Southern District of New York determined in 1141 Realty that the make-whole provision contained in a loan agreement was enforceable notwithstanding acceleration of the loan by the secured lender.
Background on Enforceability of Make-Whole Provisions in Bankruptcy
A bankruptcy trustee was “not entitled to avoid” a secured lender’s “lien under the Bankruptcy Code” (“Code”), held the U.S. Court of Appeals for the Seventh Circuit on Sept. 11, 2019. In re 180 Equipment, LLC, 2019 WL 4296751, *6 (7th Cir. Sept. 11, 2019). The court rejected the trustee’s argument that the lender’s “lien [was] avoidable because the [lender’s] financing statement failed to properly indicate the secured collateral.” Id., at 1.
On April 23, 2019, Judge Cote of the District Court for the SDNY, issued an opinion in In re Tribune Company Fraudulent Conveyance Litigation,[i] finding that the Tribune Company, which employed Computershare Trust Company (“CTC”) to handle payments made to shareholders as part of its leverage buyout (“LBO”), would be considered a “financial institution” as defined in
The Supreme Court of Missouri recently held that a trial court abused its discretion by certifying an overly broad class with a class representative whose claims against the debt collector defendant were not typical of the class.
Debtors who have filed for bankruptcy and received their Discharge often continue to receive collection letters and phone calls from their creditors. Some creditors even go so far as to sue on these discharged debts or garnish wages and bank accounts. Such actions may result in severe penalties, sanctions and damages. This article goes over the basics of the Bankruptcy Discharge and the importance of having measures in place to avoid violations.
What is the Bankruptcy Discharge?
The purchase-money security interest (“PMSI”) is a powerful tool that enables lenders to take priority over the holders of prior perfected security interests that cover the same collateral. Those lenders seeking to obtain a PMSI often take great care to comply with the statutory perfection requirements. Yet, the notice requirements for a PMSI in inventory are every bit as important. A secured party that fails to comply with the PMSI notice requirements is likely to find its security interest subordinate to prior conflicting interests.