In difficult economic times, debtors’ attorneys closely review credit reports looking for potential legal claims against creditors. Long after a debtor has been discharged from bankruptcy, creditors can find themselves defending claims of improper credit reporting. A recent case from the Eastern District of North Carolina illustrates the trouble facing creditors who furnish incorrect reports of discharged debt. See In re Adams (Bankr. E.D.N.C. 2010).The Adams debtors filed a chapter 13 petition in 2008 and received a discharge after completion of plan payments. A few days after the discharge, the debtors filed a motion seeking a declaration from the bankruptcy court that all payments due on their residential mortgage were current. The mortgage lender was served with this motion but filed no response. The bankruptcy court entered an order declaring the mortgage debt current. Thereafter, the debtors applied to refinance their mortgage. They were turned down when their … [Read more...] about Credit Reporting and Bankruptcy: Is Your Post-Discharge Credit Reporting Inviting Trouble?
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IntroductionThe Bankruptcy Code provides a trustee in bankruptcy (“trustee”) with numerous duties, which make serving as a trustee a daunting task. Not only is a trustee expected to know the ins and outs of the Bankruptcy Code, but a trustee is also expected to become familiar with any state laws that may impact the management of property in the trustee’s possessionas well as with all applicable federal, state, and local tax laws.The Fifth Circuit’s recent holding in Texas Comptroller of Public Accounts v. Liuzza (In re Texas Pig Stands, Inc.) (“Texas Pig Stands”)suggests that a trustee who does not become acquainted with these laws may incur harsh penalties upon violation.In Texas Pig Stands, the Fifth Circuit held that a first-time chapter 11 trustee was personally liable for over $100,000 worthof state sales tax he failed to remit pursuant to Texas Tax Code (“Texas Code”) section 111.016.The Fifth Circuit noted that it … [Read more...] about Changing Tides or Stagnant Waters: Personal Liability for Trustees in Bankruptcy in the Aftermath of In re Texas Pig Stands, Inc.
Selling the assets of a business through a bankruptcy case is a proven method for realizing maximum value for those assets. Traditionally, such sales have been completed either through a plan of reorganization or through what is known as a Section 363 Sale, which is conducted outside the ordinary course of business. While both methods have their advantages and disadvantages, Section 363 Sales provide a faster mechanism for realizing and maximizing value. From start to finish, sales outside of the ordinary course of business can be completed in as few as 30 days. Examples of recent Section 363 Sales involving well-known companies include SK Hand Tool Corporation, Chrysler Group and General Motors.Through a sale process outside of the ordinary course of business, a debtor can sell assets quickly and on a going-concern basis before those assets lose value during the pendency of a protracted bankruptcy case. Additionally, the sale order can (and should) provide that the assets are to be … [Read more...] about Section 363 Sales: Maximizing the Value of Your Assets in a Bankruptcy Case
The United States Court of Appeals for the Seventh Circuit issued its groundbreaking decision In the Matter of Castleton Plaza, LP on Feb. 14, 2013, delivering a valentine of sorts to Chapter 11 creditors. The decision ultimately protects creditors who are faced with being shortchanged by a reorganization plan proposed by a debtor who has significant equity in the enterprise or engineers the transfer of that equity to a family member without first putting that equity interest up for auction as required by earlier United States Supreme Court precedent. The lender in this appeal-from a decision of the bankruptcy court below-was represented by Barnes & Thornburg LLP, with a team of bankruptcy and litigation attorneys led by Alan Mills of the firm's Indianapolis office. Mr. Mills is the primary contact for the lender and made the oral argument in the Seventh Circuit that convinced the court to reverse the decision below and remand the case to the bankruptcy court with direction … [Read more...] about In the Matter of Castleton Plaza, LP: Appeal Before The Seventh Circuit Benefiting All Creditors in Bankruptcy
The recent advisory discusses a recent Third Circuit Court of Appeals ruling that held a “make-whole” optional redemption premium to be due upon a refinancing of corporate debt following its automatic acceleration upon bankruptcy. As noted in the linked advisory, the Second Circuit Court of Appeals also is considering this issue; whether it will come to the same conclusion remains to be seen. One way or another, these decisions will have spillover effect on judicial interpretation of optional redemption provisions in municipal bond transactions, and shine a spotlight upon the discrepancies between optional redemption provisions and other early payment provisions in most municipal bond indentures.The Third Circuit case involved a debtor, Energy Future Holdings, that filed for bankruptcy for the explicit purpose of refinancing the debt at favorable interest rates while avoiding the hefty make-whole premiums payable upon an optional redemption of the refinanced … [Read more...] about Third Circuit Appellate Court Rules That Post-Acceleration Payment in Bankruptcy Constitutes Optional Redemption