Bankruptcy Law Commons^™

Evidentiary Support Needed For Successful Proof Of Claim Against Affiliated Debtors, Madeline Mallo

Bankruptcy Research Library

(Excerpt)

According to title 11 of the United States Code (the “Bankruptcy Code) and the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), a debtor must file schedules of the debtor’s assets and liabilities. A debtor’s schedules would include a list of all known claims against the debtor and list the claims as disputed, contingent or unliquidated.

If an entity believes they have a claim against the debtor that the debtor has not included on a schedule, or the claim is disputed, contingent, or unliquidated, that party can file a proof of claim. A proof of claim in a bankruptcy …

Although A Presumption Against Extraterritoriality Generally Precludes A Foreign Plaintiff From Recovering A Debtor’S Assets In A Civil Rico Claim, That Presumption Can Be Overcome To Hold A Foreign Defendant Liable For A Preference Claim, Amanda M. Schaefer

Bankruptcy Research Library

(Excerpt)

The civil portion of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) permits any individual “injured in his business or property by reason of a violation of the statute’s criminal provisions” to pursue a cause of action against a tort feasor. For a party to pursue a civil remedy for economic injury under the civil portion of the statute, its criminal portion must first be violated through illegal activity, such as numerous acts of mail and wire fraud. In RJR Nabisco, Inc. v. European Community (“RJR Nabisco”), the Supreme Court held that RICO’s private right of action under …

Fraudulent Transfer Provision Of The Bankruptcy Code Defined More Narrowly Than Similar Provisions In Other Statutes, Yaakov Seff

Bankruptcy Research Library

(Excerpt)

The fraudulent conveyance provision of the Bankruptcy Code, (“the Code”), Section 548, is an “elemental and ancient provision of debtor-creditor relations.” It provides that “[t]he trustee may avoid any transfer ... of an interest of the debtor in property ... that was made ... within two years before the date of the filing of the petition . . .” where the transfer involved actual or constructive fraud.

But the ability to avoid fraudulent transfers is not limited to the bankruptcy context; parallel provisions are found in several areas of the federal legislation. For instance, there is a fraudulent transfer …

The Insolvency Effect On Attorney-Client Privilege, Anna Piszczatowski

Bankruptcy Research Library

(Excerpt)

“The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law.” This privilege has been held as sacred and essential to encourage complete and candid communication between attorneys and their clients. In fact, if the attorney’s “professional mission” is to be carried out appropriately to the fullest extent, then the attorney must be able to acquire all the information necessary to represent his client. Therefore, the privilege allows unfettered communication, for the benefit of both parties.

By carving more exceptions to the privilege, as bankruptcy courts, and even the Supreme Court, have in …

Contractual Provider Agreement Provides For Permissible Government Recoupment, Emily Santoro

Bankruptcy Research Library

(Excerpt)

A debtor healthcare provider without significant resources is unlikely to survive any prolonged disagreement with private or government payors. This challenge may be exacerbated by a debtors’ bankruptcy filing if a payor may refuses to make certain payments owed to the debtor. Therefore, whether a payors’ withholding of funds owed to a debtor hospital is considered an impermissible setoff or a permissible equitable recoupment is crucial.

This memorandum will explore whether a Medicaid/Medicare payor can withhold payments owed to a debtor, or whether such withholding violates the automatic stay. Part A will discuss withholding in healthcare bankruptcy scenarios generally. …

Bankruptcy - The Last Resort: Protecting The Diocesan Client From Potential Liability Judgments, John B. Jarboe

The Catholic Lawyer

No abstract provided.

Debt Collection ‘Versus’ Consumer Protection: The Fdcpa’S Prohibition On False Representations Of The Legal Status Of Debt, Sara Brenner

Bankruptcy Research Library

(Excerpt)

The Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, has dramatically changed the landscape of debt collection for both consumers and debt collectors. Prior to the enactment of the FDCPA, state common law governed informal debt collection, and abusive collection practices were pervasive. Debt collectors were incentivized to engage in abusive collection tactics and consumers had little recourse. As a result, the FDCPA was enacted in order to regulate consumer debt collection and to remedy abuse. The express purpose of the FDCPA is to “protect consumers against debt collection abuses” and to ensure that debt collectors who …

The Possibility Of Discharging Student Loan Debt And Assessing The Differing Standards Applied By The Courts, Maria Casamassa

Bankruptcy Research Library

(Excerpt)

Discharging student loan debt under the United States Bankruptcy Code (the “Bankruptcy Code”) is more difficult than attempting to discharge other types of debt. Although discharging student loan debt is not a simple hurdle to surpass, it is possible in certain circumstances. Under the Bankruptcy Code, student loan debt may not be discharged “unless excepting such debt from discharge . . . would impose an undue hardship on the debtor and the debtor's dependents . . . .” The Bankruptcy Code does not define undue hardship. Congress “left it up to the various Bankruptcy Courts to utilize their discretion …

Delaware Bankruptcy Court Creates Vendor-Friendly Forum By Preserving Reclamation Rights In The Face Of Dip Lenders’ Liens, Dean Katsionis

Bankruptcy Research Library

(Excerpt)

Reclamation is the right of a vendor “to recover possession of goods delivered to an insolvent buyer.” This right is codified in section 2-702 of the Uniform Commercial Code as adopted in each of the several states. Where an insolvent buyer has filed for bankruptcy after receiving goods on credit, section 546(c) of title 11 of the United States Code (the “Bankruptcy Code”) affords the vendor of those goods a remedy in reclamation. In the event an insolvent buyer in bankruptcy has disposed of the goods subject to reclamation, the bankruptcy court may grant the vendor a lien or …

Ability To Avoid Successor Liability Pursuant To A §363 Sale In Bankruptcy, Julie Lavoie

Bankruptcy Research Library

(Excerpt)

In a case filed under chapter 11 of title 11 of the United States Code (“the Bankruptcy Code”), the company entering bankruptcy, the debtor, usually files a reorganization plan that articulates how the debtor’s assets will be addressed and creditors will be treated. Once a plan is confirmed and becomes effective, the debtor “emerges from bankruptcy with its liabilities restructured along certain parameters.” This process, however, can take years. Conversely, a sale of substantially all of the debtor’s assets, pursuant to 11 U.S.C. § 363, will often “occur on a very expedited basis.” In the case of the GM …

Creditor’S Failure To File A Proof Of Claim Is Inexcusable Where Potential Danger Of Prejudice To Debtor Exists, Meghan Lombardo

Bankruptcy Research Library

(Excerpt)

The Federal Rules of Bankruptcy Procedure provide that when an act is required … to be done at or within a specified period … the court for cause shown may at any time in its discretion… on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect. Rule 9006 grants a pardon for late filings that were caused by neglect. The Supreme Court has defined neglect as “‘giv[ing] little attention or respect’ to a matter or… ‘to leave undone or unattended to especially …

Confirmed Bankruptcy Plan Supersedes Applicable Finra Rules, Derek Piersiak

Bankruptcy Research Library

(Excerpt)

In the United States, the Financial Industry Regulatory Authority (“FINRA”) is authorized by the SEC to adopt and administer the Uniform Practice Code (“UPC”), the rules governing secondary market securities transactions. UPC Rule 1140 determines which unitholders are entitled to a distribution by setting a record date and an ex-date. The record date is the date fixed by the issuer for the purpose of determining which holders of securities are entitled to receive dividends or other distributions. A debtor can also set a record date in their bankruptcy plan. The ex-date is set by FINRA and is “the date …

Non-Dischargeability Of Foreign Student Loans, Andrew Brown

Bankruptcy Research Library

(Excerpt)

Educational loans made, insured, or guaranteed by a governmental unit are not dischargeable in a bankruptcy case, unless the debtor obtains a hardship determination. This is true even if the loan is made, insured, or guaranteed by a foreign governmental unit. The rationale behind making it difficult to discharge student loans via the United States Bankruptcy Code (the “Code”) is to prevent abuses of the educational loan system, specifically students filing for bankruptcy shortly after graduation to discharge their loans.

Various circuit courts have adopted two tests when applying the undue hardship provision of section 532(a)(8). In 1987, the …

All Talk, But No Action Leads To The Loss Of Ground Breaking Cancer Research, Nicholas Marcello

Bankruptcy Research Library

(Excerpt)

Each year, the government awards millions of dollars in federal grants to fund scientific research. Despite this huge allocation of resources, the government’s claim in such funded research may be limited should the receiving institution become a debtor in bankruptcy. Last year, the United States Bankruptcy Court for the District of Massachusetts allowed the destruction of government funded research to benefit the debtor estate.

The Inconsistent Application Of Section 1113 To Expired Collective Bargaining Agreements, Courtney Creighton Sokol

Bankruptcy Research Library

(Excerpt)

The United States Bankruptcy Code (the “Bankruptcy Code”) allows a trustee a debtor-in-possession (“DIP”) to assume or reject a collective bargaining agreement (“CBA”). Courts are split on whether a trustee or DIP may reject an expired collective bargaining agreement under section 1113 of the Bankruptcy Code. In general, a collective bargaining agreement may be rejected notwithstanding the labor standards afforded to employees by the National Labor Relations Act (“NLRA”). In particular, under the NLRA, an employer that is party to a CBA is obligated to bargain with its employees until the employer either enters into a new contract or …

Courts Override Underlying Contractual Obligations In The Chapter 11 Surrender And Abandon Of Aircraft Equipment And Vessels, Lisa Strejlau

Bankruptcy Research Library

(Exceprt)

When chapter 11 airline debtors seek to abandon and surrender collateral under a financing agreement, they are not required to do so in any particular condition under the Bankruptcy Code. This leaves the question of who bears the burden of associated costs unresolved. This memo will discuss how courts interpret the issue of costs associated with the surrender and return of aircraft and related equipment.

Financers of aircraft and related equipment receive special privileges under section 1110 of the Bankruptcy Code (“the Code”). Section 1110 permits a party to take possession of an aircraft in the custody of a …

Forum Non Conveniens And Chapter 15 Bankruptcy, Tyler Levine

Bankruptcy Research Library

(Exceprt)

When pursuing a case under Chapter 15 of Title 11 in the United States, Code (the “Bankruptcy Code”) a plaintiff can litigate all claims in a single forum or in certain cases they may be able to pursue additional claims stemming from the same case in a foreign forum. Many parties will want to litigate all of the claims in a single forum and will file a forum non conveniens motion when their adversary tries to pursue claims in multiple forums. Forum non conveniens is a discretionary power that allows courts to dismiss a case where another court, or …

Substantive Consolidation Of Debtor And Non-Debtor Entities, Eileen Ornousky

Bankruptcy Research Library

(Excerpt)

Based on section 105’s grant of equitable powers, bankruptcy courts have the power to substantively consolidate debtors. Substantive consolidation pools the assets of separate legal entities and treats them as one, allowing each entity’s liability to be satisfied out of the common pool. Although it has been accepted that courts have the power to consolidate a debtor with other related debtors, it its less clear when courts can consolidate a debtor with a non-debtor, or if courts have the authority to do so at all.

Even though most courts have determined that they do have the power to substantively …

Do Foreign Representatives Need To Satisfy The Recognition Requirement?, Parm Partik Singh

Bankruptcy Research Library

(Excerpt)

A foreign representative must obtain recognition of a foreign proceeding pursuant to section 1517 of title 11 of the United States Code (the “Bankruptcy Code”) prior to applying directly to a court in the United States for any relief such as operating the debtor’s business operations in the U.S. or seeking assets and discovery from U.S. entities. However, under section 1509(f), a foreign representative may sue in a United States court to collect or recover a claim which is the property of the debtor without first obtaining recognition. The scope of this exception, though, remains unclear.

This memorandum explores …

Bankruptcy Courts May Alter Final Sale Orders And Findings Of Good Faith Purchasers, Louis Calabro

Bankruptcy Research Library

(Excerpt)

For many years, a policy of finality has existed in the legal sphere to protect purchasers after a sale has been completed. This policy serves to create stability and predictability for investors and incentivizes activity in the marketplace. In bankruptcy cases, issues of finality are implicated when a debtor engages in an asset sale, and the court grants a final sale order. The purchasing party wants the sale to be final, so courts have promoted the policy of finality to enhance the efficiency and effectiveness of bankruptcy plans. Sometimes, however, an adverse party claims to have an interest in …

Effects Of Veil Piercing, Alter Ego And Substantive Consolidation On Bankruptcy, Lauren Gross

Bankruptcy Research Library

(Excerpt)

At times, bankruptcy can seem like a game of cat and mouse between debtors and creditors. By filing for bankruptcy in the first place, debtors change the rules of the game with various bankruptcy mechanisms, such as the automatic stay provision set forth in section 361 of the United States Bankruptcy Code (the “Bankruptcy Code”). An important inquiry exists in what creditors can to do promote their interests in bankruptcy. An even more important inquiry lies in determining what doctrines may satisfy generally recognized principles of equity for all.

One option for creditors who deal with corporate entities is …

Property Of The Estate And Creditors Rights To Bring Individual Suits, Ryan Dolan

Bankruptcy Research Library

(Excerpt)

Once bankruptcy proceedings begin, section 541 of the United States Bankruptcy Code (the “Bankruptcy Code”) defines the scope of a debtor’s property as including all legal and equitable interests of the debtor. Courts have adopted an expansive interpretation of this section, noting that “every conceivable interest of the debtor, future, nonpossessory, contingent, speculative, and derivative, is within reach of the bankruptcy estate.” As a result, a trustee of the debtor’s estate, or a debtor-in-possession, obtains standing to assert general claims which are common to the creditors, and creditors are thus bound by the outcome of the trustee’s actions.

If …

Chapter 11 Liquidation And Its Effect On Collective Bargaining Agreements, Dylan Coyne

Bankruptcy Research Library

(Excerpt)

Sections 1113 and 1114 of title 11 of the United States Code (the “Bankruptcy Code”) allow a debtor to reject its collective bargaining agreements and payment of retiree benefits, subject to certain statutory conditions being met. These provisions apply to companies that employ unionized workers who receive compensation and benefits pursuant to a collective bargaining agreement. Both sections, however, only apply to a debtor that is “reorganizing.” Moreover, courts have held that section 1114, which governs the payment of insurance benefits to retirees, permits modification of obligations under a statute, such as the Coal Industry Retiree Health Benefit Act …

A Dragnet Clause And A Future Advances Clause Can Reach The Collateral Of A Loan That Has Already Been Repaid, Stephanie Hung

Bankruptcy Research Library

(Excerpt)

This memorandum will explore the secured transactions issues that arose in In re Omni Enterprises. In that case, the Bankruptcy Court in Alaska held that a bank may enforce the security interest of a prior loan that has already been repaid to cure a new loan that was in default. The prior loan was secured by the debtor’s deposit accounts, and contained a cross-collateralization clause and future advances clause; however, the new loan did not mention the deposit accounts at all. When the debtor defaulted on the new loan, the bank argued, among other things, that it continued …

Federal Preemption And The Bankruptcy Code: At What Point Does State Law Cease To Apply During The Claims Allowance Process?, Dylan Lackowitz

Bankruptcy Research Library

(Excerpt)

Anything you do in bankruptcy can and will be used against you in bankruptcy. Prior to the commencement of a bankruptcy case, perhaps courts should issue this Miranda-esque warning to the parties. At least, if the bankruptcy court had, Plymouth LLC (“Plymouth”) might have saved approximately $800,000 that it spent acquiring a lien against Princeton LP’s (“Princeton”) vacant office park in the Township of Lawrence, New Jersey. Recently, the United States Court of Appeals for the Third Circuit held that Plymouth’s claim against Princeton in Princeton’s bankruptcy case was disallowed for violating New Jersey’s tax sale law pursuant to …

A Lender’S Knowledge Of Alleged Breaches Of Fiduciary Duties Shall Not Be Imputed Upon Debtors In A Statute Of Limitations Analysis, Michael Derosa

Bankruptcy Research Library

(Excerpt)

Section 541 of the United States Bankruptcy Code (the “Code”) provides in part that the debtor’s estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” The debtor’s interests include “whatever causes of action the debtor may have possessed prior to the petition date.” In certain circumstances, a creditor may obtain the right to bring claims of the debtor. In such a case, generally the creditor is stepping into the shoes of the debtor, and the creditor is subject to all defenses proffered by the defendant that would apply had …

When Are Debtors And Creditors Bound To The Provisions Of Confirmed Reorganization Plans?, Gabriella Labita

Bankruptcy Research Library

(Excerpt)

Generally, when a debtor files for protection under chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”), a plan of reorganization is filed at some point with the bankruptcy court. The court then holds a hearing to determine whether the judge will confirm the reorganization plan. The judge will confirm the plan if it meets the criteria of Section 1129 of the Bankruptcy Code, which requires, among other things, that any payments made in connection with the plan are reasonable. A plan of reorganization is a significant component of a debtor’s emergence from bankruptcy, as it affects …

Creditors Cannot Contract Around Their Fiduciary Duties And Withhold Their Consent From A Debtor To File For Bankruptcy, Samantha Guido

Bankruptcy Research Library

(Excerpt)

Many courts have found that a debtor may not contract away their right to voluntarily file for bankruptcy. However, debtors and creditors have implemented creative measures to avoid this principle. For example, a creditor may seek the appointment of a so-called “blocking director” on a company’s board of directors, who would control the company’s bankruptcy filing. Additionally, some creditors seek a “golden share” in order to have veto power over changes to the company’s charter, including veto power over whether the company can file for bankruptcy. In determining whether these mechanisms are void under public policy, courts will consider …

The Nondischargeability Of Government Cleanup Orders, Christina Mavrikis

Bankruptcy Research Library

(Excerpt)

One of the primary purposes of title 11 of the United States Code (the “Bankruptcy Code”) is to provide debtors with a financial fresh start. Upon the filing of a bankruptcy petition by or against the debtor, section 362(a) of the Bankruptcy Code provides that all entities are barred from actions to collect, assess, or recover any pre-petition claims against the debtor. In general, the automatic stay serves to halt any pending legal proceedings against the debtor so that the pre-petition claims can be managed and discharged by the bankruptcy court. There are, however, exceptions to the automatic stay. …

Critical Differences Between Key Employee Retention Plans And Key Employee Incentive Plans, Sumaya Ullah Restagno

Bankruptcy Research Library

(Excerpt)

Section 503(c) of the United States Bankruptcy Code (the “Bankruptcy Code”) imposes strict limitations on companies in chapter 11 who want to make bonus payments to retain employees. In particular, section 503(c) limits a chapter 11 debtor’s ability to favor employees over the interests of the estate to ensure that any bonus payment is designed for the overall benefit of the bankrupt estate. This memo details the differences between bonus payments under sections 503(c)(1) and 503(c)(3) and explains how a chapter 11 debtor should design bonus payments to employees to ensure those payments pass scrutiny under these provisions.