Before a bankruptcy court may confirm a chapter 11 plan, it must determine if any of the persons voting to accept the plan are “insiders,”i.e., individuals or entities with a close relationship to the debtor. Because the Bankruptcy Code’s drafters believed that insider transactions warrant heightened scrutiny the classification of a creditor as an “insider” can have a profound impact on a debtor’s ability to reorganize.
The U.S. Court of Appeals for the Ninth Circuit recently held that if a creditor wishes to participate in the distribution of a debtor’s assets under Chapter 13, it must timely file a proof of claim, and the debtor’s acknowledgment of the debt owed to the creditor does not relieve the creditor of this affirmative duty.
A copy of the opinion is available at: Link to Opinion.
Under Section 521(a)(2)(A) of the federal bankruptcy code, a debtor in a chapter 7 bankruptcy must file a statement within 30 days of the bankruptcy filing notifying the court, creditors and the trustee whether the debtor intends to retain or surrender property encumbered by a mortgage. In its October, 2016 decision in the case of In re Failla, the 11th Circuit Court of Appeals, in affirming rulings from the bankruptcy court and the federal district court, held that once a chapter 7 debtor elects to "surrender" mortgaged property, he is precluded from thereafter opposing
In the decision of Motors Liquidation Co. Avoidance Action Trust v. JPMorgan Chase Bank, N.A. (In re Motors Liquidation Co.), 552 B.R. 253 (Bankr. S.D.N.Y. 2016), the SDNY bankruptcy court held that prepetition interest payments on a term loan did not qualify as “settlement payments” under Section 546(e) of the Bankruptcy Code.
In our previous two news alerts,1 we examined decisions that potentially undermine key elements of the legal structures that lenders created in response to their experiences in the United States Bankruptcy Courts during the real estate downturn of 1988 through 1992, including the involuntary restructure of their indebtedness and liens under the cram-down provisions of title 11 of the United States Code (the “Bankruptcy Codeâ€).
In an 8 page decision dated October 19, 2016, Judge Carey of the Delaware Bankruptcy Court overruled an objection to the reclassification of the claim of a terminated employee. Judge Carey’s opinion is available here (the “Opinion”). This employee (“Mangan”) was a fifteen year veteran of the Debtor, and was entitled to 15 weeks of severance pay upon termination. That is not in dispute.
A recent decision by the United States Bankruptcy Court for the Western District of Texas in In re Sanjel (USA) Inc.,et al., Case No. 16-50778-CAG (Bankr. W.D. Tex. July 29, 2016) explains that in a Chapter 15 case, the U.S. bankruptcy court will not always apply the law of the foreign jurisdiction to U.S. creditors and U.S.-based claims.
In a recent memorandum decision, Judge Robert S. Bardwil of the United States Bankruptcy Court for the Eastern District of California sanctioned a Sacramento attorney and ordered him to complete a local e-filing course because he did not maintain copies of filed documents that included the original “wet” signature.
On October 11, 2016, Chief Judge Brendan L. Shannon of the Delaware Bankruptcy Court issued a letter ruling in which he opined on the appropriate valuation of a first lien. A copy of the Opinion is available here.
(6th Cir. Oct. 12, 2016)
The Sixth Circuit affirms the bankruptcy court’s order denying the creditor’s motion to reopen the case. The debtor’s ex-spouse filed the motion four years after the debtor received his discharge. The ex-spouse argued that an obligation arising out of their divorce proceedings should be declared non-dischargeable. The court holds the bankruptcy court did not abuse its discretion in denying the motion. Opinion below.
Per Curiam
Attorney for creditor: Aaron J. Scheinfield