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What happens when a chapter 7 trustee brings an action to avoid a prepetition transfer of garnished funds as preference and tries to recover such transfer not only from the judgment creditor but also its attorney? Here’s an example. George Washington retains Law Firm to prosecute John Adams for an injury that Washington suffered on Adams’ property. Law Firm, not surprisingly, agrees to take the case on a contingent-fee basis. Washington is awarded damages and is very happy with Law Firm, which was able to recover X amount of the awarded damages from Adams.
Just when you think you’ve finally learned Uniform Commercial Code (UCC) Article 9, the Uniform Law Commission (ULC) proposes changes. The ULC and the American Law Institute (ALI) promulgated Revised Article 9 (RA9) in 1998, and it was enacted by all states by 2001. From 2001-08, RA9 seemed to work fairly well, but some practitioners and judges nevertheless found ambiguities.
Every so often a decision comes along that engenders heated debate but then, it seems, it cools off before being able to develop into something more. Even more quickly is this decision forgotten. In the wake of General Growth Properties (GGP),[1] many law firms and financial consultants analyzed the legal ramifications. The GGP decision was dubbed seminal, even transformative, yet the immediate takeaway that resounded was much of the same timeless rhetoric: bankruptcy-remote is not bankruptcy proof.
The effects of the epic real estate collapse that have occurred over the last five years are well known. The subprime mortgage crisis has caused residential (as well as commercial) real estate property values to drop significantly, which was has not been seen since the Great Depression. Millions of foreclosure sales across the nation have left banks and mortgagees holding the undesired title of “largest landowners in the United States.” As the economy and residential real estate market attempt to recover, homeowner’s or condominium associations continue to suffer.
Subsequent to the Bankruptcy Abuse Prevention and Consumer Protection Act Of 2005 (BAPCPA), the “ordinary-course” defense to preferences has become significantly more prevalent for creditors seeking to defend against preference actions.[1] This act modified the requirements for the “ordinary course” defense, making it necessary only to prove that the transfers occurred in the ordinary course within the industry or between the parties, rather than the previously more stringent “and” requirement.
The claims process is a fundamental part of every bankruptcy case, in that it establishes the overall amount owed to a debtor’s creditors as of the filing date of the debtor’s case. The process commences with the filing of a debtor’s schedules of assets and liabilities, as well as a statement of financial affairs (SOFAs), which set forth the amount of secured, priority unsecured and general unsecured claims as showing on the debtor’s books and records as of the filing date. Each creditor has the opportunity to file a proof of claim against the debtor, to which the debtor may object.
It has been a basic principle of U.S. commercial law that secured creditors have the right to credit-bid up to the full face amount of their debt at an auction of their collateral. However, the U.S. Court of Appeals for the Third Circuit recently created a bankruptcy plan exception to this well-established rule.
The first year of practice after law school is an exciting, yet humbling, experience for brand new associates, especially if starting in a field that is new and unfamiliar. For me, it was “exciting” because, after years of hard work, deadlines, sleepless nights and dreaded finals, I thought I was finally in a position to apply the golden nuggets of law I had accumulated during my academic career. It was also “humbling” as I realized after a few months of practice how much I had yet to learn.
Certainty in business translates into increased expenses for both buyers and sellers, or in the chapter 11 context, debtors and creditors. The Eleventh Circuit Court of Appeals has increased debtors’ and creditors’ costs of doing business by issuance of its opinion in Marathon Petroleum Co. v. Cohen (In re Delco Oil Inc.), 599 F.3d 1255 (11th Cir.
