Extending the Stay to Third Parties: Sometimes a Bankruptcy Court Will Intercede

Durr Mechanical Constr., Inc. v. I.K. Constr. Inc. (In re Durr Mechanical Constr., Inc.), 604 B.R. 131 (S.D.N.Y. 2019) –

A general contractor debtor filed an adversary proceeding against a subcontractor seeking various relief. It then filed a motion seeking to extend the automatic stay to protect nondebtor insurers that had issued a surety bond relating to the debtor’s contract with the subcontractor. Continue reading

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Easements and Sales “Free and Clear”: Oops – All Gone

Port of Corpus Christi Auth. v. Sherwin Alumina Co., L.L.C. (In re Sherwin Alumina Co., L.L.C.), 932 F.2d 404 (5th Cir. 2019) –

A state port authority (1) challenged sale of property free and clear of its road easement on Eleventh Amendment grounds and (2) sought revocation of a Chapter 11 plan confirmation order arguing that it was obtained by fraud. The bankruptcy court rejected these claims; the district court affirmed; and the port authority appealed to the Fifth Circuit. Continue reading

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Chapter 7 Sales: The Debtor May Be Pretty Much Irrelevant

Pasley v. Keats (In re Pasley), 603 B.R. 6 (6th Cir. BAP 2019) –

A chapter 7 trustee sought to sell real estate owned by the debtor’s limited liability company (LLC). When the bankruptcy court entered an order approving the sale over the debtor’s objection, the debtor appealed to the Bankruptcy Appellate Panel (BAP). Continue reading

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Sale Orders: What Constitutes a Collateral Attack?

Fulmer v. Fifth Third Equipment Finance Co., 931 F.3d 730 (8th Cir. 2019) –

A chapter 7 trustee sued more than 20 defendants alleging more than a dozen causes of action based on an allegation that a higher price could have been obtained at a pre-conversion sale of estate assets. The bankruptcy court dismissed the claims on the grounds that they were either without merit or constituted an impermissible collateral attack on the sale order. The Bankruptcy Appellate Panel affirmed, and the trustee appealed to the Eighth Circuit. Continue reading

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Continuing Perfection: Does a Mortgage Lapse During Bankruptcy If State Law Would Otherwise Require Steps to Maintain Perfection?

River Parishes Dirt & Gravel, LLC v. BankPlus (In re Willow Bend Ventures, LLC), 603 B.R. 293 (Bankr. E.D. La. 2019) –

A lender’s secured claim was challenged on the basis that postpetition it failed to take steps required to maintain perfection of its mortgage as required by state law. The matter turned on whether section 108(c) of the Bankruptcy Code extended the deadline for taking those steps. Continue reading

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Mortgages in Foreclosure: Strategies Can Get Complicated, Particularly When Bankruptcy Is on the Horizon

In re Battershell, 603 B.R. 86 (Bankr. D. N.M. 2019) –

A chapter 13 debtor objected to a proof of claim filed by a junior mortgagee. The claim included an advance used to pay off a senior mortgage that was in foreclosure. The debtor sought to have the advance recharacterized as a purchase of the senior mortgage loan. The junior mortgagee responded that recharacterization would violate the prohibition on modifying rights of a holder of a mortgage secured by the debtor’s principal residence. Continue reading

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Default Interest: What Does the Plan of Reorganization Say?

UMB Bank, N.A. v Linn Energy L.L.C. (In re Linn Energy, L.L.C.), 927 F.3d 350 (5th Cir. 2019) –

A lenders’ agent sought a court order directing payment of postpetition default interest, contending that this was required by the terms of a confirmed plan of reorganization. The bankruptcy court denied the motion; the district court affirmed; and the lenders’ agent appealed to the Fifth Circuit. Continue reading

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