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Business Bankruptcy

You Do Not Have to Mean It: Authorizing the Filing of a Mistaken Termination Statement Suffices to End Perfection of the Security Interest [Committee (re Old GM) v. JPM]

In a previous article, we explained how the unsecured creditors committee in the bankruptcy case of Old GM is suing Old GM’s lender – JPM (as agent for a syndicate of lenders) – to recover $1.5 billion that had been paid to JPM during the bankruptcy case.  Below we trace the technical legal framework for […]

Getting Over the Scariness of Filing an Involuntary Bankruptcy Petition

Mention involuntary bankruptcy to many in the credit industry and you often get a sharp response:  no way.  Decisions that have awarded punitive damages to debtors have received broad attention.  Trying to collect on a bad loan is tough enough.  Why compound the struggle by giving the debtor the claim that an involuntary filing was […]

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 […]


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 […]