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).
A June 2013 decision from the United States Bankruptcy Court for the Eastern District of North Carolina Greenville Division, In re L.L. Murphrey Company, 2013 WL 2451368 (Bankr. E.D.N.C. June 6, 2013), highlights the importance of due diligence in connection with assignments of security interests.
Probably the most significant bankruptcy law development in the past several years has been the narrowing of bankruptcy courts’ constitutional authority to enter final judgments. See Stern v. Marshall, 131 S. Ct.
In recent years, bankruptcy courts have come closer to reaching a consensus regarding their ability to recharacterize debt into equity. Yet, beneath this consensus lies a deepening divide that lenders should be aware of. Recharacterization challenges “the assertion of a debt against the bankruptcy estate on the ground that the ‘loaned’ capital was actually an equity investment.” In re Insilco Techs., Inc., 480 F.3d 212, 217 (3d Cir. 2007) (internal citations omitted).
The Tenth Circuit recently analyzed the interplay between sections 523(a)(5) and 523(a)(15) of the Bankruptcy Code in connection with a judgment obtained by a former husband for overpayment of his spousal support obligations. Eloisa Taylor, the debtor in In re Taylor, 2013 WL 6404952 (10th Cir.
In Durango-Georgia Paper Co. v. H. G. Estate, LLC, Case No. 11-15079 (decided January 7, 2014), the Eleventh Circuit addressed what it defined as a question of first impression: “whether under ERISA the trustee of a corporation that is a contributing sponsor and is in bankruptcy can maintain an action for the benefit of the bankruptcy estate and the estate’s unsecured creditors against the corporation’s former owner … for liabilities arising from the termination of a pension plan.” Opinion, p. 5. The Court held that the answer is “no.”
Over the past week, Fannie Mae has announced numerous servicing policy changes through a series of Servicing Guide Announcements.
Part Two of a Two-Part Article
Last month, we discussed “prepayment premiums” or “make-whole payments.” The purpose of such prepayment premiums is to compensate lenders for what would otherwise be the loss of their bargained-for yields for the scheduled lives of their loans. Prepayment premiums are usually either based on a fixed fee, such as a percentage of the principal balance at the time of prepayment, or a yield maintenance formula that approximates the lenders’ damages in the event of prepayment.
TheLehman Brothers bankruptcy court has determined that the contractually specified methodology for conducting the liquidation of a swap agreement is protected by the safe harbor provisions of the bankruptcy, even if the selected methodology would be more favorable to the non-defaulting counterparty than the liquidation methodology that would apply absent the bankruptcy.See Michigan State Housing Dev. Auth. v. Lehman Bros. Deriv. Prods. Inc. (In re Lehman Bros. Holdings Inc.), No. 08-13555, ---B.R.