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“[A] secured creditor [has no] affirmative obligation under the automatic stay to return a debtor’s [repossessed] collateral to the bankruptcy estate immediately upon notice of the debtor’s bankruptcy,” the U.S. Court of Appeals for the Third Circuit held on Oct. 28, 2019. In re Denby-Peterson, 2019 WL 5538570, 1 (3d Cir. Oct. 28, 2019). Affirming the lower courts, the Third Circuit joined “the minority of our sister courts — the Tenth and D.C. Circuits” with its holding. According to the court, it was “[g]uided by the plain language of the Bankruptcy Code’s automatic stay and turnover provisions, the legislative purpose and policy goals of the automatic stay, and the reasoning of the Supreme Court and our two sister circuits ….” Id. at 13. In sum, because “a secured creditor [need not] return the [repossessed] collateral to the debtor until the debtor obtains a [bankruptcy] court order … requiring the creditor to do so,” it does “not violate the automatic stay” of Bankruptcy Code (Code) §362(a)(3) (creditors stayed from “any act to obtain possession of property of the debtor … or to exercise control over property of the estate.”). Id. at 5-6. The court essentially allowed lenders with statutory defenses to a debtor’s turnover claim to retain possession pending a bankruptcy court order resolving the issue.
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COVID-19 Related Governmental Shut Down Order Triggers Force Majeure Provision In Restaurant Leases
By Marisa L. Byram
While commercial leases and the force majeure clauses contained in such leases vary widely, a recent decision from the United States Bankruptcy Court for the Northern District of Illinois may provide guidance to parties and help them to resolve similar disputes without resorting to the courts.
Do COVID-19 Rent and Eviction Protections Just Delay Inevitable Bankruptcy?
By Dana Delman and John Vukmanovic
In attempts to alleviate the impact of job losses and business disruption due to COVID-19, state and local governments have passed emergency orders and regulations temporarily prohibiting evictions and extending deadlines to pay rent, among other restrictions. When those restrictions are lifted, there is no guarantee that they will have done more than delay the inevitable: eviction and bankruptcy.
Bankruptcy Code Section 502(d) Claim Disallowance Issues ‘Travel With’ the Claim
By Rudolph J. Di Massa, Jr. and Geoffrey A. Heaton
In a recent decision, the U.S. Bankruptcy Court for the Southern District of New York held that claim disallowance issues under Section 502(d) of the Bankruptcy Code “travel with” the claim, and not with the claimant.
10th Circuit Looks At Nuances of Challenging Fraudulent Conveyance
By Francis J. Lawall and Marcy J. McLaughlin Smith
Under the Bankruptcy Code, not only can the initial recipient of a fraudulent conveyance be held liable, but so too can a subsequent transferee. However, there can be important nuances in the challenged transaction that may provide a subsequent transferee with a substantial defense.
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