Creditors Precluded from Collaterally Pursuing Claims Against Third Party/Guarantor, if Treated/Released in Confirmed Re-Org Plan
In New Falls Corp. v. LaHaye (In re LaHaye), No. 19-30795 (5th Cir. Nov. 12, 2021), the Fifth Circuit Court of Appeals prevented a secured lender from pursuing individual guarantors on a claim that had been partially released in the guarantors’ corporation’s confirmed bankruptcy plan of reorganization. New [...]
The Texas Two-Step is Alive and Well
See a related update, published Feb. 16, 2023. In re LTL Mgmt. LLC, No. 21-30589 (MBK) [Docket No. 1572] (Bankr. D.N.J. 2021) Other than being a dance, what is the Texas Two-Step, in terms of corporate mergers? The “Texas Two-Step” has proved to be a lifeline allowing companies to [...]
Capped Landlord Claim Could Become a Non-Dischargeable Claim
re: Wigley v. Lariat Cos. (In re Wigley), No. 20-3132 (8th Cir. Oct. 18, 2021). The Bankruptcy Code provides for a statutory cap on a landlord’s claims against a tenant arising from a lease rejection in bankruptcy. But subject to certain exceptions, that only applies to claims that result [...]
A Guide on How to Avoid a Clawback of a Settlement Payment of Securities
Discussing: Holliday v. Credit Suisse Securities (USA) LLC, No. 20-5404 (S.D.N.Y. Sept. 13, 2021) Subject to certain defenses, in a bankruptcy proceeding, transfers made to a creditor within 90 days of the transferor filing bankruptcy can be clawed back as a preference under the Bankruptcy Code. In addition, transfers [...]
Classifying Claims in a Plan of Reorganization – Creating an Accepting Class
Section 1122(a) of the Bankruptcy Code provides that “a plan may place a claim … in a particular class only if such claim … is substantially similar to the other claims … of such class.” Among other things, Section 1129(b) provides that to confirm a plan of reorganization the [...]
A Secured Creditor’s Right to Credit Bid in a Bankruptcy Sale
Generally speaking, when a debtor or trustee in bankruptcy seeks to sell certain assets, a secured creditor has a right to "credit bid" the secured portion of its claim. Section 363(k) of the Bankruptcy Code provides that a creditor with a lien on assets to be sold outside the [...]
Circumstances Justifying the Dischargeability of Student Loans Under the Bankruptcy Code
re: Homaidan v. Sallie Mae, Inc., et al., No. 20-1981 (2d Cir. July 15, 2021) Generally speaking, student loans are extremely difficult to discharge in bankruptcy even under dire circumstances when guaranteed by a government unit or a non-profit institution. In some cases, as much as bankruptcy judges have [...]
Recent Fifth Circuit Case Gives Lender Green Light to Change Management
The Fifth Circuit Court of Appeals recently upheld a lower court ruling permitting a lender to change management pursuant to a negotiated agreement notwithstanding the debtor’s allegation that it was only under duress that it permitted the lender to do so. As noted by the Fifth Circuit, [U]sing leverage [...]
Sales in Bankruptcy – No Stay, No Pay
Official Comm. v. Walker Cty. Hosp. Dist. (In re Walker County Hospital Corp.), No. 20-20575, 2021 U.S. App. LEXIS 20610 (5th Cir. July 12, 2021) The Fifth Circuit Court of Appeals recently reaffirmed the general rule that if an objecting party to a bankruptcy sale fails to seek a [...]
The Purpose of Special Purpose Entities
The American Bankruptcy Institute describes a Special Purpose Entity (SPE) as an entity formed concurrently with, or immediately prior to, the closing of a financing transaction…to isolate the financial assets from the potential bankruptcy estate of the original entity, the borrower, or originator. When a lender requires the creation [...]
