Lenders Beware: Lender Liability is Back
Lender liability lawsuits have generally been few and far between. However, recently, a Chapter 7 trustee obtained a judgment against a lender premised on the lender’s bad acts against the debtor prior to the filing of a bankruptcy Chapter 11 reorganization, which was subsequently converted to a Chapter 7 [...]
District Court Criticizes Bankruptcy Judge for Approving Far-Reaching Third-Party Releases and Addresses Venue Shopping
A U.S. District Court judge in the Eastern District of Virginia1, Richmond Division, set aside confirmation of a Chapter 11 plan that contained “extremely broad third-party (non-debtor) releases.” What makes this case so exceptional is the analysis, and also how critical this judge was of the bankruptcy judge who [...]
Bankruptcy Auctions and the Establishment of Fair Market Value
There is a reason why a buyer of substantially all of a seller’s assets may want to pursue a sale via the buyer filing bankruptcy, through a bankruptcy auction. By obtaining a court order approving a sale via a bankruptcy auction, a finding of fair market value can be [...]
Enforcement of Arbitration Clauses – Related to Bankruptcy
Discussion of: Highland Capital Management LP v. Dondero (In re Highland Capital Management LP), 21-03003, 2021 Bankr. LEXIS 3314 (Bankr. N.D. Tex. Dec. 3, 2021) Bankruptcy courts are in disagreement whether to enforce arbitration provisions as opposed to trying the matter in the bankruptcy court. Recently, the Bankruptcy Court for [...]
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 [...]
