Bankruptcy Headlines

LightSquared Bankruptcy Exit Plan Earns Court Approval

Wireless venture LightSquared yesterday concluded three years of litigation with creditors, securing bankruptcy court approval of a reorganization plan to end its chapter 11 case and repay in full its largest creditor, Dish Network Corp. Chairman Charles Ergen, Reuters reported yesterday. The ruling ends one of the longest and most litigious bankruptcies in recent years, and will yield a hefty profit for Ergen, who other stakeholders portrayed as the villain for his unwillingness to take a haircut on his debt. Under the reorganization plan greenlighted by Judge Shelley Chapman in U.S. Bankruptcy Court in New York, LightSquared will exit chapter 11 under the control of Centerbridge Partners and Fortress Investment Group. Ergen, who amassed a $1 billion stake of the company's loan debt, will receive about $1.5 billion in cash, reflecting accrued interest. Founded by Phil Falcone's Harbinger Capital Partners, LightSquared had planned to build a massive wireless network when the Federal Communications Commission revoked its spectrum license over concerns of GPS interference, pushing it into bankruptcy in May of 2012. Since then, there have been about a dozen failed restructuring plans and litigation between the company and Ergen over the legality of his debt purchases.

Bankrupt San Bernardino Reveals Details of Deal with CalPERS

The bankrupt California city of San Bernardino revealed on Thursday details of its deal with the California Public Employees' Retirement System (CalPERS), in which the retirement fund will be paid in full under the city's bankruptcy exit plan, Reuters reported yesterday. San Bernardino announced last year it intended to pay CalPERS in full under its bankruptcy plan, while cutting its bondholder debt. But it had not before revealed details of the deal with CalPERS, America's largest public pension fund with assets of $300 billion. San Bernardino, a city of 205,000 located 65 miles east of Los Angeles, declared bankruptcy in August 2012 with a $45 million deficit. San Bernardino was recently ordered by the federal bankruptcy judge overseeing the case to make public the CalPERS deal, and the city published the details before a court hearing in the case yesterday. The CalPERS deal has angered other creditors, including holders of $50 million in pension obligation bonds, who face cuts to their debt. They are suing the city over the CalPERS deal.

GM Shield in Doubt as Judge Mulls Ending Bar on Ignition Suits

Bankruptcy Judge Robert Gerber told General Motors Co. six years ago it didn’t have to worry about lawsuits over cars made before its $49.5 billion government bailout, Bloomberg News reported yesterday. Last month, the same judge said he wasn’t so sure anymore. Judge Gerber expressed doubts about his decision, saying that it might allow GM to get away with alleged misconduct tied to an ignition switch defect in some cars. GM may have acted “very badly” in delaying recalls of cars it knew might be dangerous, Judge Gerber said at a hearing in New York Feb. 17. The judge said at the time that he’s deciding how to “fix” his 2009 ruling, and that he may take more than a month to do it. At least 74 people were killed when GM cars suddenly turned off after the ignition was jostled. More than 2.59 million vehicles have been recalled for just one type of switch defect. Affected car owners who weren’t injured sued Detroit-based GM, seeking compensation for their vehicles’ loss in value. If Judge Gerber rules bankruptcy doesn’t protect GM from such value claims for cars made before 2009, GM may face as much as $10 billion in potential liability over the scandal, plaintiff lawyers have said.

Watt Pursues Fannie-Freddie Overhaul Blocked by Senator

Senate Banking Committee Chair Richard Shelby’s (R.-Ala.) declaration on Wednesday that Fannie Mae and Freddie Mac will likely remain in U.S. conservatorship shifts the task of reducing taxpayer mortgage risk mostly to Mel Watt, director of the Federal Housing Finance Agency, Bloomberg News reported yesterday. Shelby snuffed out any chance that Congress would overhaul the $11 trillion housing-finance system in the 114th Congress. President Barack Obama’s insistence on a continued government role in supporting the housing market puts him and fellow Democrats at loggerheads with the powerful banking chairman. That increases pressure on Watt, director of the Federal Housing Finance Agency, to accelerate regulatory efforts to remake Fannie Mae and Freddie Mac — under rules of a crisis-era conservatorship that’s heading into a seventh year.

RadioShack Rescue Deal Dogged by Fights, Demand for New Auction

A deal to keep 1,740 RadioShack Corp. stores open hangs in the balance in a Delaware court after its top creditor, a losing bidder in an auction for the bankrupt retailer, called the process a "sham" and demanded a new sale, Reuters reported yesterday. RadioShack, which filed for bankruptcy last month, told a bankruptcy judge that it had selected the Standard General hedge fund as the winning bidder in the private four-day auction, which ended just before a court hearing yesterday. Standard General plans to operate most of the stores in conjunction with wireless phone company Sprint Corp. While RadioShack's attorney told the court the deal saved 7,500 jobs and was $23 million more than a bid by liquidators, the deal included less than $40 million in cash, according to court testimony. The hearing to approve the agreement quickly deteriorated into disputes among lenders over the complex agreements that governed the repayment among creditors. An attorney for Salus Capital Partners, which is owed $150 million and is RadioShack's largest creditor, blasted the auction process and demanded it be reopened.

In related news, personal information gathered by RadioShack Corp. from shoppers is not included in its sale, the consumer privacy ombudsman in the electronics retailer's bankruptcy case said in response to concerns shared by several states that the data could be sold, Reuters reported. If that changes, Elise Frejka also said in a letter on Wednesday to Bankruptcy Judge Brendan L. Shannon that she would file a report with recommendations based on specific facts and circumstances. Her letter came as Oregon and Pennsylvania on Wednesday joined Texas and Tennessee in objecting to RadioShack selling names, email addresses and other personal information gathered from shoppers. Personally identifiable information of 117 million consumers could be made available in RadioShack's proposed sale, Oregon Attorney General Ellen Rosenblum said in a filing that urged stripping out information such as telephone numbers and mailing addresses from assets. In a separate filing, Pennsylvania Attorney General Kathleen Kane said that selling the information would violate parts of her state's Unfair Trade Practices and Consumer Protection Law. Texas Attorney General Ken Paxton last week objected to the sale of personally identifiable information and requested RadioShack's buyer be required to set a separate price for it.

Same-Sex Couple Deemed “Spouses” for Purposes of the Bankruptcy Code

By: Michael Rich

St John’s Law Student

American Bankruptcy Institute Law Review Staff

Recently, in In Re Matson, the court held that a same-sex couple who filed for bankruptcy as joint debtors were “spouses” for the purpose of the Bankruptcy Code even though the petition was filed in a state that did not recognize their same-sex marriage. In Matson, the debtors were legally married in Iowa but resided in Wisconsin, which does not recognize same-sex marriages. Upon the filing of the case, a creditor moved to dismiss the bankruptcy case or, in the alternative, to bifurcate the case. The creditor argued that a joint bankruptcy case could only be commenced “by an individual that may be a debtor under such chapters and such individual’s spouse.” Further, the creditor claimed that “the definition of marriage and the regulation of marriage . . . has been treated as being within the authority and realm of the separate States.” Thus, the creditor argued that since Wisconsin did not permit or recognize same sex marriages, the debtors should not be deemed “spouses” for the purpose of a joint bankruptcy petition. In the response, the debtors relied on the Supreme Court’s holding that the federal Defense of Marriage Act, which defined marriage as a union between one man and one women, was unconstitutional because it “violate[d] basic due process and equal protection principles applicable to the Federal Government.” In particular, the debtors argued that following Windsor, the definition of marriage could no longer be restricted to “a union between one man and one woman.” Therefore, the debtors claimed that Wisconsin did not have the authority to deny a lawfully wedded couple any federal benefits, which would include same-sex couples right to file as spouses in a joint bankruptcy case. Ultimately, the Matson court denied the creditor’s motion to dismiss or, in the alternative, bifurcate the case because the court found that it was required to give full faith and credit to the Iowa marriage.

A Self-Employed Chapter 13 Debtor Cannot Deduct Ordinary and Necessary Business Expenses When Calculating His Current Monthly Income

By: Arthur Rushforth

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Recently, in In re Hoffman, a bankruptcy court denied confirmation of the joint debtors’ plan after the chapter 13 trustee objected to the plan, which had a three-year applicable commitment period, holding that the debtors improperly deducted ordinary and necessary business expenses when calculating their current monthly income. Instead, the court held that the debtors should have used the gross receipts from the business. In Hoffman, a married couple filed a joint petition under chapter 13 of the Bankruptcy Code. The husband was self-employed, and pursuant to Official Bankruptcy Form 22C, the debtors deducted the husband’s ordinary and necessary business expenses from his gross receipts when they calculated their current monthly income. Based on these calculations the debtors’ annualized current monthly income was lower than the applicable median family income of in Minnesota, where they resided. Accordingly, the debtors proposed a plan that provided for them to pay $175.00 for thirty-six months. The chapter 13 trustee objected, arguing that the debtors improperly deducted business expenses when calculating the husband’s current monthly income and that the debtor’s current monthly income was above-median after eliminating that deduction, thereby triggering a five-year applicable commitment plan rather than the three-year period proposed by the debtors. In particular, the trustee argued the plain language of section 1325 did not provide for the deduction of ordinary and necessary business expenses when calculating current monthly income. The debtors responded by claiming their applicable commitment calculation conformed to the calculation scheme provided for by Official Form 22C. The court ultimately agreed with the trustee and denied the confirmation of the debtor’s plan.

In re 56 Walker LLC—The Resurrection of the Gifting Doctrine?

By: Brianna Walsh

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Recently, in In re 56 Walker LLC, a bankruptcy court overruled a debtor’s objection a secured creditor’s proposed order providing for the distribution of the proceeds from the sale of real property that was the debtor’s sole asset pursuant to the debtor’s confirmed plan of reorganization even though the secured creditor “gifted” a portion of its recovery to a junior class because, among other reasons, the court found that the distribution scheme would not violate the absolute priority rule. In 56 Walker, the debtor pledged a six-story mixed-use building, its sole asset, as security for an $8 million mortgage loan. After the debtor defaulted one year later, the bank that had acquired the mortgage loan from an FDIC receivership commenced a foreclosure action in New York state court. Subsequently, the debtor filed for bankruptcy under chapter 11 of the Bankruptcy Code in order to stay the foreclosure proceeding. This first case was ultimately dismissed. Following dismissal of the debtor’ first chapter 11 case, the bank resumed the foreclosure action in state court and moved for summary judgment. The debtor then crossed-moved for summary judgment, arguing that the bank had not provided adequate proof that it was the assignee of the mortgage or the note and that the bank was liable for certain lender-liability claims. The state court granted the bank’s motion for summary judgment of foreclosure and denied the debtor’s cross-motion. The debtor timely filed a notice of appeal. Prior to the state court entering the bank’s proposed judgment of foreclosure, the debtor filed a second chapter 11 case. Ultimately, the debtor confirmed a consensual plan of reorganization and sold the property for $18 million. After selling the property, the debtor objected to, among others, the bank’s claim. In its decision, the court overruled the debtor’s objection and directed the bank to settle an order to provide for the distribution of the sales proceeds. The bank then filed a proposed order, providing that (i) the bank would have a distribution in the amount of $15.1 million, (ii) another mortgage lender would have a distribution in the amount of $150,000, (iii) a mechanic’s lien holder would have a distribution in the amount of $400,000, (iv) another mechanic’s lien holder would have a distribution of $350,000, (v) the debtor’s counsel would have an administrative claim for fees and expenses capped at $250,000, and (vi) the remaining funds would be distributed to the debtor’s unsecured creditors. Equity would not receive a distribution under the proposed order. The debtor objected to the proposed order, arguing, among other things, that the proposed distribution to a mechanic’s lien holder was premature because the debtor’s previous objection to the mechanic’s lien holder’s claim was still pending. The court, however, overruled the debtor’s objection to the proposed order, noting that the only reason the mechanic’s lien holder would receive anything was the bank’s willingness to forgo part of its claim and “gift” it to the junior secured creditors.


Charity Golf Tournament to benefit the Steven M. Yoder Children's Trust and the ABI Endowment Fund

Golf Club


The Hartefeld National Golf Club in Avondale, Pa., will host the 5th Annual Steven M. Yoder Memorial Golf Outing on Monday, May 4, 2015. Join us as we celebrate the life of our friend and ABI member, Steve Yoder, who passed away in 2011. Included in the cost: golf, boxed lunch, complimentary beverages and beer, with a cocktail hour and buffet dinner to follow. Proceeds of the golf outing benefit the Steven M. Yoder Children's Trust and the ABI Anthony H.N. Schnelling Endowment Fund.

Event Sponsors

Ashby & Geddes, Bill Bowden
James Bird, Polsinelli
Buchanan Ingersoll & Rooney PC
Cozen O'Conner, Mark Felger
DLS Claims Administration, Ty Workman
DLS Discovery, Jeremy Luzader
Epiq Systems, Lance Wickel
Gavin/Solmenese LLC
Gellert Scali Busenkell & Brown LLC

Reliable, Larry Taylor
Rust Omni, Brian Osborne / Paul Deutsch
Potter Anderson & Corroon LLP, Jeremy Ryan
Mitch Ryan, personal friend of Steve Yoder
Trial Transport Logistics, Mike Schierbaum
UpShot Services LLC, Travis K. Vandell
Christopher A. Ward, Polsinelli
Chuck Ward, Data Medical
Young Conaway Stargatt & Taylor, LLP
A. Jeffrey Zappone, Conway MacKenzie


To get the information about Sponsorship Opportunities please click here (PDF file)



  • $175 for golfers
  • $100 for non-golfers
  • $600 for foursomes
For more information, contact Sharisa Sloan at










Conference Address

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Defining Residency Under the Federal Homestead Exemption

By: Sally A. Profeta

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Recently, in In re Abraham, a bankruptcy court held that debtors living in Iran could not claim the federal homestead exemption for their real property located in New Jersey because the property did not qualify as their “residence” under section 522(d)(1) of the Bankruptcy Code. In Abraham, the married debtors moved to Tehran, Iran from New Jersey in 2011, seeking employment after the husband’s business income started to decline. Their children, however, continued to occupy the debtor’s New Jersey home, making payments for the mortgage, utilities, and the general maintenance of the property. In 2012, the debtors filed for bankruptcy in New Jersey and claimed an exemption for the New Jersey property. In their original Schedule C, the debtors claimed a $10,505.76 exemption in the New Jersey property. Subsequently, the debtors amended their Schedule C and claimed a $43,250 exemption in the property. The chapter 7 trustee objected to the debtors’ proposed exemption. The trustee argued that the property did not qualify as their residence, and the debtors filed their amended exemption in bad faith. In the husband’s certification, he indicated that, while the debtors lived and worked in Iran, they intended to return to the New Jersey property in the future. Yet this assertion contradicted the debtors’ previously filed certification in support of a motion to compel abandonment of the property, where they stated they did not intend to return to the United States in the near future. In addition to the husband’s certification, the husband offered his New Jersey driver’s license as proof of residency during a section 341 meeting of creditors. Therefore, the debtors argued that the New Jersey property was their “residence” under section 522(d)(1) of the Bankruptcy Code. Ultimately, the bankruptcy court agreed with the trustee and denied the homestead exemption.