What Are U.S. Creditors' Rights?
Last month's article reviewed cross-border parallel bankruptcy proceedings, and outlined various attempts to cope with the problem. This month, we discuss situations in which the U.S. court finds a real conflict between the laws of two or more countries in the treatment of creditors' claims.
Critical Vendor Motions
Chapter 11 debtors often file motions, usually at the outset of a case, that seek to pay prepetition unsecured amounts owed to 'critical' vendors that supply debtors with essential goods and services. Debtors argue that, unless such motions are granted, vendors will cease supplying them, and thus jeopardize their ability to reorganize. Court orders that grant critical vendor motions require vendors to continue supplying debtors on specified business terms in return for payment of the prepetition amounts owed.
How to Extinguish a Lessee's Possessory Interest
The ability of a trustee to sell bankruptcy estate assets free and clear of competing interests in the property has long been recognized as one of the most important advantages of a bankruptcy filing as a vehicle for restructuring a debtor's balance sheet and generating value. Still, section 363(f) of the Bankruptcy Code, which delineates the circumstances under which an asset can be sold free and clear of 'any interest in such property,' has generated a fair amount of controversy. This is so because the statute itself does not define 'interest.'
What Are U.S. Creditors' Rights?
Cross-border bankruptcies, a by-product of the globalization of businesses, are increasing in number, size and complexity. Coordination of reorganization or liquidation of transnational businesses is difficult because the applicable laws, social policies and concerns of the various nations are not uniform or sufficiently similar so as to be interchangeable or harmonized. In partial recognition of the globalization of businesses, Congress enacted Bankruptcy Code ' 304 in 1978, which gives foreign representatives in foreign insolvency proceedings access to U.S. bankruptcy courts.
Furthering Insolvency?
What was Enron's Board thinking? Where were the Tyco directors while Dennis went shopping? Had MCI's directors been invited to Scott's new Florida mansion? This stuff makes the headlines, but all across the country, decisions are made by boards of directors that don't come close to this scale and will never see the light of day, much less a courtroom. However, these decisions are no less questionable and susceptible to attack, leaving a director in litigation for years. This is particularly true should the company end up in bankruptcy with creditors having been harmed.
Stockbroker Fraud Not Dischargeable
It is a cornerstone of our nation's bankruptcy jurisprudence that the discharge of individual debt is reserved solely for the honest debtor. This encompasses rules that certain debts are non-dischargeable, notable among them debts obtained by fraud and other illegal acts.
Bankruptcy Filing Set New Record in Calendar Year 2002
The Administrative Office of the U.S. Courts reported that a new record high in bankruptcy filings was established for the 2002 calendar year. There were a total of 1,577,651 petitions filed during the 12-month period ending December 31, 2002, an increase of 5.7% from the previous year, when 1,492,129 petitions were filed. The previous record for filings in any 12-month period was recorded in the Judiciary's fiscal year 2002 (October 1, 2001-September 30, 2002) when 1,547,669 filings were reported.
Preventing a Haven for Wrongdoers
The current economic downturn has resulted in a huge number of bankruptcy filings by publicly traded companies. During 2001, for example, a record 257 publicly traded companies filed for bankruptcy. The telecommunications sector was particularly hard hit, as 14% of those bankruptcies were filed by publicly traded telecom companies.
