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Secured Claims
90 Second Lesson: What is the Difference Between Recharacterization and Equitable Subordination?
Discerning Similar Methods to Lower the Order of Priority of Creditors’ Claims [Editors’ 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: Jeff P. from Los Angeles asked us to explain the […]
Kuney’s Corner – Giving Secured Creditor Substitute Collateral in a Chapter 11 Cramdown
Pacifying a Hostile Lender with a Motion to Substitute Collateral Can a Chapter 11 debtor confirm a plan that gives a hostile secured creditor a lien on an orange as a substitute, in essence, for the secured creditor’s lien on an apple that the debtor wants to keep and use?1 Yes, a motion to […]
The Fisker Case: My Credit Bid Capped at the Amount I Paid for the Debt?
Should Secured Creditors and Buyers of Distressed Assets Worry About Facing Limits On Their Credit Bids? One way to purchase assets (including the assets of a business as a going concern) is to prevail at a foreclosure sale or a § 363 bankruptcy auction with a credit bid. The first step is to acquire […]
Determining the Collateral Value of a Secured Claim
Knowing Collateral Value Helps Determine the Creditor’s Rights Under a Plan The question of why we need to know the collateral value of a secured claim seems quite obvious when a secured creditor may be under-secured, that is when the value of its claim exceeds the value of the collateral securing it. In that case, […]
Investing in Bankruptcy Claims as a Cash Investment
Investing in bankruptcy claims can be very profitable or can result in a significant, or even total, loss. Bankruptcy claims are a creditor’s right to payment from a debtor. A bankruptcy claim can be secured by the debtor’s property or can be unsecured. Claims are classified in chapter 11 plans of reorganization according to their […]
90 Second Lesson: Can my borrower file for bankruptcy just to keep me from foreclosing?
QUESTION: An exasperated loan officer emailed us, asking whether the borrower – a commercial real estate lessor – could really file a chapter 11 case just to evade a state court order to appoint a receiver in a foreclosure proceeding against the borrower’s building. ANSWER: If a debtor were to admit that it filed […]
90 Second Lesson: What is a “UCC Article 9” Sale?
QUESTION: 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: Well, Jack, Article 9 of the Uniform Commercial Code governs the relationship between a […]
Considerations When Selling a Bankruptcy Claim
One of your customers sends you notice it has filed for chapter 7 or chapter 11 bankruptcy protection rather than the payment for goods or services provided that you were expecting. You understand that you now have a “claim” against the “debtor,” in bankruptcy parlance. You are not quite sure you want to deal with […]
What do Secured Lenders Want? The Basics of Loan Forbearance Agreements
When a borrower defaults on its loan agreements,[i] 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 […]
When Your Borrower Files for Bankruptcy (DIP Financing, Cash Collateral, and Adequate Protection)
What you need to know as a secured lender to a borrower who goes into bankruptcy you should know already, well in advance. If your borrower’s bankruptcy filing has taken you by surprise, please refer to my next article in this series, in which I will discuss the tactics and strategies in the contested case […]