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Creditors Rights

Opportunities in Bankruptcy: Turning Coal Into Diamonds

“The time to buy is when there’s blood in the streets.” – Baron Rothschild Don’t Panic, There Are Many Opportunities in Bankruptcy When a client or a competitor files for bankruptcy, it is natural to reflect on the downside. What’s going to happen to my outstanding receivable? Is the market primed for a downturn? How […]


Absolute Priority Rule in Bankruptcy: Are You Atop the List?

Editor’s Note: This is an updated version of an article published in May of 2013. 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 […]


Lender Liability Is Alive and Well: A Case Study

The relationship between a lender and borrower can be complex. The borrower wants capital to run and grow its business and the lenders want to earn a return and eventually get its principal back. If the borrower complies with the terms of the loan, all is good. If the borrower breaches then the lender has […]


Timing Is Everything: How to Make a Rough Assessment of Potential Preference Action Defenses (PART 2)

Editor’s Note: Part 1 of this article laid out the prima facie case a plaintiff needs to have in order to sue for a preference, outlined the major defenses and explained the importance and use of certain key documents in assessing and maintaining a defense. Part 2 now delves into the major defenses in greater […]


Timing Is Everything: How to Make a Rough Assessment of Potential Preference Action Defenses (PART 1)

Your company has just been served with a preference complaint. The complaint seeks to recover tens or hundreds of thousands of dollars even though your company already has taken a loss on the debtor’s accounts. Your initial response is anger at the unfairness of being sued. Fortunately, Congress included defenses to preference actions so that […]


To Tell The Truth; The Importance Of Full And Frank Disclosure To Preserving The Attorney-Client Privilege

Imagine yourself as the owner of a small company, or the CEO of a large corporation. The company is not doing well, but you are convinced the distress can be overcome. While sales are down, competition is fierce and your latest expansion – made with borrowed money – did not go well, the business is […]


Being Proactive: Steps a Supplier Can Take in the Face of Potential Customer Bankruptcy

The impending bankruptcy of a retailer is one of the most stressful experiences that a supplier may face. The supplier is confronted not only with the potential loss of a major customer, but also with the possibility of significant financial losses on account of unpaid accounts receivable. A supplier often finds itself scrambling to mitigate […]


Unsecured Creditors Prevail Against the UCC-1

In the realm of lending, the perfected Uniform Commercial Code-1 (“UCC-1”) is the hallmark of security.  If a secured asset has value, and the liens are valid, what other issues are there to consider?  Well, in at least one instance, underlying intercompany notes were the issue.  And because of the nature of these notes, the […]


Six Common Mistakes in Drafting Collateral Descriptions

Drafting can easily go awry. When collateral descriptions are drafted errantly in security agreements and financing statements, secured creditors may not get what they bargained for and expensive disputes can bloom. A valid security agreement executed by the owner of the collateral and the secured party creates a security interest. Such a security agreement grants […]


Fourth Circuit Approves Recharacterization of Secured Debt Into Equity

A Brief Summary of PEM Entities​: Unsecured Creditors Pulled Down a Secured Creditor In its recent unpublished opinion PEM Entities, LLC v. Province Grande Old Liberty, LLC, 2016 WL 4254917, (4th Cir. Aug. 12, 2016), the Fourth Circuit Court of Appeals affirmed the bankruptcy court’s award of summary judgment to certain unsecured creditors (the “Plaintiffs”) […]


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