bankruptcya Survival Guide for Lenders Deborah L. Fletcher Kenneth E. Noble Thomas P. Yoder second edition

Transcription

1 Guide for Lenders second edition Deborah L. Fletcher Kenneth E. Noble Thomas P. Yoder bankruptcya Survival

2 Copyright 1997, 2008 American Bankruptcy Institute. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher and copyright holder. Printed in the United States of America. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations. ISBN: Additional copies may be purchased from the American Bankruptcy Institute. Discounts are available to ABI members. Copies also may be purchased at ABI s Web site, ABI World, Founded on Capitol Hill in 1982, the American Bankruptcy Institute (ABI) is the only multi-disciplinary, nonpartisan organization devoted to the advancement of jurisprudence related to problems of insolvency. The ABI membership includes more than 11,700 attorneys, bankers, judges, accountants, professors, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. ABI was founded to provide Congress with unbiased testimony and research on insolvency issues. For further information, contact ABI. 44 Canal Center Plaza, Suite 400, Alexandria, VA

3 SPONSORS Bankruptcy: A Survival Guide for Lenders This Handbook is a co-publishing project among ABI, AIRA and IWIRC. 575 Madison Avenue New York, New York i

4 Bankruptcy: A Survival Guide for Lenders ii

5 ABOUT THE AUTHORS Bankruptcy: A Survival Guide for Lenders Deborah L. Fletcher Bankruptcy and Financial Restructuring Team, her practice includes bankruptcy and commercial litigation as well as transactional matters related to distressed acquisitions and out-of-court workouts and restructurings. Ms. Fletcher is a 1982 graduate of the University of Richmond School of Law, where she was associate editor of the Law Review and a 1979 graduate of Virginia Commonwealth University (summa cum laude). Ms. Fletcher is admitted to practice before all state and federal courts in Virginia and North Carolina and before the U.S. Court of Appeals for the Fourth Circuit. She has been a frequent speaker at numerous seminars and conferences, including those sponsored by the American Bar Association, the National Conference of Bankruptcy Judges, ABI and the Turnaround Management Association. Ms. Fletcher has also served in numerous leadership positions in various local and national professional organizations, including service on the Executive Council of the Section of Business Law of the American Bar Association and on the Board of Directors of the Turnaround Management Association. Kenneth E. Noble is a partner and co-chair of the graduate of the University of Illinois College of Law (summa cum laude) where he received numerous awards. Mr. Noble is admitted to practice before the U.S. Supreme Court, the U.S. Courts of Appeal for the Sixth and Seventh Circuits and various U.S. District and Bankruptcy Courts and as a solicitor in England and Wales. He is a member of ABI and the Turnaround Management Association and has been designated in Legal 500 USA in Who s Who in American Law. He is a frequent speaker on new and developing bankruptcy and restructuring topics and is the author of the Lender Liability chapter of Norton Bankruptcy Law and Practice as well as other articles and iii

6 Bankruptcy: A Survival Guide for Lenders Thomas P. Yoder & McNagny LLP in Fort Wayne, Ind., specializing in He is a 1974 graduate of Hanover College (cum laude) and a 1977 graduate of the Indiana University School of Law (Bloomington). Mr. Yoder is admitted to practice in all state and federal courts in Indiana, as well as the U.S. Court of Appeals for the Seventh Circuit. He is a past president of the Indiana State Bar Association, having held numerous positions of leadership within the organization and its Board of Governors. Mr. Yoder is a past member of the Board of Directors of both ABI and the Seventh Circuit Bar Association and is currently a member of the Board of Directors of the Allen County Bar Association. Mr. Yoder has been listed in the last 14 editions of The Best Lawyers in America and every edition of The Indiana Super Lawyers, and is a Fellow of the American College of Bankruptcy. In 2000 he was awarded Sagamore of the Wabash distinction by the Governor of Indiana, the state s most prestigious recognition of citizenship. Mr. Yoder is a frequent lecturer, speaker and author for local, regional and national continuing regarding bankruptcy and insolvency-related topics. iv

7 ACKNOWLEDGEMENTS Bankruptcy: A Survival Guide for Lenders The authors extend their gratitude to Michael P. O Hara and Anne E. Simerman of Barrett & McNagny LLP, whose help was invaluable in Doug Deutsch of Chadbourne & Parke LLP in New York, for his editorial assistance on this edition. The authors acknowledge the contributions and assistance of Antonia Golianopoulos and Jaisohn J. Im of Mayer Brown LLP in New York. The authors also acknowledge the support of ABI Executive Director Sam Gerdano, Deputy Executive Director Felicia S. Turner for her input, Communications Director Carolyn Kanon and Communications Manager Courtney B. Reyers for the layout of this Guide. v

8 Bankruptcy: A Survival Guide for Lenders vi

9 TABLE OF CONTENTS Bankruptcy: A Survival Guide for Lenders I. INTRODUCTION... 1 A. Using the Survival Guide... 1 B. The Bankruptcy Process A. Chapter 7 Liquidation for Businesses or Individuals Generally Exemptions Avoidance of Liens that Impair Exemptions Redemption of Property Dismissal or Conversion of a Chapter 7 Case The Chapter 7 Discharge B. Chapter 11 Reorganization Generally The Plan The Disclosure Statement The Chapter 11 Discharge Dismissal or Conversion of a Chapter 11 Case C. Chapter 12 Family Farmers and Fishermen Generally Discharge Dismissal or Conversion of a Chapter 12 Case D. Chapter 13 Consumer Bankruptcy Reorganization Generally Discharge E. Chapter 15 Cross-Border Generally Ancillary Proceedings Ancillary Relief vii

10 Bankruptcy: A Survival Guide for Lenders B. Debtor s Duties C. The U.S. Trustee D. Trustees in Bankruptcy (other than the U.S. Trustee) E. Professionals F. Governmental Entities G. Secured Creditors H. Lessors I. Unsecured Creditors J. Equity-Holders A. The Bankruptcy Petition B. The Voluntary Bankruptcy Case C. The Involuntary Bankruptcy Case D. The Cross-Border Case E. Abstention F. First Meetings of Creditors G. Estate Administration The Bankruptcy Estate Property of the Estate The Automatic Stay Treatment of Claims H. Discharge and Nondischargeability I. Special Situations J. Conversion of a Bankruptcy Case L. Closing of the Bankruptcy Case A. Adequate Protection B. Relief from Stay and Abandonment C. Post-petition Effect of Pre-petition Security Interests D. Setoff E. Use, Sale or Lease of Property F. Obtaining Credit DIP Financing viii

11 Bankruptcy: A Survival Guide for Lenders G. Executory Contracts and Unexpired Leases A. Turnover of Property of the Estate B. Trustee as a Lien Creditor and as Successor to Certain Creditors and Purchasers C. Preferences D. Exceptions to Recovery of Preferences E. Fraudulent Conveyances F. Post-petition Transactions G. Transferee Liability for Avoided Transfers H. Reclamation and Return of Goods ix

12 For copies of this publication, please contact Kenneth Noble at (212) or

13 Published for clients as a source of information. The material contained herein is not to be construed as legal advice or opinion. CIRCULAR 230 DISCLOSURE: Pursuant to regulations governing practice before the Internal Revenue Service, any tax advice contained herein is not intended or written to be used and cannot be used by a taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer Katten Muchin Rosenman LLP. All rights reserved. CHARLOTTE CHICAGO IRVING LONDON LOS ANGELES NEW YORK PALO ALTO WASHINGTON, DC Katten Muchin Rosenman LLP is an Illinois limited liability partnership including professional corporations that has elected to be governed by the Illinois Uniform Partnership Act (1997). London affiliate: Katten Muchin Rosenman Cornish LLP.