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The remedy of involuntary bankruptcy “exists as an avenue of relief for the benefit of the overall creditor body …. [I]t was not intended to redress the special grievances, no matter how legitimate, of particular creditors ….” In re Murray, 900 F.3d 53, 59-60 (2d Cir. 2018). The courts of appeals have been consistent. In re Edgar A. Reyes-Colon, 2019 WL 1785039, at 1 (1st Cir. Apr. 24, 2019) (affirmed dismissal of involuntary petition filed by only two creditors; at least three petitioners required; parties engaged in “twelve years of litigation concerning the number of [debtor’s] creditors and whether he might … be placed in bankruptcy involuntarily for ‘equitable’ reasons.”); In re 8 Speeds 8, Inc., 2019 WL 1891802, at 3 (9th Cir. Apr. 29, 2019) (dissent) (“Involuntary bankruptcy is a drastic course of action that carries significant consequences, and ‘[f]iling an involuntary petition should be a measure of last resort’ …. The fee-shifting and damages provision of [Bankruptcy Code] §303(i) are intended to deter frivolous filings …. The Majority holds that … a third party who appears for a debtor and successfully defends against an involuntary petition can never request that the debtor be awarded costs, a reasonable attorney’s fee, or damages.”).
By Carl E. Black and Jonathan Noble Edel
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.
By Michael L. Cook
“[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.
By Rudolph J. Di Massa Jr. and Jarret P. Hitchings
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.
By Peter Janovsky
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.