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Over the last decade or so, the vast majority of chapter 11 cases not converted to chapter 7 have resulted in sales of the debtors' assets. The sales were accomplished either under § 363 of the Bankruptcy Code or pursuant to a liquidating chapter 11 plan. Although reasons vary, primary motives include the amount and nature of claims held by undersecured senior lenders, which often precluded the confirmation of plans where the debtors’ owners retained their interests.

In a recent decision arising out of the Lehman case, which has been characterized as the largest and most complex bankruptcy in history and saw professional fees and expenses exceed $1.8 billion, the U.S.

In seeking to protect rights in collateral during the course of a bankruptcy case, secured creditors should be aware of potential fraudulent transfer liability and its far-reaching effect on the ability to protect collateral.

By virtue of loan agreements or a debtor’s acquiescence, a creditor often has varying degrees of influence and control over a debtor and its business. Sometimes, however, a creditor may utilize this control to benefit itself at the expense of other creditors. On the eve of bankruptcy (and even post-petition), such abuse of control is anathema to the delicate distributional scheme guaranteed in the Bankruptcy Code.

In recent years, the practice of bankruptcy claims trading has grown dramatically and now represents a multibillion-dollar-per-year marketplace. However, a recent decision by the U.S. Court of Appeals for the Third Circuit may give pause to prospective claim purchasers. In In re KB Toys Inc.,[1] the Third Circuit Court of Appeals held that a claim subject to disallowance under § 502(d) of the Bankruptcy Code in the hands of the original holder is also subject to disallowance in the hands of a purchaser.

Seemingly straightforward on its face, certain aspects of the Bankruptcy Code’s “new value” defense[1] have proven frustratingly unclear for practitioners around the country. Illustrative of this frustration is the elusive answer to perhaps the simplest question: When does it apply? More specifically, if a creditor is paid post-petition for new value that remained unpaid as of the petition date, can that creditor continue to use that same unpaid new value as a defense under § 547(c)(4) of the Bankruptcy Code?

Until recently, most attorneys gave little thought as to whether they should be signing proofs of claim in bankruptcy cases on behalf of their clients. If it was more convenient to have an attorney do so, attorneys followed their clients’ wishes and complied. However, based on a recent bankruptcy court decision, it may no longer be preferable to have an attorney sign a proof of claim form on behalf of a client.

While a number of circuits have held that bankruptcy courts have authority under § 105(a) of the Bankruptcy Code to insulate nondebtors via prospective releases of liability in a confirmed plan, the practice is constrained in other circuits. These minority circuits view the broad powers vested in the bankruptcy court under § 105 as being tempered in application by the specific restrictive language of § 524(e) of the Bankruptcy Code.