Law Commons^™

Section 546(E) Safe Harbor Provision Applies To Transactions Involving Private Securities, Nino Aspanadze

Bankruptcy Research Library

(Excerpt)

A bankruptcy trustee may not avoid a margin or settlement payment made by, to, or for the benefit of a financial institution (or another covered entity) when the payment is made in connection with a securities contract as defined in section 741(7) of title 11 of the United States Code (the "Bankruptcy Code"). "A transfer is ‘in connection with' a securities contract if it is 'related to' or 'associated with’ the securities contract.' A bankruptcy trustee may avoid a covered transaction only if it was made with actual intent to hinder, delay, or defraud creditors. The purpose of Section …

Courts Are Divided On Whether Electric Energy Is A "Good" Under Section 503(B)(9) Of The Bankruptcy Code, Mari Bijimenian

Bankruptcy Research Library

(Excerpt)

Under Section 503(b)(9) of title 11 of the United States Code (the "Bankruptcy Code"), the value of goods received by a debtor in the ordinary course of business, within 20 days before the date of commencement of a case, can be granted administrative priority status. Bankruptcy courts have grappled with settling on a definition of "goods" because neither Section 503(b)(9) nor the Bankruptcy Code at large define "goods." While the definition of "goods" is a matter of federal interpretation because Section 503(b)(9) of the Bankruptcy Code is federal law, "bankruptcy courts have almost without exception looked to the Uniform …

Section 363(M) Is Not A Jurisdictional Constraint On Appellate Review Of Property Transfers, Agustin Bujanda

Bankruptcy Research Library

(Excerpt)

Under section 363(b) of title 11 of the United States Code ("the Bankruptcy Code"), the trustee "may use, sell, or lease, other than in the ordinary course of business, property of the estate." Under section 363(m), once a transfer of property has been authorized, the "reversal or modification on appeal of an authorization under subsection (b) . . . of a sale or lease of property does not affect the validity of a sale or lease . . . unless such authorization and such sale or lease were stayed pending appeal."

Until recently, various circuit courts were split on …

U.S. Bankruptcy Courts Balance The Statutory Protections Of Stakeholders With The Needs Of Discovery In Foreign Bankruptcy Proceedings, Conor Carman

Bankruptcy Research Library

(Excerpt)

Chapter 15 of title 11 of the United States Code (the "Bankruptcy Code") establishes methods for managing insolvency cases that encompass debtors, assets, claimants, and other parties across multiple nations. Section 1521(a)(4) allows courts to grant discovery relief. To determine whether to grant discovery relief, courts balance the right to discovery relief with stakeholder interests. As part of a U.S. courts’ analysis, it considers principles of comity to support a foreign bankruptcy proceeding.

This memorandum discusses the statutory availability for discovery relief under chapter 15, limitations on discovery imposed by courts to protect stakeholder interests, comity, and how courts …

A Prepetition Security Interest In Accounts Does Not Extend To The Post-Petition Sale Proceeds Of Real Property, Gabriel Eckstein

Bankruptcy Research Library

(Excerpt)

Section 552(a) of title 11 of the United States Code (the "Bankruptcy Code") states that "property acquired by the estate" after the commencement of the case is not subject to any secured lien possessed by a secured creditor that was created before the commencement of the case. A secured lien is a "legal right or interest of a creditor in a debtor’s property, which lasts until the debt it secures is satisfied." Section 552(b)(1) provides limited exceptions to the general rule in Section 552(a). If a debtor and a creditor entered into a security agreement before the commencement of …

The Regulatory Power Exception To The Automatic Stay, Kathleen Gatti

Bankruptcy Research Library

(Excerpt)

Upon a filing a petition under title 11 of the United States Code (the "Bankruptcy Code"), all actions against a debtor are generally automatically stayed. While the automatic stay is broad, there are exceptions. Under the regulatory power or police power exception, a governmental unit or organization is not stayed from taking any action "to enforce such governmental unit's or organization's police and regulatory power." Not all actions by a government are immune from the automatic stay. Courts have generally held that an action to effectuate a "public policy" is not stayed, but an action to advance the government’s …

Creditors Have Standing To Bring Derivative Actions Against Delaware Llcs In Bankruptcy, John D. Hayes Jr.

Bankruptcy Research Library

(Excerpt)

Delaware limited liability companies ("LLCs") are "creatures of contract" and their corporate structure may vary to resemble corporations, partnerships, or a mix of both. Managers of LLCs—like a director or officer of a corporation—owe fiduciary duties to the entity and its members. Generally, the entity has standing to pursue breach of fiduciary duty claims. It is well established that creditors of a corporate debtor may have standing to pursue breach of fiduciary duty claims against directors through derivative actions. Under Delaware law, the applicable statute does not confer standing for creditors of Delaware LLCs to bring derivative actions on …

Chapter 5 Avoidance Actions Can Be Sold As Property Of The Estate, Enrica Brook

Bankruptcy Research Library

(Excerpt)

Many courts, including the Fifth, Seventh and Ninth Circuits, have found that avoidance actions, under Chapter 5 of the Bankruptcy Code, are property of the estate. Section 541(a)(1) of the Bankruptcy Code defines property of the estate as "all legal or equitable interests of the debtor in property as of the commencement of the case," and section 541(a)(7) states that "[a]ny interest in property that the estate acquires after the commencement of the case" is estate property. The Supreme Court has interpreted the definition of "property of the estate" broadly, finding section 541(a)(1) can be read "to include in …

Service Of A Subpoena Through Alternative Means: Social Media, Taylor Eynon

Bankruptcy Research Library

(Excerpt)

Service of a subpoena via a means besides personal service, i.e., "alternative service," has been "routinely authorized" under Rule 45 of the Federal Rules. The functional purpose of requiring delivery is to "ensure receipt," which then allows the enforcement of a subpoena to be consistent with due process. With the development of new means of communication, however, an emerging issue has become whether service of a subpoena via social media may provide similar "evidence of actual receipt." Many courts have read Rule 45 broadly to allow for service of a subpoena through social media if certain fundamental requirements are …

Insider May Be An Alter-Ego When It Exercises Control Over A Debtor, Delanie Fico

Bankruptcy Research Library

(Excerpt)

Section 101(31) of title 11 of the United States Code (the "Bankruptcy Code") defines an "insider." This definition, however, is not exhaustive. Courts have concluded that certain persons or entities not mentioned in the statute can be "non-statutory" insiders. In certain circumstances, a statutory or non-statutory insider may be the alter-ego of a debtor. As an alter-ego, an insider may be liable for a debtor’s debt. Alter-ego liability may be imposed on an insider who significantly controls the debtor and has committed some form of injustice.

This memorandum discusses an insider’s possible liability for a debtor’s debt in the …

Date For Determining Subchapter V Eligibility, Frederick Giovanelli

Bankruptcy Research Library

(Excerpt)

The Small Business Reorganization Act of 2019 ("SBRA") created Subchapter V of title 11 of the United States Code (the "Bankruptcy Code"). Subchapter V provides an "expedited process for small business debtors to reorganize quickly, inexpensively, and efficiently." To be eligible under Subchapter V, a debtor must satisfy the four requirements listed in section 1182(1) of the Bankruptcy Code. However, even if all four requirements are met, there are four exceptions that exclude a debtor from Subchapter V eligibility. In several instances, creditors have argued that these requirements are continuing obligations, so the debtor’s post-petition actions can revoke their …

Ability To Assume A Contract Over The Objections Of Third Party Beneficiaries Or Counterparty That Is Not Subject To U.S. Personal Jurisdiction., Matthew Hanauer

Bankruptcy Research Library

(Excerpt)

Under Title 11 of the United States Code (the "Bankruptcy Code"), a trustee or a debtor in possession may assume or reject any executory contract and unexpired leases subject to court approval. If a debtor rejects a contract, they breach the agreement. After rejection, neither party is obligated to continue performance, and the counterparty has a general unsecured claim against the debtor. If a debtor assumes an executory contract, then the parties continue to act in accordance with the terms of the contract. To assume a contract, a debtor must cure any defaults, compensate the counterparty for any pecuniary …

Whether Electricity Is A "Good" Under 11 U.S.C. § 503(B)(9), Zhiqian Ke

Bankruptcy Research Library

(Excerpt)

Under section 503(b)(9) of title 11 of the United States Code (the "Bankruptcy Code"), administrative expenses should be allowed for "the value of any goods received by the debtor within 20 days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtor’s business." Courts uniformly analyzed the Uniform Commercial Code’s (the "UCC") definition of “goods” in the absence of a definition in the Bankruptcy Code. However, courts are split on whether electricity is a good.

This memorandum will explore the courts' …

Interest Rate Determination Methods In Bankruptcy Chapters 11, 12, And 13, Michael Kleinman

Bankruptcy Research Library

(Excerpt)

The United States Supreme Court's decision in Till v. SCS Credit Corp. established a formula approach for determining interest rates in cases filed under chapter 13 of title 11 of the United States Code (the "Bankruptcy Code"). The Till decision implemented the formula approach, requiring the national prime rate to be augmented by a risk premium to account for the debtor's heightened nonpayment risk. Till is limited to chapter 13 cases, however, courts have applied the Till test in chapter 11 and 12 cases.

This memorandum examines the different methods utilized in bankruptcy to determine appropriate interest rates. Section …

Ownership Of Social Media Accounts In Bankruptcy Cases, Garrity Kuester

Bankruptcy Research Library

(Excerpt)

Section 541(a) of title 11 of the United States Code (the "Bankruptcy Code") defines "property of the estate" broadly to include "all legal or equitable interests of the debtor in property as of the commencement of the [bankruptcy] case." Congress did not identify social media accounts as property of the estate under section 541(a)(1) of the Bankruptcy Code. Bankruptcy courts have generally concluded that business social media accounts constitute property interests. As such, these accounts often fall under the purview of the bankruptcy estate.

This memorandum discusses the courts’ analysis of the classification and ownership of social media accounts …

Corporate Insider Status As A Badge Of Fraud Under 11 U.S.C. § 548, Aria Lugo

Bankruptcy Research Library

(Excerpt)

Section 101(31)(B)(i) - (vi) of title 11 of the United States Code (the "Bankruptcy Code") outlines a number of parties who are considered corporate insiders. Additionally, courts have identified a class of "non-statutory" insiders, who fall outside of the parties defined in section 101 but are still considered insiders in the context of corporate bankruptcy. In a corporate bankruptcy, who is an insider, and what are the implications of being an insider with respect to fraudulent transfer claims?

This memorandum explores insider liability under chapter 11 of title 11 of the United States Code. Part I identifies the parties …

Claims Agents’ Duties And Rights To Compensation May Be Restricted, Giuseppina Mammoliti

Bankruptcy Research Library

(Excerpt)

In large chapter 11 cases, the number of creditors or claimants may exceed two hundred. Under the Federal Rules of Bankruptcy Procedure, creditors are entitled to notice. It is the role of the Clerk of Court to manage claims and provide notice to creditors. However, due to the notice requirement’s twenty-one-day deadline, it may become burdensome on the Clerk of Court to process claims and provide notice in a timely manner. Therefore, in these large chapter 11 cases, a Claims and Noticing Agent ("Claims Agent") is retained to relieve the clerk of court from claims-management work.

Claims Agents are …

Exceptions To The Rule: When Non-Debtor Entities Are Protected By The Automatic Stay, Isabella Benchetrit

Bankruptcy Research Library

(Excerpt)

In most cases, the automatic stay, under section 362 of title 11 of the United States Code (the "Bankruptcy Code"), stays all creditors from pursuing litigation against debtors. Nonetheless, non-debtor entities can obtain the protection afforded to debtors by the automatic stay in limited circumstances. There are two primary ways of staying litigation against a non-debtor. First, through demonstrating that there are exceptional circumstances to extend section 362 to a non-debtor. Second, through satisfying the standard for an injunction pursuant to section 105 of the Bankruptcy Code.

This Article considers the circumstances by which a non-debtor entity may receive …

Personal Injury Tort Claims As Core Proceedings In Bankruptcy Courts—Broad, Narrow, And Intermediate Approaches, Brigid Lynn

Bankruptcy Research Library

(Excerpt)

Under 28 U.S.C. § 157(b)(1), “bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11.” Core proceedings are those concerning the administration of an estate and the confirmation of plans, among others listed in the statute. However, not considered core proceedings are those regarding “the liquidation or estimation of contingent or unliquidated personal injury tort . . . claims against the estate for purposes of distribution in a case under title 11.” Personal injury tort claims are instead reserved for the district court in which the bankruptcy case is pending …

The Application Of 11 U.S.C. § 523(A) To Subchapter V Corporate Debtors Under 11 U.S.C. § 1192(2), Elizabeth Allhusen

Bankruptcy Research Library

(Excerpt)

Under title 11 of the United States Code (the “Bankruptcy Code”), a debtor can receive a fresh start through a broad discharge of its debts. The general availability of a discharge is limited by section 523(a). Section 523(a) provides that certain types of debts of an individual are excepted from discharge. Section 1192 applies these exceptions in certain small business bankruptcy cases.

In 2019, Congress created Subchapter V of the Bankruptcy Code with the passing of the Small Business Reorganization Act (“SBRA”). The SBRA added provisions to Chapter 11 which apply to small business debtors. Small business debtors, as …

Creditors Not Precluded From Recovering Debtors’ Commercial Tort Litigation Recovery Through Security Interest, Dana Aprigliano

Bankruptcy Research Library

(Excerpt)

Title 11 of the United States Code (the “Bankruptcy Code”) provides valuable protections for secured creditors. A secured creditor of a chapter 7 debtor is entitled to distribution of any debtor property (or its value) in which they have an interest before any other creditors are paid. Even if the debtor has filed under chapter 11 or 13, a secured creditor is still entitled to receipt of their collateral or its value.

Under Article 9 of the Uniform Commercial Code (“UCC”), commercial tort claims and their proceeds may collateralize secured liens. Hence, creditors believing they are secured by a …

A Claims Agent Can Only Profit From The Fees The Clerk Of Court Can Charge, Peter Berkanish

Bankruptcy Research Library

(Excerpt)

In the Southern District of New York, the retention of claims agents is governed by the judicial procedure set forth in section 156(c) of title 28 of the United States Code, for cases under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) that involve 250 or more creditors and equity holders. When a claims agent is retained under section 156(c), the claims agent is acting in the same capacity as the clerk and the services are “limited in scope to those duties that would be performed by a Clerk of Court with respect to …

Free And Clear Sale Under Section 363 Of The Bankruptcy Code Prevents Successor Liability, Matthew Bopp

Bankruptcy Research Library

(Excerpt)

The Bankruptcy Code allows a debtor to sell its assets free and clear of any interest in such property, pursuant to section 363(f) of the Bankruptcy Code. Section 363(f) is used to allow the trustee to sell assets not in the ordinary course of business and to allow purchasers to buy assets without the fear of liability. The Bankruptcy Code does not define the term “interest.” Thus, in interpreting section 363(f), a court must view interest in property expansively. Using section 363(f), courts have extinguished several types of claims and interest in property including: possessory interests, employment related claims, …

An Unincorporated Entity Will Be Unable To Recover As A Secured Creditor In Bankruptcy Unless A Court Invokes The Doctrines Of De Facto Corporation Or Corporation By Estoppel, Andrew Braverman

Bankruptcy Research Library

(Excerpt)

Under New York law, an entity that has failed to properly incorporate cannot assume liabilities or acquire rights. As a result, unincorporated entities will typically lack capacity to enter into contractual agreements. Within the context of bankruptcy, this may hinder a creditor’s ability to maximize its recovery.

A creditor that is adversely affected by a lack of corporate recognition will attempt to persuade a court to impose the doctrines of de facto corporation or corporation by estoppel. These doctrines, which are matters of state law, provide unincorporated entities with the rights and obligations that a legally recognized entity would …

Trustee’S Broad Duty To Disclose Information To Interested Parties Under Section 704(A)(7) Of The Bankruptcy Code, Joel Cardoz

Bankruptcy Research Library

(Excerpt)

A trustee has a duty to disclose information to interested parties upon request. Section 1109(b) of title 11 of the United States Code (the “Bankruptcy Code”) includes creditors in the definition of interested parties. Trustees must obtain a court order to be excused from their duty to disclose.

A trustee’s duty of disclosure is “broad and extensive.” Courts are reluctant to excuse the trustee from their duty of disclosure unless the trustee points to a compelling “countervailing fiduciary duty … whose performance is more important than avoiding the harm resulting from withholding the information in question.”

First, this article …

A Majority Of Courts Reject The Application Of The Rules For Disallowance Of Claims Under Section 502(D) To Administrative Expense Claims, Mairead Cooney

Bankruptcy Research Library

(Excerpt)

Since the adoption of title 11 of the United States Code (the “Bankruptcy Code”), courts have struggled with the application of administrative expense claims. Administrative expenses include the actual costs and expenses of preserving the estate after the commencement of a bankruptcy case. Allowance of an administrative expense claim is governed by section 503 of the Bankruptcy Code. A question arises, however, whether the rules of governing the allowance of claims, under section 502, also applies to administrative expense claims.

Under section 502(d), a court may “disallow any claim of any entity from which property is recoverable . . …

Bad Faith Dismissals In Chapter 7, Myah Drouin

Bankruptcy Research Library

(Excerpt)

Title 11 of the United States Code (the “Bankruptcy Code”) provides a fresh start to the “honest but unfortunate debtor.” Chapter 7 therefore permits a debtor to “discharge their outstanding debts in exchange for liquidating their nonexempt assets and distributing them to their creditors.” Dismissals in chapter 7 are governed by section 707 of the Bankruptcy Code. Section 707(a) governs all chapters of bankruptcy filings and applies when adequate “cause” is shown.

There is currently a circuit split regarding whether a debtor’s lack of good faith constitutes cause for dismissal under section 707(a). Under section 707(a), a case may …

Uncertainty Surrounding Takings Claimants’ Rights In Municipal Bankruptcies, Gillian Deery

Bankruptcy Research Library

(Excerpt)

Governments in the United States and its territories have the power to exercise eminent domain so long as they provide property owners with the constitutionally guaranteed “just compensation.” The Fifth Amendment’s Takings Clause specifically prescribes this remedy for parties whose property has been subject to a government taking. “Just compensation” has proven to be an issue in the context of bankruptcy, as bankruptcy law inherently allows debtors to alter their obligations to their creditors.

In response to Puerto Rico’s financial crisis, Congress enacted the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”), which created a modified version of …

Two Valid Approaches For Determining Whether “Taxes” Get Priority In Bankruptcy Cases, Jonathan Fuller

Bankruptcy Research Library

(Excerpt)

In bankruptcies, tax status often effects whether claims are entitled to priority. Thus, debates about whether charges are penalties or taxes date back to the early twentieth century. In 1930, the Supreme Court established that courts are not bound to the characterization given to a charge by the municipality that created it. Rather, courts have a duty to consider the “real nature” and “effect” of the charge. Accordingly, different circuits have implemented different approaches to make these determinations.

This Article examines the ambiguity among circuits regarding charges’ “tax” status and resulting priority entitlement. Part I outlines In re Lorber …

The Intersection Of The Bankruptcy Courts And Ferc, Amanda Gazzo

Bankruptcy Research Library

(Excerpt)

In the past, the bankruptcy courts and the Federal Energy Regulatory Commission (“FERC”) have been involved in a power struggle with one another. Congress has granted bankruptcy courts exclusive authority to allow debtors to reject executory contracts in chapter 11 reorganization cases. Additionally, Congress has granted FERC authority to govern over utility entities’ filed-rates, which are sometimes contained in executory contracts. It is in this intersection, regarding executory contracts containing filed-rates, where the power struggle between the two exists.

An executory contract is a contract where both parties still have material obligations to perform under the contract. Filed-rates may …