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Zone of Insolvency

Aereo, Inc.: A Chapter 11 Debtor That is Not Broke

The word bankruptcy is derived from Italian banca rotta, meaning “broken bench,” and may derive from the early modern Florentine custom of breaking a moneychanger’s bench to signify his insolvency and cease his operations.  Yet, as we explained earlier this year, a chapter 11 debtor need not be broke.  We summarized the law as follows: […]

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 […]

Ousting the Debtor in Possession: The Good, the Bad and the Ugly of Replacing a Debtor’s Management with a Chapter 11 Trustee

The mere act of filing a chapter 11 bankruptcy petition significantly alters the relationship between a debtor and its creditors, yet, perhaps surprisingly, the filing does not automatically trigger removal of the very management team that led (or maybe drove) the debtor into bankruptcy in the first place.  Why?  Because, in enacting the Bankruptcy Code, […]