Credit Bid: Loan-to-Own Strikes Out

In re The Free Lance-Star Publ’g Co. of Fredericksburg, VA, 512 B.R. 798 (Bankr. E.D. Va. 2014)

After the debtors obtained court approval of bidding procedures to auction substantially all of their assets, a secured creditor sought a court determination that it had valid perfected liens on the assets, and the debtors sought to limit the secured creditor’s right to credit bid in the bankruptcy sales. Continue reading

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Abandonment: When Property Drops Out of the Bankruptcy Estate

In re Rich, 510 B.R. 366 (Bankr. D. Utah 2014)

In a case that was converted from a chapter 11 reorganization to a chapter 7 liquidation, the debtor sought an order directing the trustee to abandon certain real estate, arguing that there was no equity for the bankruptcy estate. A lender had already obtained relief from the automatic stay permitting it to foreclose on the property, and the debtor wanted to do a short sale with the consent of the lender. The chapter 7 trustee opposed the motion. Continue reading

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Improperly Indexed Mortgage: How Far Does Your Record Review Need to Go to Be Safe?

Albert v. Green Tree Servicing, LLC (In re El Erian), 512 B.R. 391 (Bankr. D. D.C. 2014)

A chapter 7 trustee sought to avoid the lien of a recorded deed of trust because (1) it contained both correct and incorrect parcel numbers and (2) it was improperly indexed. The issue turned on whether a bona fide purchaser would have had inquiry or constructive notice of the deed of trust. Continue reading

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LLC Managers Beware: Get Involved With Member Distributions By an Insolvent LLC and You May Be Personally Liable

Vieira v. Harris (In re JK Harris & Co., LLC), 512 B.R. 562 (Bankr. D. S.C. 2012)

A chapter 7 trustee sued a manager of three limited liability company (LLC) debtors for breach of fiduciary duty and to hold the manager personally liable for distributions made to members, including himself. Continue reading

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Fraudulent Transfer: A Case Where Strong Arm Powers Were “An Inch Too Short”

Casey v. Rotenberg (In re Kenny G Enterprises, LLC), 512 B.R. 628 (C.D. Cal. 2014)

A Chapter 11 trustee sought to avoid a transfer of property under Section 544 of the Bankruptcy Code that occurred after (1) the bankruptcy petition was filed and (2) a chapter 11 plan of reorganization was confirmed. The defendants moved to dismiss on the basis that Section 544 applies only to prepetition transfers. The bankruptcy court denied the motion, and the defendants appealed. Continue reading

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Lease Termination: Do You Really Mean It?

In re 2408 W. Kennedy, LLC, 512 B.R. 708 (Bankr. M.D. Fla. 2014)

A commercial landlord sought relief from the automatic stay so that it could complete prepetition eviction proceedings against the debtor. The debtor objected, arguing that it had a right to assume the lease. The case turned on whether the landlord effectively terminated the lease prepetition. Continue reading

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Post-Petition Interest: Not Very Predictable

Prudential Ins. Co. of Am. v. SW Boston Hotel Venture, LLC (In re SW Boston Hotel Venture, LLC), 748 F.3d. 393 (1st Cir. 2014)

A senior mortgagee battled the debtor and a junior mortgagee over its entitlement to post-petition interest: If and when did it become oversecured and thus entitled to interest? Was it entitled to interest at the default rate? Should the interest be compounded? Continue reading

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