CHAPTER 19
Debt Restructuring and Asset Protection Issues
§ 19.1 INTRODUCTION
p. 1336. In footnote 1, delete 2013 and replace it with 2018.
p. 1336. In footnote 2, delete (ALI-ABA, 4th ed. 1996) and replace with (ALI-ABA, 7th ed. 2011).
§ 19.2 OVERVIEW OF BANKRUPTCY
(a) Chapter 7 Bankruptcy
p. 1345. In footnote 18, delete faxed moment and replace with fixed moment.
(b) Chapter 11 Bankruptcy
(i) Generally p. 1348. In footnote 28, delete the last sentence and insert the following at the beginning of the footnote:
See In re E. End Dev., LLC, 491 B.R. 633, 640 (Bankr. E.D.N.Y. 2013) (finding the debtor's managing member was authorized to file the Chapter 11 petition “[b]ased on the language of the Operating Agreement, and the clear intent to give the Managing Member broad authority to act on behalf of the Debtor and to bind third parties with respect to the Debtor”);
p. 1350. In footnote 31, add n. 15 after B.R. 43, 49 . . .
p. 1350. Delete language in footnote 32 in its entirety and replace it with the following:
In re Market Center East Retail Property, Inc., 433 B.R. 335 (Bankr. New Mexico 2010); UBS Commercial Mtge. Trust 2007-FL1 v. Garrison Special Opportunities Fund L.P., 938 N.Y.S.2d 230 (N.Y. Sup. Ct. Mar. 8, 2011).
p. 1353. Add footnote 48.1 after … if the debtor abandons the property) found on line 13 of the last paragraph on this page:
48.1 11 U.S.C § 362(c)(1).
(iv) Plan/Sale p. 1356. Add the following to the end of footnote 59:
See also In re Pursuit Capital Mgmt., LLC, No. BR 14-10610-LSS, 2016 WL 5402735, at *5 (D. Del. Sept. 26, 2016) (holding the Trustee requested approval of Purchasers' bid from the outset of the sale hearing, consistent with his business judgment, and the Bankruptcy Court's exercise of its discretion not to reopen the auction was consistent with the well-recognized policy concerns of finality and integrity in the auction process), appeal dismissed, 874 F.3d 124 (3d Cir. 2017); In re Signature Apparel Grp., LLC, 577 B.R. 54, 100 (Bankr. S.D.N.Y. 2017) (“[C]ourts have generally applied the business judgment rule to protect debtors in connection with their decisions to dispose of property of the estate when affirmatively seeking court approval for those transactions, such as to assume or reject an executory contract or to enter into a transaction outside of the ordinary course of business.”)
p. 1356. Add on Bankruptcy after Collier in footnote 60.
p. 1357. Insert the following after the first sentence in footnote 61:
See In re HHH Choices Health Plan, LLC, 554 B.R. 697, 702 (Bankr. S.D.N.Y. 2016) (querying “[w]hat relative weight am I to give to the interests of creditors and to the mission of the not-for-profit corporation where those considerations, at least potentially, are in conflict?”);
§ 19.3 THE ESTATE AND THE AUTOMATIC STAY
p. 1360. In footnote 69, change Chapter 22 to Chapter 11.
(a) Automatic Stay: Generally
p. 1362. In footnote 70, delete the language after Citizens Bank v. Strumpf, and replace with the following:
516 U.S. 16 (1995) (holding that placing an administrative hold on the debtor's bank account did not violate the automatic stay provisions of § 362(a)(7) because bank did not refuse to pay its debt permanently and absolutely; rather, it only refused to pay its debt while seeking relief from the automatic stay).
(d) Acts Done in Violation of the Stay
p. 1365. In the beginning of the first paragraph, delete The majority and replace with A general.
p. 1365. Delete language in footnote 83 in its entirety and replace it with the following:
See, for example, In re Gruntz, 202 F.3d 1074, 1082 (9th Cir. 2000); Ellis v. Consolidated Diesel Electric Corp., 894 F.2d 371 (10th Cir. 1990); Far Out Productions, Inc. v. Oskar, 247 F.3d 986 (9th Cir. 2001); In re Webb, 472 B.R. 665 (B.A.P. 6th Cir. 2012).
(f) Relief from the Automatic Stay
p. 1367. Insert the following after See, e.g., in footnote 89:
In re Votaw, No. 10-63744, 2011 WL 5357719, at *3 (Bankr. N.D. Ohio Nov. 4, 2011);
p. 1367. Insert the following at the end of footnote 90:
In re A. Hirsch Realty, LLC, 583 B.R. 583,602 (Bank. D. Mass. 2018) (concluding a court-approved waiver of the protection of the automatic stay pursuant to a prior consensual reorganization plan “constitutes ‘cause' under 11 U.S.C. § 362(d)(1) for relief from the automatic stay and that the Debtor has not satisfied that burden of demonstrating that Blue Hill is adequately protected or otherwise not entitled to rely upon the waiver”).
(g) Application of the Automatic Stay to Third Parties
p. 1369. Add the following at the end of footnote 101:
See also Agrawal v. Ogden, 753 Fed. Appx. 644 (10th Cir. 2018).
p. 1370. Delete the language in footnote 103 and replace with the following:
McHugh v. Otlowski, Bankruptcy No. 05-60442 (DHS), Adv. No. 10-02348-DHS, 2011 WL 1833370, at *4 (Bankr. D.N.J. May 11, 2011) (acknowledging cases in which the bankruptcy court granted injunctions blocking “actions against the debtor's principals, officers, directors, or guarantors”).
p. 1370. Insert the following after the first cite in footnote 104:
In re Midway Games, Inc., 428 B.R. 327, 33 (Bankr. D. Del 2010), opinion clarified No. ADV. 09-5228 (KG), 2010 WL 2076955 (Bankr. D. Del May 20, 2010);
(h) Application of Automatic Stay to IRS Revocation of Tax-Exempt Status
p. 1371. Footnote 108 should read 26 U.S.C. § 7421(a).
p. 1371. Delete language in footnote 109 in its entirety and replace it with the following:
Bob Jones University v. Simon, 416 U.S. 725 (1974), overruled on other grounds; see also Supreme Court's Construction and Application of Anti-Injunction Act (26 USC § 7421(a)) Prohibiting Suits to Restrain Assessment or Collection of Federal Taxes, 46 L. Ed. 2d 956.
§ 19.4 CASE ADMINISTRATION
(b) Use of Cash: HUD Context
p. 1373. Delete language in footnote 121 in its entirety and replace it with the following:
In re EES Lambert Associates, 62 B.R. 328, 336 (Bankr. N.D. Ill. 1986).
p. 1374. Delete language in footnote 122 in its entirety and replace it with the following:
Indian Motorcycle Associates III Ltd. Partnership v. Massachusetts Housing Finance Agency, 66 F.3d 1246, 1250 (1st Cir. 1995).
(c) Postpetition Financing
p. 1374. Insert the following at the beginning of footnote 124:
See In re 211 Waukegan, LLC, 479 B.R. 711, 779 (Bankr. N.D. Ill. 2012) (“Some courts have adopted a two-prong test to determine whether a transaction is in the ordinary course of business. The two-part test has a ‘vertical' and a ‘horizontal' dimension. Applying this test, courts consider whether the transaction is consistent with the debtor's prepetition transactions and, second, with transactions in the industry in which the debtor is engaged.”);
p. 1375. The first citation in footnote 126 should read 11 U.S.C. § 364(b)-(d).
(d) Sale of Property/Rejection, Assumption or Assignment of Contracts
p. 1376. Under footnote 132, the first and second conditions are reversed.
§ 19.5 CHAPTER 11 PLAN
p. 1378. Insert the exclusive before period within in the third sentence of the first full paragraph on this page.
(a) Basic Contents of Plan
p. 1379. Delete the language in item 7 and replace with the following:
The plan must give impaired creditors who do not accept the plan at least as much as they would get in a Chapter 7 liquidation (also known as the “best interests of creditors” test).147
(b) Acceptance Requirements
p. 1381. Under footnote 158, 2. a., delete the language and replace with the following:
cures, any such default that occurred before or after the commencement of the case under this title, other than a default of the kind specified in § 365(b)(2) of this title or of a kind that § 365(b)(2) expressly does not require to be cured;
(d) Cramdown
(ii) Fair and Equitable Requirement: Secured Claims p. 1384. Delete language in footnote 167 following U.S.C. cite and replace with the following:
see also RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, where debtors proposed to sell their property free and clear of the bank's liens and repay the bank with the sale proceeds, as contemplated by clause 1129(b)(2)(A)(ii). The debtors claimed that their plan could instead satisfy clause (iii) by providing the bank with the “indubitable equivalent” of its secured claim, in the form of cash generated by the auction. However, the court stated that because the debtors' auction procedures did not permit the bank to credit-bid, the proposed sale could not satisfy the requirements of clause (ii) when property is sold free and clear of lien.
p. 1384. Insert the following at the end of footnote 168:
See also In re Sugarleaf Timber, LLC, 529 B.R. 317, 328 (M.D. Fla. 2015) (citations omitted) (holding that “in order to qualify as the ‘indubitable equivalent' of its claim, ‘the treatment must be completely compensatory,'” i.e., “no reasonable doubt exists that the creditor will be paid in full”).
(iii) Fair and Equitable Requirement: Unsecured Claims—Absolute Priority (Whether and When It Applies) and New Value p. 1386. Delete language in footnote 173 in its entirety and replace it with the following:
See, for example, Farms v. Gen. Teamster (In re General Teamsters), 265 F.3d 869,874 (9th Cir. 2001); In re Havre Aerie No. 166 Eagles, No. 12-60679-11, 2013 WL 1164422 (Bankr. D. Mont. Mar. 20, 2013) (“The absolute priority rule of 11 U.S.C. § 1129(b)(2)(B)(ii) does not apply to a nonprofit entity such as the Debtor…”)
p. 1387. Delete language in footnote 176 in its entirety and replace it with the following:
Bank of America v. 203 North LaSalle Street Partnership, supra; Case v. Los Angeles Lumber Products Co., 308 U.S. 106 (1939) (holding that debtor's prebankruptcy equity holders could not, over objections of senior class of impaired creditors, contribute new capital and receive ownership interests in reorganized entity without allowing others to compete for that equity or propose a competing reorganization plan).
(e) Effect of Plan Confirmation on HUD Regulatory Agreement
p. 1389. At the end of footnote 183, it should read cases cited in n. 120.
§ 19.6 DISCHARGE
p. 1393. Insert the following at the end of footnote 200:
In re Millennium Lab Holdings II, LLC, 575 B.R. 252, 272 (Bankr. D. Del. 2017).
§ 19.7 SPECIAL ISSUES: CONSEQUENCES OF DEBT REDUCTION
p. 1393. Change footnote 201 to read as follows:
26 U.S.C. § 61(a)(11).
NOTE
- 147 11 U.S.C. § 1129(a)(7).