Creditor that Filed an Excessive Claim Draws Court’s Rebuke and Possible Sanctions
Bankruptcy Update
by Daniel A. Lowenthal
1d ago
This post is about a junkyard, hogs getting slaughtered, and a bankruptcy judge poised to sanction a creditor and her counsel.  The message from the case to would-be claimants in other cases is simple: do not “overreach.”  In re U Lock, Inc., Case No. 22-20823, 2023 WL 308210, at *1 (Bankr. W.D. Pa. Jan. 17, 2023). More specifically, in this case, a junkyard is the location of the debtor’s property, which consists of “construction debris, scrap piles, tire mounds, collapsed trailers, and inoperable vehicles.”  It is also environmentally contaminated. Id. The phrase “hogs get sla ..read more
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Bankruptcy Court Issues Ruling on Ownership of Celsius Account Assets
Bankruptcy Update
by Jonah Wacholder, Daniel A. Lowenthal
5d ago
The concept of “property of the estate” is important in bankruptcy because it determines what property can be used or distributed for the benefit of the debtor’s creditors. Defined by section 541 of the Bankruptcy Code, “property of the estate” broadly encompasses the debtor’s interests in property, with certain additions and exceptions provided for in the Code. See 11 U.S.C. § 541. Difficult questions can arise in a contractual relationship between a debtor and a counterparty about whether an entity actually owns a particular asset or merely has some contractual right. The question has high s ..read more
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A Primer on Avoidance Actions in the Context of Crypto Bankruptcies
Bankruptcy Update
by Kimberly Black, Daniel A. Lowenthal
5d ago
In 2022, there were several high-profile crypto bankruptcy filings.  A big question in these cases is whether there will be any money to satisfy unsecured creditor claims.  If there are funds to distribute, then the creditors’ claims will become more valuable, and the cases will become even more interesting.  Because crypto companies do not have much physical inventory, real estate or other tangible assets to liquidate, it can be hard to imagine what assets will be available to help satisfy creditor claims.  One way these debtors will bring value into their estates is throu ..read more
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Second Circuit Reaffirms that Debtor Can Obtain Refund for Non-Uniform Bankruptcy Fees
Bankruptcy Update
by Jonah Wacholder, Daniel A. Lowenthal
2M ago
We have previously blogged about Siegel v. Fitzgerald, the Supreme Court decision last June that invalidated the 2018 difference in fees between bankruptcy cases filed in Bankruptcy Administrator judicial districts and U.S. Trustee judicial districts.  As we explained, the parties in that case disputed whether, if the fee difference were to be held unconstitutional, the appropriate remedy would be a refund for the debtors charged the higher fee or additional fees imposed on the debtors charged the lower fee.  The Supreme Court did not resolve that question, leaving the question to be ..read more
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Crypto Company FTX Files Massive Bankruptcy in Delaware
Bankruptcy Update
by Kimberly Black, Daniel A. Lowenthal
2M ago
Another domino has fallen.  Earlier this year, we wrote about the challenges facing the crypto industry that resulted in the bankruptcy filings of Three Arrows Capital, Celsius Network, and Voyager Digital. We noted that other crypto entities could also end up in chapter 11, and that prediction has proven correct. On November 11, FTX Trading LTD and approximately 130 of its affiliates filed voluntary chapter 11 bankruptcy petitions in Delaware.  FTX operates the world’s second largest cryptocurrency exchange and was valued earlier this year at $32 billion.  The FTX filing estima ..read more
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SCOTUS Grants Certiorari, Remands U.S. Trustee Fee Dispute to Second Circuit
Bankruptcy Update
by Maxwell K. Weiss, Daniel A. Lowenthal
3M ago
The ramifications of uneven increases to fees in chapter 11 bankruptcies continue to ripple through federal courts.  As we discussed previously, Congress enacted legislation in 2017 that temporarily increased U.S. Trustee fees chapter 11 debtors had to pay in virtually every district in the U.S.  The increase was meant to offset the costs of the U.S. Trustee program, especially in large bankruptcy cases.  The maximum amount for large debtors increased dramatically, from $30,000 to $250,000 quarterly. Legal challenges to the increase arose throughout the country, including in the ..read more
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Bankruptcy Court Denies Chapter 15 Recognition to a Case in the Isle of Man
Bankruptcy Update
by Daniel A. Lowenthal
3M ago
A U.S. bankruptcy court recently denied chapter 15 recognition to a case in the Isle of Man (IOM).  The court ruled that the foreign case was neither a foreign main proceeding nor a foreign non-main proceeding.  Although the court found that the IOM proceeding was a “foreign proceeding,” it also held that the debtor’s center of main interests wasn’t in the IOM and the debtor didn't have an establishment there.  In re Shimmin, No. 22-10039, 2022 LEXIS 2932 (Bankr. W.D. Okla. Oct. 14, 2022). The chapter 15 case was filed as a result of litigation in the U.S. arising from the ..read more
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New SDNY Decision on Administrative Priority for Executory Contracts
Bankruptcy Update
by Jonah Wacholder, Daniel A. Lowenthal
4M ago
To encourage parties to transact with debtors in bankruptcy, the Bankruptcy Code in corporate bankruptcies provides highest priority to “administrative expenses,” which include “the actual, necessary costs and expenses of preserving the estate.”  11 U.S.C. § 503(b); id. § 507(a)(2).  Section 365 of the Bankruptcy Code permits the assumption or rejection of any executory contract—a contract in which the parties have ongoing duties of performance to each other when a bankruptcy case is filed—and provides that if the debtor rejects the contract, such rejection is treated as a breach occ ..read more
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What to Do If Your Tenant Is Bankrupt
Bankruptcy Update
by Kimberly Black, Daniel A. Lowenthal
4M ago
On September 15, President Biden announced a tentative deal with unions representing tens of thousands of railroad workers that helped narrowly avoid a strike that threatened to devastate the country’s delicate supply chains that have been strained since the beginning of the pandemic.  Now the country awaits the outcome of the union member votes (which we may not know until mid-November), but even if the members approve the deal, the retail sector will still face empty shelves, job vacancies and surging inflation. In fact, the retail industry has been facing economic headwinds f ..read more
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For Hawaiian Golf Project, it’s Aloha New Ownership, Aloha Old Debt
Bankruptcy Update
by Daniel A. Lowenthal, Maxwell K. Weiss
6M ago
The owners of an ambitious Hawaiian golf project in the Makaha Valley of Oahu said Aloha (hello) to new owners, and Aloha (goodbye) to old debt obligations. In an adversary proceeding, the collective owners of the Makaha Valley Country Club, golf courses, surrounding undeveloped land, and other related assets (the “Owners”) avoided obligations undertaken in connection with a loan extension provided by Tianjin Dinghui Hongjun Equity Investment Partnership (the “Lenders”). The Bankruptcy Court for the District of Hawaii ruled that the extension was constructively fraudulent, and thus avoidable ..read more
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