Understanding bankruptcy avoidance actions and the defenses available can make a significant difference for companies facing litigation exposure.

Revisiting the TOUSA Case Ruling on Fraudulent Transfers One of the most powerful tools in the Bankruptcy Code available to bankruptcy trustees, or other estate representatives, to maximize creditors’ recovery is the power to avoid and recover fraudulent transfers of a debtor’s property. These include transfers that are made or obligations that are incurred by a debtor: “With the actual intent to hinder, delay or defraud creditors” (§ 548(a)(1)(A)); or “Constructively fraudulent transfers, i.e., transfers made or obligations incurred for which the debtor receives less than reasonably equivalent value, that are made […]

Bankruptcy valuation of a debtor plays an integral part in bankruptcy, from debtor-in-possession financing, confirmation and how much creditors are paid.

Assessing Legal Risk    “One man’s rubbish is another man’s treasure.” -William & Robert Chambers Journal of Popular Literature, Science and Arts (1879)  “A little learning is a dangerous thing” -Alexander Pope, An Essay on Criticism (1709)    Purchasing operating assets from a financially distressed seller is a fantastic opportunity to buy low. Before doing so, however, any buyer must take into account a host of considerations, including, but not limited to, operational, competitive, integration, and legal issues, such as fraudulent transfers and successor liability. Buying a business, or business […]

Bernard Madoff’s infamous Ponzi scheme left victims in its wake worldwide and resulted in numerous bankruptcy and insolvency proceedings around the world. How far can the trustee’s power reach?

QUESTION: Scott T,  emailed, asking, “I have a client who owns a few income-producing properties, and she thinks she may not be able to make her next mortgage payments to her lender. What should I tell her to expect?” ANSWER: Once a default on a commercial loan is looming or occurs, a proactive mortgage lender should be expected to review several factors surrounding property management. If a third-party manager is involved, the lender will want to determine whether any lien rights arise in favor of this property manager, including in […]

The Sixth Circuit would quote Ohio case law to explain that “A contract of novation is created where a previous valid obligation is extinguished by a new valid contract, with the consent of all the parties, and based on valid consideration.” In a sense, a novation establishes that the prior contract is fully performed by the novated contract.

The borrower is an LLC managed by a greedy principal member. The borrower slowly pays the secured creditor and unsecured creditors over years and its business becomes insolvent. The insolvent LLC makes cash distributions to its members, but not to the secured creditors. Is there a law against this sort of behavior?

A Series on the ABCs of ABCs, Business Bankruptcy & Corporate Restructuring/Insolvency Greetings, Dear Reader: It seems you’re interested in learning how to deal with corporate distress, and we’re glad you’re here. But let’s first make sure you got on the right plane. Maybe you… Are a C-suite executive of a business that’s considering buying a failing competitor on the cheap Manage a private equity or hedge fund Are a junior associate in the restructuring or special situations group of a law, investment banking, or accounting firm Are a credit […]

This series was started with a broad overview of business bankruptcy, but our last few installments have focused on: unsecured creditors the priority scheme in bankruptcy protecting/collecting your claim In this installment, we draw on our discussion of the priority scheme, with a special focus on super and residual priorities. As previously discussed, not all claims are treated the same.  At its foundation, claims can be divided into two general buckets—secured and unsecured.  If there is collateral securing the claim, it is secured.  If not, it’s unsecured.  However, Congress decided […]