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General Unsecured Creditor

Do’s and Don’ts of Gifting in Bankruptcy: When a Court Will Look a Gift Horse in the Mouth  

The gifting doctrine in bankruptcy is not new and often is used to obtain creditor consensus to a debtor’s proposed exit – either through a chapter 11 plan or a 363 sale. A bankruptcy “gift” typically involves a structurally senior class voluntarily giving some of its property or distribution to a structurally junior class of […]


Dealing With Distress For Fun & Profit – Installment #2 – Bankruptcy Parties

A written tour of business bankruptcy and its alternatives A typical commercial litigation case involves a judge, a plaintiff, and a defendant. A typical commercial bankruptcy case also has a judge, but that’s about where the similarities stop. A typical commercial litigation case, you see, is a two-party dispute. A typical commercial bankruptcy case is anything […]


DOCKET BULLETIN: Court Overrules Chemours Objection / Approves Mississippi Phosphate’s Sale Motion

The United States Bankruptcy Court for the Southern District of Mississippi entered an Order last evening approving the amended sale motion of debtor Mississippi Phosphates Corporation (In re Mississippi Phosphates Corporation, et al., Case No. 14-51667-KMS, (the “Debtors”)), as well as separate settlements made between the Debtors and the Unsecured Creditors’ Committee (the “Committee”) and […]


“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 […]


Mega RV—Lender Compromise Provides Funds to Creditors

A recent settlement agreement in the Mega RV Corp. (“Mega” or the “Debtor”) bankruptcy highlights the interplay between an overzealous lender and a repentant business owner who came together to cooperate and provide a windfall recovery to unsecured creditors. Mega RV was founded in 2000 by Mike McMahon as McMahon’s RV. The Debtor was in the […]


What Else Can a Creditors Committee Do? Maybe Reap $1.5 Billion for Unsecured Creditors (Lender Beware)

JPMorgan Chase & Co. and others (“JPM”) lent $1.5 billion to General Motors Corporation (“Old GM”) under a term loan agreement (the “Term Loan Agreement”).  JPM was the senior secured creditor of Old GM.  Old Gm went into chapter 11 bankruptcy.  Under the terms of the DIP financing approved by the bankruptcy court, proceeds of […]


RECOMMENDED READING: What Can a Creditors Committee Do? Prevent the DIP Lender From Making Off With Assets That Could Help Pay Unsecured Creditors

The recommended reading this time is not an article but a pleading in a bankruptcy case. The official committee of unsecured creditors (the “Committee”) appointed in the Kids Brands case (In re Kid Brands, Inc., Case No. 14-22582 (Bankr. D. N.J.) objected to financing for which the large corporate debtor seeks approval from the Court. […]


How Unsecured Creditors Push Ahead of Lenders Who in Fact Invested, Part III – Equitable Subordination vs. Recharacterization

In part one of our series on recharacterization, we discussed the elements of judicial recharacterization of loans as equity interests.[i]  In part two of the series, we considered how debtors can “claw back” putative “loans” that they may have repaid years earlier because the “loans” were in fact equity investments and their repayment was invalid.[ii]  […]


How Unsecured Creditors Push Ahead of Lenders Who in Fact Invested, Part II – Clawback of “Loan Repayments”

In our last article[i], we discussed the judicial recharacterization of loans as equity interests.  As we described, a court will recharacterize a lender’s debt claim as equity if it determines the “loan” actually was intended to be, and was treated by the parties as, an equity investment.  Recharacterization is a powerful tool for creditors and […]


How Unsecured Creditors Push Ahead of Lenders Who in Fact Invested, Part I – What is Recharacterization in Bankruptcy?

In bankruptcy, a debt claim has a higher priority than an equity interest (or share) in the debtor company, and should be (and ordinarily is) paid in full before equityholders receive any distribution from the debtor.  Better, then, to acquire or hold a debt claim — an elegant swan — than to hold an equity […]


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