| February 2011 issue: Your Name Here! The Bankruptcy Section is looking for volunteers to write a Case Analysis for an upcoming edition. The Case Analysis is typically based on Court of Appeals or Supreme Court decisions, although you can use your discretion to discuss relevant BAP, District Court and Bankruptcy Court decisions -- especially those interpreting BAPCPA's amendments to the Code. If you are interested or would like to learn more, please send an email to the Managing Editor. You can view the archive here. Your subscription You have been subscribed to this list as part of your membership in the Bankruptcy Section of the Commercial Law League of America. CLLA 205 N. Michigan, Suite 2212, Phone: 312-240-1400 Newsletter design by: |
February 2011 Bankruptcy Section Newsletter Section NewsCLLA Staff Reed Case Granted Rehearing En Banc The Fifth Circuit agreed to grant an en banc rehearing in Reed v. City of Arlington on Feb. 23, 2011. On behalf of the CLLA, the law firm of Barron Newburger & Sinsley filed an amicus curiae requesting such a rehearing. This case held that judicial estoppel could be applied against the trustee based on the debtor's failure to disclose an asset. The oral argument will be the week of May 23. Bankruptcy CLE will be featured at this year's New England Region Meeting – if you are in the Boston area on March 11, please join the CLLA for these outstanding programs:
The bankruptcy section will sponsor up to 6 hours of continuing legal education at this year's Chicago/Spring Meeting, which takes place April 14-17, 2011 at the Westin on Michigan Avenue. The education includes: Friday, April 15, 2011, 9:00-10:30am This program will examine ways in which creditors can legally get more value for their claims when a debtor files bankruptcy. Topics covered will include dischargeability, exemptions and liens.
Friday, April 15, 2011, 2:00-5:00 p.m. Judges from around the country will provide attendees with a view "from the bench" about current bankruptcy issues, particularly fraudulent conveyances, the absolute priority rule and credit bidding. Questions will be provided beforehand, and there will be a live question-and-answer session. If you have questions or issues you would like the judges to discuss, please send them to the Section staff liaison Meghan Flesch at mflesch@clla.org.
Saturday, April 16, 2011, 10:30am-12:00pm Ron Peterson, a prominent bankruptcy practitioner and riveting speaker, provides an update for bankruptcy and creditors' rights attorneys on important and emerging bankruptcy case law issues arising in the past year.
Saturday, April 16, 2011, 1:30- 3:30p.m. Get ethics credit while watching your favorite movies and enjoying a seminar with Professor Nancy Rapoport, the Gordon Silver Professor at the William S. Boyd School of Law, University of Nevada, Las Vegas.
Case Law Analysis Randall Woolley Bankruptcy Court Stays Collection Efforts against Non-Debtor Guarantors Harris, N.A. v. Gander Partners, LLC, 2011 WL 249484 (N.D. Ill. Jan. 26, 2011) The district court for the Northern District of Illinois recently affirmed the bankruptcy court's entry of an injunction enjoining collection efforts against non-bankruptcy filing personal guarantors of certain bank loans. The debtors were development companies. The personal guaranties were executed by the owners and principals of the debtors in order to secure financing for the acquisition of certain residential lots. The lending bank filed state court collection actions after the debtors defaulted on the loans. The debtors then filed Chapter 11 and brought an adversary proceeding against the lending bank to prevent the state court actions from proceeding against the personal guarantors. The personal guarantors presented testimony in the adversary concerning the extensive amount of time they devoted to the operation of the debtors and their willingness to contribute funds to the reorganization. The bankruptcy court determined that the adversary proceeding related to the underlying bankruptcy case and enjoined the state court collection actions. The bankruptcy court reasoned that entry of an injunction was warranted because the guarantors were vital to the success of the reorganization and the collection proceedings would place a significant burden on the guarantors' ability to assist in the reorganization process. The district court affirmed and held the injunction was an appropriate exercise of the bankruptcy court's authority under 11 U.S.C. §105(a) to "'issue any order, process, or judgment that is necessary to carry out the provisions of' the Bankruptcy Code." In discussing the basis for entry of the injunction, the district court noted that the lending bank faced only a temporary stay, that the failure of the reorganization would have dire consequences on the debtors' ability to satisfy creditors, and that the public interest was best served by allowing the reorganization to run its course with the assistance of the personal guarantors. Despite not filing individual bankruptcies, the guarantors were temporarily spared from collection efforts due to the special role they served in the reorganization process. The district court further relied on 7th Circuit case law permitting the bankruptcy court to block adjudication of claims that are not property of the estate if the separate claims have a significant impact on the bankruptcy court and trustee's ability to perform their assigned functions. See Fisher v. Apostolou, 155 F.3d 876, 882 (7th Cir. 1998). The district court emphasized that based on the detailed record in the bankruptcy proceeding and unique circumstances involved it was necessary to enjoin other court proceedings that would defeat or impair the jurisdiction of the bankruptcy court. The decision should be of interest to bankruptcy practitioners because the protections authorized by the bankruptcy code were bestowed upon individuals who didn't actually file bankruptcy. Rather than file individual bankruptcy cases, the personal guarantors apparently directed the debtor to file an adversary case against their joint creditor. This does not appear to be an effective use of the debtor's resources. Meanwhile, the personal guarantors were free to operate outside of the constraints of the bankruptcy code, and also free, although temporarily, from application of state collection law. In its decision, the court discusses the likelihood of the personal guarantors making payments into the bankruptcy estate. Normally a judgment debtor is prohibited from transferring any assets once state collection proceedings are commenced. A creditor could potentially be harmed by the personal guarantors' transfer of assets while not subject to bankruptcy or state law. Legislative UpdateDavid Goch, CLLA General Counsel New York Fed Concludes BAPCPA Has Led to Increase in Foreclosures According to a recently released Federal Reserve Bank of New York report, the Bankruptcy Abuse Prevention and Consumer Protection Act (Pub. L. No. 109-8), enacted in 2005, has contributed to an increase in subprime mortgage foreclosures because it disallows some borrowers from discharging unsecured debt and thus restricting cash flow that could be used to meet mortgage obligations. The report concluded that BAPCPA's means test prohibits some relatively better-off households facing financial duress from filing for Chapter 7 protection: instead, many file for Chapter 13 relief. Chapter 7 filers enjoy a relatively easier time discharging some unsecured debts, providing them with more cash to pay their secured debts, including mortgages, the report said. |