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Fraudulent Transfers

Fraudulent Transfer Remedies – How Much is Enough?

One of the most powerful tools in the Bankruptcy Code available to bankruptcy trustees (or other estate representatives) to maximize the recovery of creditors is the power to avoid and recover fraudulent transfers of a debtor’s property.  These include transfers that are made, or obligations that are incurred, by a debtor (a) with the actual […]


Be Careful What You Ask For: The Unintended Consequences of Creditor Remedies in Bankruptcy Cases

To anyone practicing bankruptcy law more than a month, the scenario of a lender secured by a lien against real property, as well as an assignment of rents (“AOR”) is pretty standard fare. Default on the debt occurs, threats (and counter threats) are tossed about, notices of foreclosure are filed (and perhaps receivership proceedings were […]


Litigation Funder Monetizes Portion of Fraudulent Transfer Judgment in Cutting-Edge Transaction

Gerchen Keller purchases a portion of the interest in proceeds of $213 million fraudulent conveyance judgment in innovative public sale. An interesting transaction took place on September 8, 2016. The chapter 7 bankruptcy trustee for Magnesium Corporation of America (“MagCorp”) sold a $50 million share of a $213 million judgment it has against fraudulent conveyance […]


Transparency Is Key: The Importance of Disclosure in Bankruptcy

Firms targeting fellow restructuring professionals’ disinterestedness to gain leverage Transparency and disclosure are pillars of the bankruptcy system. Companies going through chapter 11, as debtors, are required to publicly report information they would rather keep private. So are the professionals (lawyers, financial advisors, accountants, etc.) that are retained by court order and payed from the […]


Ponzi Scheme Lender May Be On The Hook, After All!

The Skinny The Sixth Circuit recently revived a trustee’s $17 million avoidance and claw-back suit against a lender, finding that the lender’s existing security interests could have been extinguished via novation. Impact: secured lenders entering into amended and restated loan documents should adopt definitive and irrefutable language demonstrating that the parties do NOT intend for the new […]


Fraud And Deceit in Bankruptcy Cases — Lessons from “The Clouds”

Some of the best advice on how to deal with a looming bankruptcy was written around 2,500 years ago. Yes, all the way back in 423 B.C., the Greek playwright Aristophanes offered his thoughts for posterity in his comic play The Clouds, whch tells the story of Strepsiades, a man unable to even sleep because […]


“Don’t Pass Me By”—The Jevic Case and Bypassing the Absolute Priority Rule

It’s an all-too-familiar situation: a debtor files for chapter 11 bankruptcy and an asset sale takes place, but there is not enough money at the end of the day to fund a plan confirmation process, or adequately pay off all creditors who come first in line according to the bankruptcy code. That “line” is defined […]


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 […]


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 […]


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