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Creditors Rights

Article 9 Sale

90 Second Lesson: What is a UCC Article 9 Sale?

An Introduction to UCC Article 9 Question: What is it? Jack B. emailed, asking, “Please explain what an Article 9 sale is. My lawyer said that if I give a security interest to a lender, it can do an Article 9 sale.  What is an Article 9 sale?” Answer: It’s a Creditor’s Remedy to Enforce […]


Ipso Facto Clauses

The Nuts & Bolts of Ipso Facto Clauses and Golden Share Arrangements That May Sidestep the Bankruptcy Code’s Prohibition

When are Ipso Facto Clauses and Golden Share Arrangements Enforceable in Bankruptcy? “Termination on bankruptcy” provisions—ipso facto clauses—are commonly used in many types of business contracts, providing for the termination of the contract (either automatic or at the non-debtor party’s election) upon the obligor’s filing of bankruptcy or the occurrence of similar events or conditions. […]


Trade creditor rights

3 Issues for Vendors to Consider When Their Customer Files Bankruptcy

Trade Creditors Still Have Options In the Event of a Customer Bankruptcy When a customer files bankruptcy, vendors can be exposed to considerable losses if they have debts owed by the customer that arose before the commencement of the case (the “Petition Date”). Once the case is filed, the vendor becomes a creditor, or trade […]


Borrower Bankruptcy

What Secured Lenders Should Know If Their Borrower Files for Bankruptcy

When a Borrower Files for Bankruptcy, How Can Secured Lenders Protect Their Position? As a secured lender, you should know well in advance the necessary details if a borrower files bankruptcy. Let us presume therefore that, from consultations with your borrower, it is clear that the borrower is in distress: The borrower is likely unable […]


Solvent Debtor Chapter 11 Bankruptcy

Solvent Debtor? A Chapter 11 Debtor Need Not Be Broke

A Solvent Debtor Can File for Bankruptcy…but Can They Survive a Motion for Dismissal? Suppose that your borrower or customer files for chapter 11 bankruptcy. You do not like this, because you’ll almost certainly not collect the full amount owed to you. In fact, to get anything at all, you’ll have to get involved with […]


Order of Priority

Which Creditors Get Paid First? The Liquidation Order of (Absolute) Priority

What is the Hierarchy of Claims Under the Absolute Priority Rule? If you are a vendor, service provider, or another unsecured creditor to a chapter 11 debtor, you cannot be blamed for feeling like a duped lover after learning about the bankruptcy of your once devoted business companion. Despite the promises of “I’ll stand by […]


Questionable Right to Credit Bid

90 Second Lesson: The (Arguable) Right to Credit Bid in Plan Sales

Understanding the Right to Credit Bid After Radlax [Editor’s Note: this is part of our irregular series in which we answer readers’ questions. If you have a question, submit it to [email protected] and we will try to answer it.] Question A private equity investor wrote in recently asking us to address credit bidding in the […]


Boston post-petition interest bankruptcy case

Lender vs Debtor on the Payment of Post-Petition Interest

The Battle Over Post-Petition Interest for Oversecured Creditors In bankruptcy, an oversecured creditor (in which the value of its collateral is higher than its claim) is first in line to be paid. Unfortunately, oversecured creditors are also entitled to post-petition interest (interest that accrues or would accrue after the start of bankruptcy proceedings, regardless of […]


Absolute priority rule

The Order of Claims in Bankruptcy: Absolute Priority Rule, Structured Dismissals and More

Are the Rules Really “Absolute?” At its core, corporate bankruptcy addresses the problem of the “inadequate pie.” While occasionally the debtor will be solvent, in most cases, the debtor will, for lack of a better term, be “bankrupt.” That is, it won’t have enough money or other assets to pay its creditors all they are […]


Receipt of goods in administrative claims

When are Goods ‘Received by the Debtor’ for Purposes of a Section 503(b)(9) Administrative Expense Claim?

Two Decisions that Clarify “Receipt” of Goods in Administrative Expense Claims   Section 503(b)(9) of the Bankruptcy Code1 allows a creditor an administrative expense claim (i.e., a claim with payment priority over other pre-bankruptcy claims) for the value of goods that the debtor “received” within 20 days before filing for bankruptcy. But what precisely does […]


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