The Bankruptcy Code in the United States is generally intended to give honest but unfortunate debtors the opportunity for a fresh start. This includes the honest but unfortunate franchisee who attempts to start a franchise but ultimately fails. Generally, if a franchisee files a personal bankruptcy case, the personal liability of the individual who filed bankruptcy is discharged and that individual has the opportunity for a fresh start.

We recently commented here on the standard for reviewing key employee incentive plans (KEIPs) and the approval of the KEIP in the Velo Holdings chapter 11 cases pending in the Southern District of New York.  On July 24, Bankruptcy Judge Carla Craig of the Eastern District of New York approved a KERP (a key employee retention plan) in the Global Aviation bankruptcy cases aimed at retaining five employees deemed critical to the conso

The United States District Court for the Central District of California has held that, under California law, claims for restitutionary relief are uninsurable as a matter of law. Dobson v. Twin City Fire Ins. Co., et al., 2012 WL 2708392 (C.D. Cal. July 5, 2012). Additionally, the court held that individual insureds breached a policy’s no-voluntary payment provision by settling an underlying claim without insurer consent and that the insureds’ breach was not excused by the carrier’s failure to advance defense costs.

On July 2, 2012, the Illinois Department of Insurance (IDOI) entered an Agreed Order of Rehabilitation against Lumbermens Mutual Casualty Company and American Manufacturers Mutual Insurance Company, which is the part of the Lumbermens Mutual Group formerly known as Kemper (collectively, “Lumbermens”). Under the order, IDOI’s Director will serve as Lumbermens’ Rehabilitator with powers to restructure Lumbermens’ insurance business. From this point forward, Lumbermens will no longer take on any new insurance obligations, issue any new policies, or renew any existing policies.

In Skov v. U.S. Bank N.A., 2102 WL 2549811 (June 8, 2012), the Court of Appeal reversed the trial court’s decision to sustain a demurrer against plaintiff Andrea Skov’s second amended complaint, holding that she had stated a claim for violation of Civil Code Section 2923.5, which requires a lender to contact a defaulted borrower to discuss alternatives to foreclosure before starting a nonjudicial foreclosure by recording a notice of default.

It is not uncommon for a supplier of goods or services to receive a demand letter or adversary complaint alleging that it received avoidable transfers—commonly known as "preferential payments" or "preferences"—during the 90 days preceding a customer's bankruptcy filing. Such claims arise under section 547 of the Bankruptcy Code, and can result in a supplier having to return certain payments made during the 90-day preference period.

In the case of Coughlin v. South Canaan Cellular Investments, LLC, C.A. No. 7202-VCL (Del. Ch. July 6, 2012), Respondents made a request for fee shifting under the bad-faith exception to the American Rule.  In reviewing this fee shifting request, the Court found that Respondents’ request itself was unfounded, and coupled with Respondents’ own conduct in the case, instead awarded Petitioner his fees in costs in the amount of $17,906.

In a recent opinion, the Supreme Court unanimously affirmed a secured lender’s right to credit-bid at a bankruptcy sale of assets encumbered by such lender’s liens.  In addition to solidifying the rights and protections afforded to a secured creditor in bankruptcy, the Supreme Court lessened some of the uncertainty associated with the acquisition strategy by which a potential buyer purchases claims secured by the targeted assets of a troubled company and seeks to exercise such secured creditor’s rights as to such assets.

As of August 1st, the legal landscape for receiverships in the State of Minnesota will change dramatically. Receiverships have long been used a remedy for mortgage lenders to preserve commercial property in foreclosure, but a lack of clear guidance under Minnesota law has been problematic for all parties. The Minnesota State Bar Association convened a panel of experienced debtor creditor attorneys to create a new statutory framework, which was eventually passed by the Legislature and signed by the Governor this spring. The new receivership statute, codified under Minnesota St

Participants in the multibillion-dollar market for distressed claims and securities have had ample reason to keep a watchful eye on developments in the bankruptcy courts during the last decade. That vigil appeared to have been over five years ago, after a federal district court ruled in the Enron chapter 11 cases that sold claims are generally not subject to equitable subordination or disallowance on the basis of the seller's misconduct or receipt of a voidable transfer. A ruling recently handed down by a Delaware bankruptcy court, however, has reignited the debate.