Blogs

By: Andrew Serrao

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In the first appellate decision on the issue, the Fourth Circuit in In re Maharaj[1] held that the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) did not abrogate the absolute priority rule’s applicability to individual Chapter 11 debtors.[2] Ganess and Vena Maharaj (the “Debtors”) accumulated a significant amount of debt while owning and operating an auto body repair shop.[3] The Debtors filed a voluntary petition under Chapter 11 in bankruptcy court, and subsequently filed a plan of reorganization (the “Plan”),[4] pursuant to section 1121(a).[5] The Plan provided that the Debtors would continue to own and operate their auto body business, using income from the business to pay general unsecured claims.[6] The Plan also separated creditors into four classes[7]. Class 3 (general unsecured claims) voted to reject the Plan,[8] and the Debtors sought a cram down.[9] If BAPCPA had abrogated the absolute priority rule, the Debtors could have retained their auto body business and crammed down the Plan.[10] However, the Fourth Circuit held that the absolute priority rule had not been abrogated by BAPCPA.[11]

By: Brendan A. Bertoli

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

The Bankruptcy Court for the Southern District of New York held that courts have discretion to appoint an independent examiner in cases where the debtor’s fixed debts exceed five million dollars, but the facts of In re Residential Capital, LLC[1] warranted appointment.[2] Berkshire Hathaway (“Berkshire”), joined by the Trustee, sought the appointment of an independent examiner to investigate certain pre-petition transactions between the debtor, GMAC, Ally and Cerebus Capital.[3] Berkshire claimed that appointment was mandatory pursuant to section 1104(c)(2) of the Bankruptcy Code.[4] The Official Committee of Unsecured Creditors (“the Committee”) objected to appointment, arguing that its own investigation obviated the need for an independent examiner.[5] The court held that appointment was not mandatory because section 1104(c)’s mandatory language is qualified by the phrase “as is appropriate.”[6] However, the court held that the Committee’s concurrent investigation, by itself, was not enough to render an independent examiner’s appointment inappropriate.[7]

 By: Brett Joseph

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re Greenwich Sentry, L.P.,[1] the Bankruptcy Court for the Southern District of New York held that section 1111(a) of the Bankruptcy Code did not prevent the court from requiring all interest holders to file proofs of interest.[2] In 2010, Greenwich Sentry Partners, L.P. (“the Debtor”) filed a petition for Chapter 11 relief.[3] The Debtor also filed its schedules and a statement of financial affairs,[4] which listed Christopher McLoughlin Keough, Quantum Hedge Strategies Fund, LP, and SIM Hedged Strategies Trust (the “Purported Limited Partners”) as interest holders. The Purported Limited Partner’s interests were listed on the Debtor’s schedules, but were not listed as disputed, contingent, or unliquidated.[5] The court issued an amended bar date order requiring all interest holders to file proofs of interest, even if their interests were not listed as disputed, contingent, or unliquidated.[6] Despite receiving a copy of the amended bar date order, the Purported Limited Partners did not file proofs of interest by the bar date. Nevertheless, the Purported Limited Partners sought a declaration from the court that they were holders of allowed limited partner interests, entitled to distribution.[7] The court denied the motion, holding that the Purported Limited Partners were required to submit proofs of interest in accordance with the amended bar date order and that they had failed to do so.[8]

By: Robert Garafola

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In Jendusa-Nicolai v. Larsen, the Seventh Circuit held that section 523(a)(6) of the Bankruptcy Code prevented the debtor, David Larsen, from discharging his debt from a civil judgment stemming from the attempted murder of his former wife, Teri Jendusa-Nicolai.[1] Larsen savagely beat Jendusa-Nicolai with a baseball bat, sealed her in a snow-filled trash can, and left her to die in a storage facility.[2] Jendusa-Nicolai miraculously survived, but she lost all of her toes to frostbite and suffered a miscarriage.[3]  Larsen was sentenced to life imprisonment for his crimes and lost a civil action to Jendusa-Nicolai and her family, who were awarded a judgment in excess of $3.4 million.[4] Larsen attempted to discharge the debt from the judgment by filing for bankruptcy under Chapter 7. Larsen argued that his debt should be discharged because he did not willfully injure his ex-wife within the meaning of section 523(a)(6) since he did not specifically intend to cause his ex-wife to lose her unborn child and toes.[5]  However, the court found that the statute did not require that the debtor intend to cause specific injuries and that a broader analysis of the debtor’s intended results is proper.[6]