Chapter 11 for the Smaller Guys. Until very recently, filing for Chapter 11 reorganization was a tool for larger businesses since the process is expensive and time consuming while the Debtor corporation seeks to negotiate deals with suppliers, utilities, service providers and other creditors. However, on February 19, 2020, the Small Business Reorganization Act
Bankruptcy
Bankruptcy Court Finds Committee Member To Have Breached Her Fiduciary Duty To Unsecured Creditors
On November 15, 2019, the U.S. Bankruptcy Court for the Central District of California (the “Court”) issued an opinion in the case of Naylor v. Farrell (In re Farrell), Ch. 7 Case No. 14-11729-MW, Adv. No. 16-01123 (Bankr. C.D. Ca. Nov. 15, 2019), finding, among other things, that Betty Farrell (“Betty”), a member of…
New York Bankruptcy Court Permits Discovery Requests in Chapter 15 Case Despite Potentially Conflicting Cayman Islands Law
On April 17, 2018, the U.S. Bankruptcy Court for the Southern District of New York (the “Court”) issued a decision requiring CohnReznick LLP (“CohnReznick”) to produce documents requested by the foreign representatives (the “Foreign Representatives”) in the chapter 15 case of Platinum Partners Venture Arbitrage Fund (International) Limited (in…
The Supreme Court Clarifies the Scope of Section 546(e)’s Safe Harbor for Securities Related Transactions in Merit Management Group, LP v. FTI Consulting, Inc.
The Bankruptcy Code gives a bankruptcy trustee, or the debtor in possession, the power to “avoid” certain transfers made by the debtor at various times before filing for bankruptcy relief. Congress provided a number of limits on these significant avoidance powers, whether within the sections granting the powers themselves (e.g., in Section 547(c), which sets…
The Bankruptcy and Construction Junction: Making Your Texas Mechanic’s Lien Function Better in Bankruptcy
In order to secure a real property owner’s payment obligation, contractors, mechanics, materialmen, and other workmen are often granted a lien referred to by a variety of names including, materialmen’s liens, workmen’s liens, and mechanic’s liens. While the parlance varies by jurisdiction, they are generally referred to as mechanic’s liens in Texas—even in the context…
Some Upside to Being Upside-Down: The Fifth Circuit Provides Undersecured Creditors an Additional Front on which to Contest Preference Claims
Undersecured creditors face unique challenges because they are neither fully secured nor fully unsecured. Beyond the obviously undesirable issue of being upside-down on their deal, undersecured creditors often are exposed to preference liability for those payments they received in the 90 days prior to the debtor filing bankruptcy. This is especially true where an aggressive…
Section 1521(a)(7)’s Restrictions Found Inapplicable to State Law Fraudulent Conveyance Actions
On March 23, 2017, the U.S. Bankruptcy Court for the Southern District of Florida (the “Court”) issued an opinion in the chapter 15 case of Banco Cruzeiro do Sul, S.A., a Brazilian bank (“BCSUL” or the “Debtor”), holding, among other things, that section 1521(a)(7) of the Bankruptcy Code does…
The Increased Use of Combined Hearings and Combined Plan and Disclosure Statements in Delaware
Since February 2016, the Local Rules for the United States Bankruptcy Court for the District of Delaware provide for combined hearings on approval of disclosure statements and confirmation of plans and for the use of combined disclosure statement and plans in liquidating chapter 11 cases.
Although combined hearings in such cases occurred prior to the…
Second Circuit Refuses to Expand Scope of Chapter 15 of the Bankruptcy Code
On January 18, 2017, the U.S. Court of Appeals for the Second Circuit issued an opinion in the case of Trikona Advisers Limited v. Chugh, No. 14-975-cv, 2017 WL 191936 (2d Cir. Jan. 18, 2017), thwarting an attempt to expand the scope of Chapter 15 of Title 11 of the United States Code (the…
Plan Proponents Beware of “Death Trap” Traps in Chapter 11 Plans and Disclosure Statements
A topic that receives relatively little attention is the practice of plan proponents to include “death trap” provisions in chapter 11 plans. A death trap provision can provide for a distribution, or a larger distribution, to an impaired class in exchange for a favorable vote on the plan. Although such a provision can be an…