Business Bankruptcy
LLC Membership Interests in Chapter 11 – Can They be Sold Over Other Members’ Objections?
Interpretation Matters When a chapter 11 debtor holds a membership interest in an LLC, it may be permissible for them to sell their membership interest in the LLC, or even force the sale of the entire LLC, over the objections of one or more other members. Or not. At the crux of the debate in […]
Mission Accomplished: Executory Contract Protections Extend Beyond Trademark Licenses
Tempnology Resolves the Treatment of Trademark Licenses Under Bankruptcy Law and More On May 20, 2019, the United States Supreme Court resolved what, according to the International Trademark Association, had been “the most significant unresolved legal issue in trademark licensing.” In an opinion delivered by Justice Kagen[1], the Court held 8-1 that under Section 365 […]
90 Second Lesson: If I File a Chapter 7 Bankruptcy, Are the Assets of My Single-Member LLC Safe From the Trustee?
QUESTION: A small business owner emailed us, on behalf of a friend, to ask whether assets in a single-member LLC could be used by a Chapter 7 Trustee in the LLC member’s personal bankruptcy case to satisfy creditors’ claims against the member. ANSWER: We can imagine this question arising where the member’s business is owned […]
Fancy Filing: Can They File a Chapter 11 Bankruptcy Case Just to Gain a Litigation Advantage?
The Answer Is: It Depends Debtors often use bankruptcy filing to gain an advantage in litigation. Whether or not they succeed depends on the facts and circumstances of the bankruptcy case. Let’s look at a sample case to determine how a court might rule. Case Study Catherine, Jules, and Jim each founded and owned one-third […]
What Happens in the BVI, Doesn’t Stay In The BVI – Clawbacks of Fraudulent Transfers
How Far Can the Trustee Reach? It is common practice that trustees will seek to recover or “clawback” fraudulent transfers made prior to the commencement of a Chapter 11 bankruptcy case. But what happens when all transfers by the debtor were fraudulent? And how far can the trustee reach to recover a transfer? Let’s look […]
Section 363 Sale: Free and Clear of Claims That Are Backed By Strong Public Policies
Under Section 363(f) Free and Clear Means Free and Clear: A Case Study Bankruptcy sales of assets under section 363(f) can bring more cash into the estate in part because the purchaser takes the assets “free and clear” of the liabilities of the debtor-seller. The Ormet[i] case illustrates that the “free and clear” quality of […]
90 Second Lesson: Can my borrower file for bankruptcy just to keep me from foreclosing?
QUESTION: An exasperated loan officer emailed us, asking whether the borrower – a commercial real estate lessor – could really file a chapter 11 case just to evade a state court order to appoint a receiver in a foreclosure proceeding against the borrower’s building. ANSWER: If a debtor were to admit that it filed […]
Chapter 11 Debtor’s Reporting Obligations
Reporting Requirements Make the Debtor More Transparent One of the central principles of bankruptcy is that a debtor should have the benefit of a “fresh start.” However, to accord such relief, the Bankruptcy Code, Bankruptcy Rules, and case law require transparency from the debtor and other parties in interest. As such, strict compliance with reporting […]
Not Necessarily Free and Clear I: Purchasing Real Estate Property in a Section 363 Sale
Just Because A 363 Sale Says Free and Clear, Does Not Mean It Is Free and Clear A bankruptcy debtor is offering commercial property in a section 363 sale. It is an attractive property and Lou is considering purchasing it. Lou has heard that a section 363(b) sale “cleans” the assets of all liens, claims, […]
File Early and Often: Filing and Amending Claims in a Bankruptcy Case
A Primer for Those Holding Bankruptcy Claims Against a Debtor Bankruptcy claims do more than simply determine the amount of money a creditor is owed or can receive as a distribution. Claims also can generate clout. Clout enables a creditor to sit on a creditor committee, have more leverage in negotiations, and claim a higher-priority […]