ABI Blog Exchange

When an insolvent entity files for bankruptcy, it can be tough to be a creditor. But holding equity — stock in a corporation or a membership interest in an LLC, a limited liability company — can be even worse. Under bankruptcy’s “absolute priority rule,” creditors generally must be paid in full before equity gets anything. That usually means that holders of equity, or claims treated as equity, get nothing. Section 510(b) Mandatory Subordination. A recent decision by the U.S. Court of Appeals for the Ninth Circuit in In re Tristar Esperanza Properties, LLC serves as a good reminder of the special bankruptcy rules involving mandatory subordination of certain equity-like claims. More on the Tristar case in a minute, but first let’s take a look at the provision that spells out the mandatory subordination rule. Section 510(b) of the Bankruptcy Code provides:
5 days 6 hours ago
The ABI has spent thousands of hours on its Chapter 11 Commission Report; the National Bankruptcy Conference is hard at work on its "Rethinking Chapter 11" project. Underlying these and other such efforts is an overwhelming frustration with the failure of Chapter 11, under current circumstances to empower true reorganization. Hard to believe but it was not always this way. During the first decade or two of the Bankruptcy Code it seemed to be working pretty well; in fact many courts were unwilling to consider quick sales of the entire business. Many large cases resulted in a confirmed reorganization plan although some led to further chapter 11 efforts or failure; the results in smaller or medium-sized cases were more uneven with a healthy percentage being dismissed or converted to Chapter 7.  There was almost no discussion of Section 363 at the Ten Year Retrospective on Chapter 11 in Williamsburg and there was little commentary on its use. Indeed, the 1997 report of the Bankruptcy Review Commission did not focus on this issue.  Beginning sometime between the Code's tenth and twenty-fifth birthdays the tide shifted; not only did most courts back off from their legal position that Chapter 11 was for reorganization and that any sale of the entire business needed to be done within a Plan, but the vast majority of cases seemed to shift to quick 363 sales to a suitor that was identified before the filing with an auction possible if there were competing bidders. 

Read More from: Credit Slips

5 days 7 hours ago
When an insolvent entity files for bankruptcy, it can be tough to be a creditor. But holding equity — stock in a corporation or a membership interest in an LLC, a limited liability company — can be even worse. Under bankruptcy’s “absolute priority rule,” creditors generally must be paid in full before equity gets anything. That usually means that holders of equity, or claims treated as equity, get nothing. Section 510(b) Mandatory Subordination. A recent decision by the U.S. Court of Appeals for the Ninth Circuit in In re Tristar Esperanza Properties, LLC serves as a good reminder of the special bankruptcy rules involving mandatory subordination of certain equity-like claims. More on the Tristar case in a minute, but first let’s take a look at the provision that spells out the mandatory subordination rule. Section 510(b) of the Bankruptcy Code provides:
5 days 7 hours ago
The New York Times carried an important story about the risky investment moves of life insurance companies. There's a lot of good stuff in the story, but it missed an important angle, namely the consumer harm that has already resulted from bank affiliation with captive reinsurers in the private mortgage insurance space, namely inflated and unecessary private mortgage insurance premiums because of illegal kickback arrangements. 

Read More from: Credit Slips

5 days 7 hours ago
The Basel Committee needs to measure the efficacy of recently implemented rules, strengthen banks' operational risk requirements and make banks' risk models less variable. Luckily, secretary general William Coen has vowed to do just that.

Read More from: Creditors' Rights

5 days 7 hours ago
The Basel Committee needs to measure the efficacy of recently implemented rules, strengthen banks' operational risk requirements and make banks' risk models less variable. Luckily, secretary general William Coen has vowed to do just that.

Read More from: BankThink

5 days 7 hours ago
On September 9, 2013, Furniture Brands International (“Furniture Brands”) and various related entities filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  We initially published a blog post about the filing here: Furniture Brands Files for Bankruptcy in Delaware Seeking to Sell Assets On August 1, 2014, the Debtors’ confirmed chapter 11 plan became effective, thereby creating the FBI Wind Down, Inc. Liquidating Trust (the “Trust”) and appointing Alan D. Halperin as the Trustee.  We recently were informed that the Trustee has begun sending out preference demand letters, informing recipients that if they do not settle their liability, he will bring a preference lawsuit.  The Trustee will argue that the transfers, or payments, received by various defendants are avoidable and subject to recovery under 11 U.S.C. § 547 and 548 of the United States Bankruptcy Code. Defenses to a Preference Action
5 days 8 hours ago
Breaking News This Morning ... Earnings: JPMorgan, Wells Fargo Wall Street Journal Citigroup's reshuffling of executives announced on Monday included the appointment of a clear number two executive behind CEO Michael Corbat. Citi named Jamie Forese its sole president, making him the likely successor to Corbat should he step down, unnamed sources told the paper. Forese's promotion was not mentioned in a letter Corbat sent to Citi employees on Monday. Forese is currently head of Citi's investment bank...

Read More from: BankThink

5 days 8 hours ago
Asim Hafeez/Bloomberg News
Texas energy giant Energy Future Holdings Corp. has filed the restructuring plan that outlines how it hopes to reshape a $42 billion debt load and exit bankruptcy. The Wall Street Journal has the Daily Bankruptcy Review article here. (Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit http://on.wsj.com/DJBankruptcyNews, scroll to the bottom and click “try for free.”) RadioShack Corp.’s trademarks, customer data and dealer network are headed to the auction block next month, DBR reports in WSJ.

Read More from: WSJ.com: Bankruptcy Beat

5 days 8 hours ago
Asim Hafeez/Bloomberg News
Texas energy giant Energy Future Holdings Corp. has filed the restructuring plan that outlines how it hopes to reshape a $42 billion debt load and exit bankruptcy. The Wall Street Journal has the Daily Bankruptcy Review article here. (Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit http://on.wsj.com/DJBankruptcyNews, scroll to the bottom and click “try for free.”) RadioShack Corp.’s trademarks, customer data and dealer network are headed to the auction block next month, DBR reports in WSJ.

Read More from: WSJ.com: Bankruptcy Beat

5 days 8 hours ago
Asim Hafeez/Bloomberg News
Texas energy giant Energy Future Holdings Corp. has filed the restructuring plan that outlines how it hopes to reshape a $42 billion debt load and exit bankruptcy. The Wall Street Journal has the Daily Bankruptcy Review article here. (Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit http://on.wsj.com/DJBankruptcyNews, scroll to the bottom and click “try for free.”) RadioShack Corp.’s trademarks, customer data and dealer network are headed to the auction block next month, DBR reports in WSJ.

Read More from: WSJ.com: Bankruptcy Beat

5 days 8 hours ago
Authored by Edward L. Kelly and Karl R. Grussand Edward L. Kelly and Karl R. Gruss of Rogers TowersCash proceeds obtained from the sale of a homestead property receive protection from creditors’ claims, provided the funds are not commingled with other assets and are intended in good faith to be reinvested in a new homestead.  In essence, courts treat the proceeds as a provisional homestead, temporarily protecting the proceeds from levy until they are reinvested in real property.  When a debtor converts the proceeds from the sale of homestead property into non-cash assets, such as securities, determining whether the proceeds remain inaccessible to creditors becomes more opaque.  Although creditors cannot garnish homestead proceeds merely because a debtor holds the proceeds in a form other than cash, the manner in which the debtor manages the non-cash proceeds may reveal a lack of intent to reinvest in a new homestead and provide an avenue for creditors to collect on their claims. Homestead Protection on Proceeds from Sale The protection from forced sale Florida residents receive on their homestead property under Article X of the Florida Constitution extends to the proceeds from a voluntary sale of the homestead, shielding the proceeds from creditors’ claims so long as:

Read More from: Florida Banking Law Blog

5 days 9 hours ago
Falling behind on your federal student loans is like walking down a long, dark hallway. You have no idea where you’re headed, and there’s no way to know what’s in your way. Today’s episode of The Student Loan Show helps shine a light, banishing the darkness so you have a better understanding of what’s going on. In this 19 minute episode we talk about:
  • The difference between delinquency and default
  • What the government can do to make you pay once you go into default on your federal student loans
  • How to avoid default
  • Ways to get out of default and back into good shape with your student loans
http://media.blubrry.com/studentloanshow/p/www.studentloanshow.com/wp-content/uploads/2015/04/150414.mp3 Podcast: Play in new window | Download Like what you hear? Subscribe in iTunes by clicking here.
5 days 10 hours ago
General Electric's plan to sell most of its financing arm has been hailed as a sign that financial reform is successfully persuading too big to fail firms to break up. But the end of GE Capital just means that the conglomerates left standing are even more homogeneous and risk-prone.

Read More from: BankThink

6 days 1 hour ago
The United States Bankruptcy Court for the Southern District of Texas in In re Waco Town Square Partners, L.P., et al. considered whether it had the authority to order a non-debtor to dismiss a state court lawsuit. Finding that “when you snooze, you lose,” the bankruptcy court held that although it did not necessarily have the authority to order the non-debtor to dismiss all of the claims in its state court lawsuit, the non-debtor forfeited its right to challenge the bankruptcy court’s authority to do so by failing to file a timely objection.  Background NSJS Limited Partnership commenced a lawsuit against Waco Town Square Partners II, LP (WTSP II) and certain other defendants in state court for, among other things, fraud and breach of contract. WTSP II subsequently commenced a chapter 11 proceeding. The confirmation order for WTSP II’s chapter 11 plan required NSJS to remove any derivative claims (i.e., claims belonging to WTSP II or its estate) from its state court complaint within 45-days or all of NSJS’s claims would be deemed derivative claims, which must be dismissed with prejudice. NSJS failed to amend its complaint within the 45-day period.
6 days 1 hour ago
By Guest Blogger Michael V. Baumer On June 12, 2014, the U.S Supreme Court issued an opinion in Clark v. Rameker, 134 S.Ct. 2242 (2014) in which the court, in a 9-0 decision, affirmed a decision by the 7th Circuit holding that an IRA inherited by a daughter from her mother is not exempt under 522(b)(3)(C). It is important to note that although Clark determined whether inherited IRAs are exempt under 522(b)(3), the decision should also apply to whether inherited IRAs are exempt under 522(b)(2) and (d)(12). Both statutes exempt “Retirement funds to the extent that those funds are in a fund or account that is  exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986.” The Clark court concluded that funds in an inherited IRA are not “retirement funds,” although “retirement funds” is not defined in either the Bankruptcy Code or the Internal Revenue Code.522(b)(1) says that a debtor can claim exemptions under 522(b)(2) which we commonly refer to as “federal exemptions,” or 522(b)(3)  which we commonly refer to as “state exemptions.” [522(b)(2) includes the “opt out” provision which allows the individual states to deny the federal exemptions to their residents.] It is not really that simple. The federal exemptions under 522(b)(2) are limited to the exemptions listed in 522(d).
6 days 3 hours ago
As Basel III gets ready to turn five years old this summer, recently appointed Basel Committee secretary general William Coen is taking the necessary step of ensuring that new capital ratio, liquidity standard and leverage ratio rules work well together.

Read More from: BankThink

6 days 5 hours ago
The cost of complying with New York State's proposed BitLicense regulations would wipe out many smaller digital currency businesses. But there is a middle ground: placing those businesses under the supervision of a self-regulating incubator that would help them develop robust yet affordable compliance programs.

Read More from: BankThink

6 days 7 hours ago
The cost of complying with New York State's proposed BitLicense regulations would wipe out many smaller digital currency businesses. But there is a middle ground: placing those businesses under the supervision of a self-regulating incubator that would help them develop robust yet affordable compliance programs.

Read More from: BankThink

6 days 7 hours ago
Receiving Wide Coverage ... GE Turns Off Bank Switch: Plenty of digital ink was spilled late Friday and over the weekend about General Electric's decision to sell its GE Capital unit. The Wall Street Journal suggests in one of its takes the exit decision represents a chance for banking and non-bank companies to acquire assets that could transform a company. The largest piece of the business up for sale is GE's $74 billion-asset commercial lending and...

Read More from: BankThink

6 days 8 hours ago

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