The South Bay Law Firm Law Blog highlights developing trends in bankruptcy law and practice. Our aim is to provide general commentary on this evolving practice specialty.

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      Bankruptcy and Insolvency News and Analysis Week Ending October 21, 2016
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    Bankruptcy and Insolvency News and Analysis Week Ending October 14, 2016

    Posts Tagged ‘creditor’

    Bankruptcy and Insolvency News and Analysis – Week Ending October 7, 2016

    Sunday, October 9th, 2016



    Top ten court districts for ch. 11 filings reporting over $10 million in debt for 2016 year-to-date

    Business Bankruptcy Filings Through First Three Quarters of 2016 Up 28 Percent; Total Filings Fall 6 Percent

    Total chapter 11 filings reporting over $10M in debt by sector for 2016 YTD, led by energy, consumer discretionary and financials

    Sept. Business Bankruptcy Filings Up 28 Percent over 2015


    The Divide Between Maritime And Bankruptcy Jurisdiction

    Secured Claims

    Rules of Thumb for Intercreditor Agreements

    Satisfaction of a Prepetition Loan by a DIP Loan Does Not Extinguish Vendor’s Reclamation Rights Under Section 546(c)

    Avoidance and Recovery

    Extraterritorial Avoidance Actions: Lessons from Madoff

    The Avoidance of Pre-Bankruptcy Transactions: An Economic and Comparative Approach

    Opinion in NewPage (Pirinate Consulting) is a Reminder of 547 Defenses


    Preserving a Fundamental Bankruptcy Tool: Despite uncertainty, credit bidding continues to serve lenders and investors well in distressed industries

    Executory Contracts

    Lease Rejection: Does the Contract Disappear?


    How Absolute Is the Absolute Priority Rule in Bankruptcy? The Case for Structured Dismissals

    American Idol & The Absolute Priority Rule


    Chapter 15 at 11: Bankruptcy Code’s Cross-Border Insolvency Law Approaches 11th Anniversary


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    Bankruptcy and Insolvency News and Analysis – Week Ending September 30, 2016

    Friday, September 30th, 2016
    (Photo: AP)

    (Photo: AP)

    Case Commencement

    Third Circuit Court of Appeals Concludes that Section 303(i) Does Not Preempt State Law Claims of Non-Debtors Predicated on the Filing of an Involuntary Petition

    The Enforceability of Independent Director or Independent Member Provisions in a Bankruptcy-Remote Entity’s Organizational Documents


    Credit Bidding: Back and Better Than Ever?

    Avoidance and Recovery

    Recent Rulings Demonstrate Evolving Law on Ability of Plan Trustees to Assert Creditors’ Pre-Bankruptcy State Law Fraudulent Transfer Claims


    Successor to Bankrupt Company Saddled with Pre-Bankruptcy Environmental Claims

    Ruling Provides Guidance on Standard to Reopen Fully Administered Chapter 11 Case “for Other Cause”


    Two-Year Delay in Confirmation Requires Holding Another Valuation Hearing


    Creative Finance: U.S. Bankruptcy Courts Will Not Tolerate Manipulation of COMI and Bad Faith Uses of Chapter 15

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    Bankruptcy and Insolvency News and Analysis – Week Ending September 2, 2016

    Sunday, September 4th, 2016



    Involuntary Bankruptcy Primer Part I: Understanding the Oft Ignored Involuntary Bankruptcy Petition


    Reclamation Claims and Lien Priority




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    Bankruptcy and Insolvency News and Analysis – Week Ending October 30, 2015

    Sunday, November 1st, 2015



    BAPCPA at 10: Was It Good or Bad?

    Bankruptcy Filings declined 11% in Fiscal 2015, Lowest Filings since 2007

    Avoidance and Recovery

    In re MCK Millennium: Court Vacates Landmark 546(e) Safe Harbor Decision

    House Wins! 7th Circuit Holds that “Good Faith” Defense Under Section 550(b)(1) Applies to Casino in Fraudulent Transfer Action

    Distressed Investing

    As Defaults Rise, Distressed-Debt Investors Seek an Edge by Buying the DIP

    Bankruptcy 101 for Investors: Acquiring a Debtor’s Assets in a Bankruptcy Case

    Related Articles

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    Bankruptcy and Insolvency News – Week Ending May 1, 2015

    Friday, May 1st, 2015



    March 2015 Bankruptcy Filings Down 12 Percent

    Bankruptcies Drop: ‘The Worst I’ve Seen in 30 Years’


    The American Bankruptcy Institute’s Recommendations for Chapter 11 Reform

    Out-of-Court Workouts


    Avoidance and Recovery

    The Fraudulent Transfer Laws Do Indeed Apply To Future Creditors

    Liability for Preferential Transfer May Be Reduced by Subsequent New Value

    Fraudulent Transfer Damages: Creditor Windfall, Creditor Claims Cap, or Equitable Determination by the Court?

    Leases and Executory Contracts

    Filene’s Basement Decision Interprets Lease Rejection Damages Statute

    Intellectual Property and Social Media

    Texas Bankruptcy Court ‘Likes’ Facebook and Twitter Accounts as Property of the Reorganized Debtor


    Reorganization By Foreign Debtors In The US And UK

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    Insolvency News and Analysis – Week Ending April 17, 2015

    Friday, April 17th, 2015
    Trade Off theory diagram

    Trade Off theory diagram (Photo credit: Wikipedia)


    Corporate bankruptcies are on the rise in America

    U.S. public companies seek bankruptcy at fastest 1st-qtr rate since 2010

    Q1 Bankruptcy Filings Fall 15%

    Dr. William Rule (AOUSC): When Will Bankruptcy Filing Trends Change Course?

    The $12,473 Corporate Reorganization

    Current Developments

    Bankruptcy Year In Review 2014

    Corporate Governance

    Corporate Governance In Chapter 11 – Business As Usual, With Possible Exceptions

    Administrative Claims

    Reclamation, Administrative Claims and Other Possibilities for Recovery When a Factor Has Not Approved Orders

    Unsecured Claims

    Mandatory Subordination: How Even A Money Judgment Can Be Treated Like Equity In Bankruptcy

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    Insolvency News and Analysis – Week Ending April 10, 2015

    Friday, April 10th, 2015


    Pigs Get Fat


    Q1 Distressed debt & bankruptcy restructuring review: Thomson Reuters

    ABI Commission’s Plan Process and Confirmation Recommendations: A Mixed Bag for Secured Creditors

    Weil’s Bankruptcy Blog: 2014 Annual Review

    Out-of-Court Restructuring

    Recent Case Law Impacting Debt Transactions

    Sales and Distressed Investing

    Distressed debt: Loan to own investment strategies after Fisker

    Hedge Funds and Distressed Debt Investing Program – Summary

    Avoidance and Recovery

    9th Circ. Panel Bolsters Trustees’ Reach-Back Powers

    Secured Claims

    Have Courts Left The Pinegate Open?


    Tipping Point: Plan Clarification or Plan Modification? Third Circuit Denies Bankruptcy Court’s Use of Its Plan Clarification Powers to Circumvent Plan Modification Requirements of Section 1127

    Non-Consensual Third-Party Releases: Eleventh Circuit Joins “Pro-Release” Majority

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    Insolvency News and Analysis – Week Ending April 3, 2015

    Friday, April 3rd, 2015

    Bank Run


    Q1/15 Commercial Bankruptcy Filings Down 19%

    Peer-to-peer lending is surging in the US, and it could hurt big banks

    Case Commencement

    Involuntary Bankruptcy Petitions: A Powerful Weapon, But Beware Of The Downside Risks

    Secured Claims

    Lender Beware: The Pitfalls of Narrowly Defined Secured Obligations

    Unsecured Claims

    Creditors’ Rights in Chapter 11: Use Them or Lose Them

    Avoidance and Recovery

    Reforming Preference Law


    Third Circuit Finds Settlement Agreement to be Plan Modification


    Centre of Main Interest (COMI) and Jurisdiction of National Courts in Insolvency Matters (Insolvency Status)

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    Paid in Full

    Sunday, August 10th, 2014
    American National Bank AD

    American National Bank AD (Photo credit: Wikipedia)

    One of the fundamental functions of any bankruptcy proceeding is the establishment of an amount and priority for each creditor’s claim against the debtor. A short, 5-page decision issued late last month by the Nebraska Bankruptcy Court in two related Chapter 11 cases (Biovance and Julien) serves as a reminder that although creditors are not permitted a “double recovery” on their claims, they are nevertheless permitted to assert the full value of their claims until those claims are paid in full.

    In the US, it is common for creditors to mitigate credit risk through two primary means: Taking a security interest in the debtor’s collateral, and/or securing a guaranty of payment from a [non-debtor] third party. Further, and in the event of a payment default, courts frequently recognize a creditor’s right to pursue simultaneous collection activity for the entirety of the debt against the debtor, the collateral, and the guarantor. In a recent decision involving two related Chapter 11 debtors, a Nebraska Bankruptcy Court was asked by the debtors to limit the amounts claimed by a creditor as the creditor had already received a portion of the payments owed to it.

    In this case, a business debtor (Biovance) had leased equipment from American National Bank (ANB), collateralizing one of the leases with a certificate of deposit held by that debtor.  The other lease was protected by a guarantee issued by the individual debtor (Julien) to ANB.  ANB had obtained permission to collect its collateral with respect to the first lease, and to liquidate its claims in Nebraska state court with respect to the second (which claims were subsequently settled).  The debtors argued, among other things, that as the confirmed bankruptcy plan provided for payment in full of all claims, the creditor was therefore obligated to immediately credit the amounts it had received.  ANB argued that a proof of claim filed under 11 U.S.C. § 502 need not be reduced by amounts recovered from a third party unless it stood the chance of a double recovery.

    The Bankruptcy Court of Nebraska agreed with ANB, noting that the confirmed plan is neither a recovery nor payment in full. It is only a promise to pay. The Court went on to hold that until such time as ANB had actually received its payment in full, it was entitled to assert the balance due against all concerned parties – including the debtors.

    Establishing the amount and priority for each creditor’s claim against the debtor fixes the limit of recoveries available to a creditor from the debtor’s estate. Such claims are, in the aggregate, an important factor in the creditors’ assessment of the feasibility of a debtor’s proposed reorganization – and in determining whether liquidation offers them a preferable recovery.

    The Biovance decision, though not surprising, nevertheless reminds creditors and their counsel to preserve all of the value of their claims, even if paid partially, until the claims are paid in full.

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    Intercreditor Agreements: How Far Can They Reach?

    Tuesday, January 17th, 2012
    Creditor's Ledger, Holmes McDougall

    Image by edinburghcityofprint via Flickr

    Can a senior secured lender require, through an inter-creditor agreement, that a junior lender relinquish the junior’s rights under the Bankruptcy Code vis á vis a common debtor?

    Though the practice is a common one, the answer to this question is not clear-cut.  Bankruptcy Courts addressing this issue have come down on both sides, some holding “yea,” and others “nay.”  Late last year, the Massachusetts Bankruptcy Court sided with the “nays” in In re SW Boston Hotel Venture, LLC, 460 B.R. 38 (Bankr. D. Mass. 2011).

    The decision (available here) acknowledges and cites case law on either side of the issue.  It further highlights the reality that lenders employing the protective practice of an inter-creditor agreement as a “hedge” against the debtor’s potential future bankruptcy may not be as well-protected as they might otherwise believe.

    In light of this uncertainty, do lenders have other means of protection?  One suggested (but, as yet, untested) method is to take the senior lender’s bankruptcy-related protections out of the agreement, and provide instead that in the event of the debtor’s filing, the junior’s claim will be automatically assigned to the senior creditor, re-vesting in the junior creditor once the senior’s claim has been paid in full.

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