Debt consolidation bankruptcy

The City of Detroit filed for protection under chapter 9 of the Bankruptcy Code on July 18, 2013,[1] becoming the largest municipality to ever file for bankruptcy. Detroit’s bankruptcy filing presents numerous complicated issues, which will be resolved over the course of the case. This advisory provides an overview and history of chapter 9 of the Bankruptcy Code, beginning with a discussion of the various substantive provisions that govern (i) chapter 9’s eligibility requirements, (ii) case administration issues that arise in chapter 9 cases and (iii) the requirements for confirming a chapter 9 plan of adjustment. Next, the advisory discusses significant chapter 9 cases since the Orange County bankruptcy case in 1994—the largest municipal bankruptcy at the time. Finally, since many municipal bonds are insured, the advisory provides an update on the major monoline insurance companies—most of which have been placed into rehabilitation proceedings due to … [Read more...] about Municipal Bankruptcies: An Overview and Recent History of Chapter 9 of the Bankruptcy Code

On August 11, 2009, Judge Allan L. Gropper of the United States Bankruptcy Court for the Southern District of New York issued a decision denying several motions to dismiss filed in the bankruptcy of General Growth Properties (GGP) and its various subsidiaries.Each of the motions to dismiss was filed on behalf of lenders to project-level or mezzanine-level debtors that were GGP subsidiaries. (Project-level debtors mortgaged their properties; mezzanine-level debtors pledged their equity in the projects as collateral for the mezzanine loan.) Most of the motions to dismiss were filed by special servicers, which, since the GGP bankruptcy filings, have taken over servicing responsibility for securitized mortgage loans, with other motions to dismiss filed by direct lenders.Ultimately, the question presented to the Court was whether the bankruptcy filings by the solvent and positive cash-flow debtors were made in bad faith. The Court followed the rule set out in In re Kingston Square … [Read more...] about General Growth Properties and the Boundaries of Bankruptcy Remoteness

The four federal financial institution regulatory agencies—the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Office of the Comptroller of the Currency (the agencies)—have jointly issued supervisory guidance clarifying certain issues related to the accounting treatment and regulatory classification of commercial and residential real estate loans that have undergone troubled debt restructurings (TDRs). The agencies’ guidance reiterates key aspects of previously issued guidance and discusses the definition of a collateral-dependent loan and the classification and charge-off treatment for impaired loans, including TDRs. The guidance highlights the following points: A loan in nonaccrual status that is modified in a TDR need not be maintained for its remaining life in nonaccrual status, but can be restored to accrual status if it meets the return-to-accrual conditions in the … [Read more...] about Agencies Issue Guidance on Troubled Debt Restructurings

On June 13, 2012, the bankruptcy court for the Northern District of Texas in In re Vitro, S.A.B. de C.V. (“Vitro SAB”) declined to recognize and enforce an order issued by the Federal District Court for Civil and Labor Matters for the State of León, Mexico, which approved Vitro SAB’s reorganization plan in its Mexican insolvency proceeding (known as a concurso mercantil proceeding). Vitro S.A.B. v. ACP Master Fund, Ltd., et al. (In re Vitro S.A.B.), Case No. 11–33335 (HDH), 2012 WL 2138112 (Bankr. N.D. Tex. June 13, 2012). The Texas bankruptcy court’s refusal to enforce the Mexican court’s order and the Mexican plan of  reorganization was based in large part on the Mexican plan’s release of non-debtor subsidiaries from U.S.-based indebtedness. Vitro SAB has filed a request to take the decision directly to the Fifth Circuit Court of Appeals for expedited review, and the bankruptcy court has already indicated that it will … [Read more...] about Texas Bankruptcy Court Denies Recognition to Mexican Financial Restructuring Plan; Decision to be Appealed to the Fifth Circuit

In the wake of the American Bankers Association’s lawsuit challenging the Volcker Rule’s treatment of collateralized debt obligations (CDOs) backed by trust preferred securities (TruPS), the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Securities and Exchange Commission (the Agencies) have issued a statement which appears to signal that they are considering walking the rule back. The question is to what extent the Agencies will reverse themselves. The December 27 statement states in pertinent part as follows: [The Agencies] are currently reviewing this matter and are considering whether it is appropriate and consistent with the provisions of the Dodd-Frank Act not to subject pooled investment vehicles for TruPS, such as collateralized debt obligations (CDOs) backed by TruPS (TruPS CDOs), to the prohibitions on ownership of covered funds in section 619 of … [Read more...] about Agencies Appear to Signal Retreat on Collateralized Debt Obligations (CDOs) backed by Trust Preferred Securities (TruPS) Issue