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I cannot recall how many attorneys, young and old, creditor counsel or debtors I have heard stand up in open court and state with conviction that a debtor must provide “adequate protection” under 11 U.S.C.

The use of nonrecourse carve-out clauses and so-called “springing” or “bad-boy” guarantees in commercial lending is a relatively new concept. Accordingly, case law dealing with their enforceability is not very well developed. The courts that have addressed these issues have uniformly held that such lender safeguards are generally enforceable. This article analyzes these early decisions.

A majority of individuals filing for bankruptcy relief do so in the wake of mounting mortgage debt and collapsing home values. In such circumstances, the ability to “strip off” a wholly unsecured mortgage lien could bring tremendous relief to debtors who are homeowners. Stripping off an unsecured mortgage lien requires it to be treated as an unsecured claim in the bankruptcy case. Such a claim would be discharged in a chapter 7 case or be paid as a pro rata distribution under a chapter 13 plan in conjunction with unsecured creditors.

It is well established by the Delaware courts that the creditors of an insolvent corporation have standing to bring a breach of fiduciary duty derivative suit against directors. [1] The basis for such standing heavily relied on “equitable considerations.” [2] Many scholars—and even some courts—have assumed that such derivative standing extends to the creditors of a limited liability company (LLC). According to a recent Delaware Chancery Court ruling, they were wrong.

The Fifth Circuit Court of Appeals, on October 19, 2010 corrected a bankruptcy court’s calculation of a secured lender group’s superpriority administrative claim more than two years after consummation of the debtors’ chapter 11 reorganization plan. [1] In doing so, the court reconciled the rationale for giving secured lenders “adequate protection” with the “fallback” superpriority administrative claim of § 507(b) of the Bankruptcy Code. [2]

With the economy still lagging and an apparent end to federal assistance for state and local governments, some experts are predicting an increase in chapter 9 bankruptcy filings. Chapter 9 of the Bankruptcy Code provides a rarely used avenue for municipalities and other political subdivisions to obtain relief from creditors.

In In re Boston Generating LLC, a New York bankruptcy judge held that second-lien lenders could object to a debtor’s bid procedures approved by the first-lien lenders despite the terms of an intercreditor agreement. [2] The intercreditor agreement provided the first-lien lenders with the “exclusive right to…make determinations regarding the…sale” of the collateral. According to the court, the agreement did not expressly preclude the second-lien lenders from objecting to bid procedures.

A series of recent court opinions have precipitated ominous warnings that we may be witnessing the erosion of secured creditors’ rights, an erosion that some have argued may herald substantially increased borrowing costs and a further dissipation of the credit markets as a whole.

The epic §363 sales that were consummated in the Chrysler and General Motors bankruptcies this past summer raised objections from parties in interest[1] and concerns from the broader legal community[2] that the sale transactions were, in effect, sub rosa plans that effectively bypassed the Bankruptcy Code’s important disclosure and voting requirements.

In September 2009, the Third Circuit issued a ruling in Wawel Savings Bank v. Jersey Tractor Trailer Training Inc. (In re Jersey Tractor Trailer Training Inc.), 580 F.3d 147 (3d Cir. 2009), that addressed significant issues that can arise in situations where competing claims to a debtor’s accounts receivable exist between a traditional lender and a factor. Although the court emphasized that it was rendering its decision based on the New Jersey version of the Uniform Commercial Code (UCC), its relatively broad holdings are generally applicable in the Circuit.