Bankruptcy

In a recent case, a Chapter 11 debtor sought to employ an accounting firm under section 327(a), the principal of which was the first cousin of the owner of the debtor corporation. The U.S. Trustee objected to the retention, arguing that the debtor’s cousin was an insider. But the bankruptcy judge disagreed.

As the costs of U.S. bankruptcy cases have increased, and relief such as obtaining nonconsensual third-party releases has been limited by court rulings, restructuring specialists have begun to look to foreign restructurings’ use of Chapter 15 as an ancillary proceeding to implement certain corporate restructurings.

In the case of In re Black Diamond Energy of Delaware, the U.S. District Court for the Western District of Pennsylvania provided insight regarding the “police and regulatory power” exception to the automatic stay set forth in 11 U.S.C. Section 362(b)(4).

A unanimous U.S. Supreme Court revived a personal injury lawsuit against a construction company, saying a federal appeals court was “too rigid” in applying a legal rule meant to ensure fairness in the judicial system.

In a closely followed venue dispute, the Bankruptcy Court for the District of New Jersey recently held that venue in the District was proper in the Chapter 11 cases of Multi-Color Corporation and its affiliates. The decision is significant because it offers an analytical framework for determining a debtor’s “principal assets” under section 1408 of the Bankruptcy Code.

In In re 33 Mako, the U.S. Bankruptcy Court for the Southern District of New York addressed the issue of whether an oversecured creditor may recover post-petition default interest under Section 506(b) of the Bankruptcy Code. In denying the debtor’s motion, the opinion offers meaningful guidance on the application of the five-factor equitable test used to evaluate default interest claims and clarifies how courts should weigh each factor.

Spirit Airlines’ shutdown was not merely another distressed-company filing, it was a real-time illustration of the limits of Chapter 11 in industries where value depends on uninterrupted operations, customer confidence, and constant liquidity.

The automatic stay that goes into effect when a bankruptcy petition is filed can be hard to process for someone who has been injured. The facts have not changed. The injury has not changed. But the path forward suddenly depends on a different court, applying a different set of priorities.