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Business Bankruptcy

There Ought to Be a Law, and There Is: When the Insolvent LLC’s Manager Distributes Cash But Does Not Pay Creditors

Editor’s Note: The scenario discussed below was present in many respects in Vieira v. Harris (In re JK Harris & Co. LLC), 512 B.R. 562 (Bankr. D. S.C. 2012). Let us suppose that a provider of tax resolution services to a large number of customers borrows cash secured by accounts receivable (the cash borrower can […]


Foreign Buyers of US Assets in Section 363 Sale: National Security Regulatory Review

Foreign entities are not barred by the Bankruptcy Code from purchasing assets in section 363 sales in bankruptcy cases. Usually, the debtor’s estate and creditors welcome anyone who may bid up the sale price and raise the return to the estate and creditors from the auction sale. For the foreign purchaser, buying assets out of a bankruptcy […]


Demystifying Administrative Expenses in Bankruptcy

Bankruptcy professionals, other business professionals, and trade vendors would be reluctant to provide services or otherwise extend credit on an unsecured basis to an insolvent entity like a bankruptcy debtor unless their claims to payment were somehow ensured.  In addressing this predicament, Congress provided that holders of unsecured claims that arise from certain transactions that […]


RECOMMENDED READING: How Fisker and Free Lance Star-Publishing Did Not Alter Credit-Bidding

The Editorial Staff of Commercial Bankruptcy Investor recently reviewed the seemingly earth-shaking Fisker and Free Lance Star-Publishing orders limiting credit bidding rights. The Editorial Staff concluded that much of the angst is misplaced and that credit bidders should try to be the least bit cool in credit bidding, in particular to avoid inequitable behavior in […]


RECOMMENDED READING: On a Failed Attempt to Leave Billions of Environmental and Pension Liabilities in Moribund Old Corp, while Splitting off the Best of Old Corp Into a New Entity

Let us say that Old Corp. was founded in 1929 as an oil and gas exploration company, and that it later added other businesses, including chemicals. By the turn of the century, Old Corp. had immense “legacy” environmental and pension obligations that weighed upon profits. The chemical business languished with mediocre earnings while the oil […]


RECOMMENDED READING: The Lender Made Borrower Waive Its Right to File Bankruptcy – Enforceable?

Your company’s loan agreement contains a waiver of the company’s right to file a bankruptcy case.  Enforceable?  No, for it contravenes public policy. Your company’s formation documents require that any bankruptcy filing be authorized in a certain manner (e.g., approval of a certain percentage of directors, partners, or members).  Enforceable?  Many such restrictions have been […]


How Much Can I Add to My Claim? (says Lender) How Much Liquidity Will I Have? (says Reorganizing Debtor): On the Payment of Post-Petition Interest

Your company owes substantial loan principal secured by real property that your company is developing into a hotel, condominiums, and a nightclub. Your company defaulted on the construction loan by missing some payments and filed a chapter 11 petition with the strategic goals of making operations more efficient and further developing the real property to […]


RECOMMENDED READING: PACA Claims in Bankruptcy

Certain suppliers of agricultural goods get paid ahead of secured party, both inside bankruptcy and outside bankruptcy. The suppliers benefit from a federal statutory trust imposed to protect them from nonpayment. The goods involved are “fresh fruit and fresh vegetables of every kind and character” – and regulations set the limits on what qualifies. Suppliers […]


KUNEY’S CORNER – Cramming Down a Chapter 11 Plan by Giving Secured Creditor Substitute Collateral

Can a chapter 11 debtor confirm a plan that gives a hostile secured creditor a lien on an orange as a substitute, in essence, for the secured creditor’s lien on an apple that the debtor wants to keep and use?[i] Yes, if the value of the new lien meets the test of “indubitable equivalence” with […]


Bid Now or Forever Hold Your Peace: Challenging the Results of a Section 363 Sale in Bankruptcy (In re New Energy Corp.)

You would like to purchase wind turbines in a lease-to-own scenario, that is, you would like to take possession of certain items and pay for the purchase or ownership over time or in a lump-sum at some point in the future.  You prefer this mode to an outright cash purchase because of your other cash […]


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