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Creditors Rights
90 Second Lesson: What is a “UCC Article 9” Sale?
An Article 9 sale allows a creditor to sell its collateral to a third party in a private or public sale without the need for judicial proceedings.
Commercial Real Estate Tenant Bankruptcy — What To Do
When a commercial real estate tenant files a chapter 11 bankruptcy case, the landlord faces unfamiliar issues. Although each case is unique, this article provides a basic overview of the issues commercial landlords could run into.
Ponzi Scheme Lender May Be Off The Hook, After All: A Case Study
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.
What do Secured Lenders Want? The Basics of Loan Forbearance Agreements
When a borrower defaults on its loan agreements, a lender may, among other options, sue to foreclose on its collateral and collect from the borrower. The lender, however, may instead agree to amend the loan documents or enter into a loan forbearance agreement. If the borrower can convince the lender that, within a reasonably short […]
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. […]
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 […]
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? 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 […]
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 […]
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 […]