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Last year, a divided panel of the Third Circuit Court of Appeals held that the plain language of § 1129(b)(2)(A) of the Bankruptcy Code allows a debtor to propose the sale of a secured creditor’s collateral free and clear of liens without providing a right to credit-bid, so long as the creditor receives the indubitable equivalent of its claim.[1] This summer, a unanimous panel of the Seventh Circuit decided just the opposite; that a debtor cannot sell a secured creditor’s collateral free and clear of liens under a plan without affording

Although several months have now passed since the Supreme Court first decided Stern v. Marshall, parties to bankruptcy cases nationwide are still absorbing the impact of the decision on the authority of bankruptcy courts to determine certain disputes in bankruptcy cases and to render final judgments.[1] Much of the current confusion can be attributed to the wide gulf separating Stern’s majority and dissenting opinions, but the Supreme Court’s prior forays into this area also deserve some of the blame.

In certain industries, it is not uncommon for parties to a commercial transaction to alter the normal debtor-creditor relationship by entering into consignment arrangements. Under a typical consignment arrangement, the consignor of the goods (typically a manufacturer or distributor) delivers such goods to the consignee (typically a retailer) to be sold. The consignee generally does not pay for the consignment goods until it sells such goods to a customer.

Representing creditors’ committees can be lucrative, and law firms often engage in competitive pitches with other firms when seeking to become creditors’ committee counsel.  In order to bolster the odds of winning multi-firm “beauty contests,” many firms actively solicit votes from committee members, or if the committee is not yet formed, from the potential committee members.

Creditors share bankruptcy estate assets according to the amount and priority of their claims. The estate is comprised of the debtor’s legal and equitable interests in property as of the filing date. Property that the debtor holds in trust for another is not an asset of the bankruptcy estate, [1] and accordingly, the beneficiary of that trust is entitled to collect the entire amount it is owed before other creditors of the estate are entitled to their distribution.

Circuit City and Commissary
As discussed in the previous article, in Circuit City, the U.S. Bankruptcy Court for the Eastern District of Virginia refused to allow a preference defendant to claim § 547(c)(4) subsequent new value for goods that were also the subject of a § 503(b)(9) Claims (20-day goods).  In Commissary, the U.S. Bankruptcy Court for the Middle District of Tennessee seemingly did just the opposite.

Relations between one company and another do not always follow a consistent and steady course. As the economy, industry dynamics, material prices and politics change, the relationship between the customer and suppliers will also often change. This article discusses recent and long-standing opinions of various U.S. courts regarding these circumstances and provides guidelines for information that may be helpful in establishing that such arrangements and payments may indeed be “ordinary.”

There currently exists a split as to whether goods delivered within 20 days of a filing that qualify as §503(b)(9) administrative expenses (“20-day claims” or “20-day goods”) may also serve as new value to defend a preference under § 547(c)(4). On Jan. 6, 2010, Hon. Marian Harrison held that a preference defendant was not precluded from asserting new value based on 20-day goods. [2] By contrast, on Dec. 1, 2010, Hon. Kevin R.

Since Hon. Frank Easterbrook’s decision in the Kmart bankruptcy, [1] scholars and attorneys have commented on the decision and voiced their opposition to critical vendor orders in bankruptcy proceedings, yet such orders are still prevalent in bankruptcy cases. There has been limited discussion as to risks to the trade creditor of accepting critical vendor status.

Because there can be at least a two-year lag between a bankruptcy filing and a preference demand made pursuant to 11 U.S.C. §547, a consistent, proactive approach to gathering defense data is critical. Modern legal practice requires a nonintuitive, technical and peculiarly factual approach to defending preferences and preserving the electronically stored information (ESI) relevant to defending preferences. The creditor will need to supply the facts upon which its defense is based.