In determining their preference liability exposure, creditors typically consider whether they have provided any subsequent “new value” to the debtor after they have received an alleged preferential payment. Debtors and trustees frequently take the position that creditors cannot use as a defense any new value that has been repaid to the creditor post-petition through critical vendor payments or pursuant to Section 503(b)(9) of the Bankruptcy Code. Bankruptcy courts have ruled differently on this issue.

A settlement has reportedly been reached among litigants in multi district litigation proceedings involving the bankrupt New England Compounding Center (NECC) and its insurers and creditors, including those who allegedly contracted fungal meningitis linked to the compounding pharmacy’s tainted injectable steroid products.

Section 548 of the Bankruptcy Code provides that a transfer made within two years of a bankruptcy filing is fraudulent if the debtor received less than “reasonably equivalent value” in exchange for the transfer and (i) the transfer rendered the debtor insolvent or was made at a time that the debtor was already insolvent or; (ii) the debtor had an unreasonably small amount of capital; or (iii) the debtor intended to incur, or believed that it would incur, debts that it would be unable to pay as they matured.  The fraudulent transfer laws of most states, made applicable in bankruptcy pro

The Bottom Line:

In Michigan State Housing Development Authority v. Lehman Brothers Derivatives Products, Inc., et al. (In re Lehman Brothers Holdings Inc., et al.) (Michigan State Housing), 1 the US Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) recently held that a provision in a swap agreement that shifted the methodology for calculating termination amounts upon the debtor counterparty’s bankruptcy was enforceable under the Bankruptcy Code’s safe harbor for liquidating, terminating and accelerating swap agreements.

Supreme Court Rules on Importing And Selling Foreign Made Goods

Neither snow nor rain nor heat nor gloom of night – and certainly not a batch of freezing rain and ice that’s currently paralyzing the greater Baltimore-Washington area right now – stays your trusty editors from the swift completion of their appointed rounds; namely, bringing you the weekly roundup of 

Section 546(e) of the Bankruptcy Code provides a “safe harbor” for certain transfers involving the purchase and sale of securities and protects those transfers from avoidance in bankruptcy proceedings as preferences or constructively fraudulent conveyances.  Specifically, section 546(e) insulates transfers that are “settlement payments” used in the securities trade, as well as other transfers made to or from certain parties, including financial institutions, financial participants and stockbrokers, in connection with a securities contract.  Section 741(8) of the Bankruptcy Code de

Nearly 30 years after enactment of the Bankruptcy Amendments and Federal Judgeship Act of 1984 and establishment of the current bankruptcy court structure, courts are still struggling to understand the bounds of a bankruptcy court’s jurisdiction and power. Unfortunately for one recent appellant, a bankruptcy court’s power to enter punitive damages is not as great as it had hoped.

Nearly two years ago, a bankruptcy court in the Central District of Illinois caused quite a bit of commotion in the lending community when it held that the provisions of Section 11 of the Illinois Conveyances Act (the “Act”) (765 ILCS 5/11) were mandatory rather than permissive.  Crane v. Richardson (In re Crane), 20121 WL 669595 (Bankr. C.D. Ill. Feb. 29, 2012).