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Plan support agreements are often an essential component of a successful complex Chapter 11 reorganization and provide a framework for a debtor's financial restructuring. These agreements have increasingly been used to induce core groups of major lenders and bondholders to support a debtor's restructuring in return for enhanced recoveries.
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On Dec. 6, 2019, Gov. Andrew Cuomo signed legislation modernizing New York's 95-year-old fraudulent conveyance law and making it consistent with the U.S. Bankruptcy Code and the law of at least 44 other states. The Uniform Voidable Transactions Act (UVTA) primarily clarifies the rights and remedies of parties involved in transactions with financially distressed entities.
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In the day-to-day practice of bankruptcy law, it may occasionally be tempting to dismiss "reservation of rights" language as unnecessary or unimportant — after all, a pragmatically minded court will consider the economic reality of the case before it. Right? Well, the U.S. District Court for the District of Delaware's recent ruling in Emerald Capital Advisors v. Victory Park Capital Advisors (In re KII Liquidating) demonstrates the flaws in that way of thinking.
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The advantages of Chapter 11 bankruptcy are oftentimes unavailable to small businesses and its owners. The substantial disclosure and reporting requirements alone scare off many potential debtors. In response to this problem, Congress recently created the Small Business Reorganization Act of 2019.
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Recognizing the potential consequences, companies in Chapter 11 bankruptcy often try to reduce employee uncertainty by seeking authority from the bankruptcy court. The Bankruptcy Code, however, imposes a variety of limitations on the ability of a debtor-employer to provide certain types of compensation and benefits to "insiders," a term that is broadly defined in the Bankruptcy Code.
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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 In re Denby-Peterson.
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The assumption that bankruptcy can't relieve a borrower of student loan obligations is incorrect, however a debtor must provide compelling evidence that an undue hardship will result if the debtor is required to repay the loan.
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A debtor's goal in a Chapter 11 Bankruptcy is to confirm a "plan of reorganization." Creditors usually have the right to vote for or against a plan, and in some cases, a plan can be confirmed over the objection of one or more classes of creditors. This is called a "cram-down." The Bankruptcy Code's rules governing cram-down are complex and differ for secured and unsecured classes of creditors. This article shows how bankruptcy courts have ruled on a particular method of cram-down known as a "dirt-for-debt" plan.
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Any Cannabis-Related Business or Any Business In a Relationship With One Will Likely Find Itself Barred from the Door of the Federal Bankruptcy Courts The ability to file a federal bankruptcy case is an important resource for struggling businesses. It is particularly important to start-up businesses in an emerging field, such as the production and marketing of cannabis-related products. It is precisely this resource, however, that is currently being denied to cannabis-related businesses.
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The new decision is significant because lawsuits against former (and current) officers and directors of debtors commonly are brought, as here, by trusts established under plans of reorganization. Because insurance policies often are the only viable source of recovery for the claims asserted in such lawsuits, this decision potentially opens a pathway to creditor recovery in other similar matters.
