Home > Practices > Business Reorganization and Financial Restructuring

Risk and Recovery - Sample Table of Contents

TABLE OF CONTENTS

INTRODUCTION

  1. THE BANKRUPTCY AND WORKOUT PROCESS GENERALLY
    1. Background.
    2. Chapters 1, 3, And 5 Of The Code.
    3. Chapter 7 - Liquidation.
    4. Chapter 9 - Adjustment Of Debts Of A Municipality.
    5. Chapter 11 - Reorganization.
    6. Chapter 12 - Adjustment Of Debts Of A Family Farmer Or Fisherman.
    7. Chapter 13 - Adjustment Of Debts Of An Individual With Regular Income.
    8. Chapter 15 - Ancillary And Other Cross Border Cases.
    9. Conclusion.
  2. SELECTED BUSINESS BANKRUPTCY TOPICS
    1. Claims: Treatment In Bankruptcy.
      1. Claims Allowance In General.
      2. Restriction On Allowance Of Particular Claims.
        1. Section 502(b)(2)
        2. Section 502(b)(6)
      3. Administrative Expenses And Other Priority Claims.
        1. Section 503(b) Administrative Expenses.
          1. Section 503(b)(3)(D) Substantial Contribution
          2. Section 503(b)(9) Reclamation Claims
        2. Section 507(a)(5) Priority Claims For Contribution To Employee Benefit Plan.
      4. Rejection Damages Claims.
      5. Secured Claims.
        1. Interest And Reasonable Fees, Costs And Other Charges.
        2. Entitlement To Fees.
        3. Default Interest
    2. Equitable Subordination And Debt Recharacterization.
      1. Equitable Subordination.
        1. Equitable Subordination Against Good Faith Transferees.
        2. Categorical Equitable Subordination Absent Inequitable Conduct.
      2. Debt Recharacterization.
    3. Executory Contracts And Unexpired Leases.
      1. Review of Section 365.
        1. The Code And Legislative History.
        2. What Is An Executory Contract?
          1. Legislative History
          2. Tests Used To Determine Whether A Contract Is Executory
        3. Severable Contracts.
        4. Time of Determination.
        5. True Lease Or Secured Transaction.
        6. Debtor's Postpetition Contractual Duties and Rights.
          1. Pre-Assumption/Rejection Duties.
          2. Payment Of Rent Under Section 365(d)(3) - Nonresidential Real Property.
          3. Obligations To Be Paid Under Section 365(d)(3).
          4. Payment Of Rent Under Section 365(d)(5) - Personal Property.
          5. Prepetition Termination Or Expiration Of Agreements.
        7. Timing Of The Election To Assume Or Reject.
          1. Nonresidential Real Property Leases.
          2. Leases Of Personal Or Residential Property And All Other Executory Contracts.
        8. Standard For Assumption Or Rejection.
        9. Procedure For Assumption Or Rejection.
        10. Effect Of Assumption.
          1. Generally.
          2. Cure Of Defaults.
          3. Adequate Assurance Of Future Performance By Debtor Or By Assignee.
          4. Assignment Notwithstanding Anti-Assignment Provisions In Contract Or Lease.
          5. Default After Assumption.
        11. Effect Of Rejection.
          1. Generally.
          2. Rejection Versus Termination.
          3. Covenants Not To Compete.
          4. Considerations When Debtor Is A Lessor.
          5. Contracts That Are Neither Assumed Nor Rejected.
        12. Restrictions On Assumption And Assignment.
          1. Instances Where Applicable Law Excuses A Non-Debtor From Accepting Performance From Or Rendering Performance To An Entity Other Than The Debtor.
          2. Contracts To Extend Loans Or Other Debt Financing.
        13. Special Considerations For Certain Contracts And Leases.
          1. Collective Bargaining Agreements.
          2. Contractual Provisions For Retiree Benefits.
          3. Pension Plan Terminations.
          4. Aircraft Equipment And Vessel Leases.
      2. Changes To The Code Made By BAPCPA Relating To Executory Contracts And Unexpired Leases Not Previously Noted.
    4. Sale Of Assets.
      1. Credit Bids.
      2. Breakup Fees
      3. Tenancy By The Entirety.
      4. Compelled Money Satisfaction.
      5. Sale Of Debtor's Member Interest In A Limited Liability Company And Right Of First Refusal By Members.
      6. Post-Sale Issues.
      7. Declaratory Judgment.
      8. Good Faith Purchaser.
      9. Mootness On Appeals.
      10. Exception To Mootness.
      11. Reopening Of Case For Interpretation Of Sale Orders.
    5. The Chapter 11 Plan Process.
      1. Formulation And Confirmation Of Plans.
        1. Exclusivity.
        2. Pre-Arranged Plans.
        3. Claims Estimation In The Plan Process.
        4. Claims Allowance In The Plan Process.
        5. Classification of Claims.
        6. Feasibility.
        7. "Cramdowns" And The Absolute Priority Rule.
        8. Cramdowns And The Secured Creditor.
        9. Determining Acceptance Of Votes.
        10. Rights Of Insurers.
        11. Modification Of Retiree Benefits.
      2. Effect Of Confirmation.
        1. Tax Exemptions For Transfers Of Real Estate Under A Plan.
        2. Third Party Plan Releases And Exculpation Clauses.
        3. Postconfirmation Jurisdiction.
      3. Post-Confirmation Challenges To Confirmation Order.
        1. Appeal
          1. Equitable Mootness.
          2. Bond Requirement.
        2. Revocation And The Status Quo Ante.
      4. Channeling Injunctions And Section 524(g) Trusts.
        1. Background Of Section 524(g) In Asbestos Chapter 11 Cases.
        2. Conditions For A Section 524(g) Trust.
        3. Court Determinations Required Under Section 524(g).
    6. Substantive Consolidation.
      1. Introduction.
      2. Authority For Substantive Consolidation.
      3. Grounds For Substantive Consolidation.
      4. Recent Cases.
    7. Conversion And Dismissal.
      1. Conversion To Chapter 7 By Debtor.
      2. Conversion/Dismissal On Motion Of Party Other Than Debtor.
        1. Mandatory Versus Discretionary Standard.
        2. Time Limitations For Hearings.
        3. "Cause" For Conversion Or Dismissal.
        4. Narrowed Discretion To Convert Or Dismiss: "Unusual Circumstances."
        5. Determination Of Best Interest Of The Creditors.
      3. Dismissal Due To Bad Faith Filing.
      4. Standing.
      5. Effect Of Dismissal.
      6. Effect Of Conversion On Debtor's Estate.
  3. LITIGATION IN THE WORKOUT AND BANKRUPTCY CONTEXT
    1. Preferential Transfers.
      1. Transfers Of An Interest In Property.
        1. Property Of The Estate Generally.
        2. Earmarked Funds.
        3. Trust Arrangements.
      2. Transfers To Or For The Benefit Of A Creditor.
      3. Transfers On Account Of Antecedent Debt.
      4. Transfers From An Insolvent Debtor.
      5. Transfers During The Preference Period.
        1. When Does A Transfer Occur?
        2. Insider Preference Period; Legislative Nuance.
      6. Transfers That Permit A Better Recovery.
      7. Defenses Available To Preference Defendants.
        1. Contemporaneous Exchange For New Value.
        2. Ordinary Course Of Business Exception.
          1. Pre-BAPCPA.
          2. Post-BAPCPA.
          3. Current Cases.
        3. Subsequent Advance Exception.
    2. Fraudulent Transfers.
      1. Introduction.
      2. Threshold Issues.
        1. Standing.
        2. Timeliness.
      3. Procedural Issues.
        1. Existence Of Creditor Holding An Unsecured Claim Allowable Under Section 502 Who Can Render A Transfer Voidable Under Applicable Law.
        2. Pleading Constructively Fraudulent Transfer With Particularity.
        3. Can A Plaintiff Who Is The Only Party With Knowledge Of A Transferor's Financial Condition Plead Insolvency On Information and Belief?
        4. May A Defendant Be Charged With Aiding And Abetting A Fraudulent Transfer?
        5. May A Defendant Be Charged With Conspiracy To Commit A Fraudulent Transfer?
        6. Does A Choice Of Forum Clause In An Agreement Determine The Forum Of A Fraudulent Transfer Case Brought By A Debtor Or Trustee In Bankruptcy?
        7. Is There A Jury Trial For Fraudulent Transfer Claims?
        8. What Relief May A Fraudulent Transfer Plaintiff Seek?
        9. Use of Section 541 To Recover Fraudulent Transfers.
        10. Use of Section 542 To Recover Fraudulent Transfers.
        11. Extraterritoriality And Comity As A Defense To A Fraudulent Transfer Claim.
        12. Can A Fraudulent Transfer Defendant Receive A Credit For Expenses Incurred In Protecting Or Maintaining Fraudulently Transferred Property While It Was In His Possession?
        13. Does A Finding Of Deemed Validity Of A Prepetition Transfer In A Cash Collateral Order Entered Early In A Bankruptcy Case Preclude Later Determination Of The Invalidity Of The Transfer?
        14. Transfer Of An Interest Of The Debtor.
        15. "Initial" And "Immediate Or Mediate" Transferees And "The Entity For Whose Benefit A Transfer Was Made" Under Section 550.
        16. Burden And Standard Of Proof.
        17. Conversion Of Non-Exempt To Exempt Assets As A Fraudulent Transfer.
      4. Intentionally Fraudulent Transfers.
      5. Constructively Fraudulent Transfers.
        1. Insolvency Of The Debtor.
        2. Reasonably Equivalent Value Or Fair Consideration.
          1. Generally.
          2. Date For Defining Reasonably Equivalent Value.
          3. Use of Reasonably Equivalent Value In Actual And Constructive Fraudulent Transfers.
          4. Indirect Benefit As Reasonably Equivalent Value.
          5. Reasonably Equivalent Value In Forced Sales.
          6. Fair Consideration Under New York Law.
          7. Recent Decisions On What Is "Reasonably Equivalent Value."
      6. Effect Of Assumption Of Contract On Avoidance Actions.
      7. Transfers To Charitable Organizations.
    3. Deepening Insolvency.
      1. Introduction.
      2. Historical Development.
      3. Recent Developments And Trends.
      4. Standing Issues.
        1. The Wagoner Rule.
        2. The Innocent Director Exception.
      5. The Defense Of In Pari Delicto.
        1. The Adverse Interest Exception.
        2. The Sole Actor Exception To The Adverse Interest Exception.
      6. Conclusion.
  4. TREATMENT OF SECURITIES AND DERIVATIVES TRANSACTIONS IN BANKRUPTCY
    1. History And Structure Of The Code's Financial Contracts Provisions.
    2. Specific Exemptions From The Automatic Stay And Avoidance Provisions.
      1. Protected Contracts.
      2. Protected Participants.
      3. Protected Payments.
      4. Summary.
    3. Derivatives And OTC Derivatives Transactions.
    4. Settlement PaymentsIn Stock Transactions.
      1. Background.
      2. Recent Judicial Interpretation.
      3. The Financial Netting Improvements Act Of 2006.
    5. Subordination Of Claims Relating To Purchase Or Sale Of Securities Of The Debtor.
    6. Credit Default Swaps.
  5. SELECTED TAX ISSUES FOR TROUBLED BUSINESSES
    1. Cancellation Of Indebtedness Income ("CODI").
      1. General Rule.
        1. CODI Generally Taxable.
          1. Old Debt For New Debt.
          2. Old Debt For Stock.
          3. Old Debt For Partnership Interest.
        2. Nonrecourse Debt.
      2. CODI Exceptions For Insolvent Debtor Or Debtor In Bankruptcy.
        1. Definition Of Insolvency.
        2. Reduction Of Tax Attributes.
        3. Attribute Reduction In Consolidated Group Contexts.
      3. Other Exceptions To CODI.
      4. Debt Modifications.
        1. General Rule.
        2. Modification Defined.
    2. Other Tax Considerations For Debt Exchanges And Modifications.
      1. General.
      2. Debt Treated As Securities.
    3. Limitations On The Use Of Net Operating Losses.
      1. Section 382 Limitation.
        1. General Rule.
        2. Value Of Loss Corporation.
        3. Value Of Corporation In Bankruptcy.
      2. Definition Of "Ownership Change."
        1. Five Percent Shareholders.
        2. Family Attribution.
      3. Special Rules Regarding Stock Of A Loss Corporation.
        1. Stock Not Treated As Stock.
        2. Options Treated As Stock.
      4. Continuity Of Business Enterprise.
      5. Built-In Gains And Losses.
      6. The Bankruptcy Exception.
        1. Reduction In NOLs.
        2. Continuity Of Business Enterprise.
        3. Successive Ownership Changes.
        4. Election Out Of Bankruptcy Exception.
    4. Tax Liens.
      1. Perfecting A Tax Lien.
      2. Priority Of Tax Liens.
      3. Tax Lien Enforced Against Property Held As Tenancy By The Entirety.
    5. Other Recent Cases And Rulings Involving Tax Issues In Bankruptcy.
      1. Exemption From Real Estate Transfer Taxes In Chapter 11.
        1. Sale Must Be "Under A Plan Confirmed."
        2. Exemption May Apply To Non-Debtor Transactions.
      2. Offers In Compromise By Taxpayers In Bankruptcy.
      3. Tax Rules For Individual Debtors In Bankruptcy.
        1. Background.
        2. Use Of NOLs By Individual Debtor.
        3. S Corporation Losses In Year Of Bankruptcy Petition.
      4. Other Miscellaneous Tax Issues In Bankruptcy.
        1. Shareholder Of S Corporation In Bankruptcy Liable For Tax On Corporation's Income.
        2. Automatic Stay.
        3. Dischargeability.
        4. Offers In Compromise.
        5. Property Of The Estate.
        6. Tax Attributes.
        7. Exemption Of Individual Retirement Accounts.
        8. Authority Of Bankruptcy Court To Determine Tax Liability.
    6. Tax Provisions In The Bankruptcy Abuse Prevention And Consumer Protection Act Of 2005 ("BAPCPA").
  6. CROSS-BORDER INSOLVENCY ISSUES.
    1. Chapter 15 Of The Code.
      1. General Provisions.
      2. Recognition Of A Foreign Proceeding And Relief.
        1. The Petition For Recognition.
        2. The Order Granting Recognition And The Authority Of The Foreign Representative.
          1. Relief Available Upon Recognition Of A Foreign Main Proceeding.
          2. Relief Available Upon Recognition Of A Foreign Proceeding.
      3. Foreign Creditor Participation And Foreign Claims.
      4. Concurrent Proceedings.
    2. Continuing Cases Under Section 304.
      1. Commencement Of An Ancillary Case.
      2. Relief Available In Ancillary Proceeding.
      3. Factors Considered By The Court In Granting Relief.
        1. Just Treatment Of All Claim Holders.
        2. Protection Of United States Claim Holders Against Prejudice.
        3. Prevention Of Preferential Or Fraudulent Dispositions.
        4. Distribution Substantially In Accordance With The Bankruptcy Code.
        5. Comity Considerations.
        6. Opportunity For A Fresh Start.
      4. Termination Of An Ancillary Case Under Section 304.
    3. Current Issues And Cases Of Interest.
      1. Concurrent Cases.
      2. Forum Selection.
      3. Application Of International Treaties.
  7. INSURANCE COMPANY INSOLVENCIES
    1. Introduction.
    2. Overview Of The Insurers Rehabilitation and Liquidation Model Act ("IRLMA").
    3. Selected Issues.
      1. Payment Of Claims Outside The Priority Of Distribution Statute.
        1. Factual Background.
        2. Procedural History.
        3. The New Hampshire Supreme Court Decision.
      2. Liability Of Excess Insurer.
      3. Guaranty Associations.
        1. Statutory Limit Applies Per Insured Per Policy, Rather Than Per Claimant.
        2. Surplus Lines Insurers Are Not Supported By State Guarantee Funds Or Associations.
    4. IRLMA And The Code: A Comparison.
      1. The Automatic Stay.
      2. Fraudulent Transfers.
      3. Preference Actions.
  8. SELECTED ISSUES IN HEALTH CARE BANKRUPTCIES.
    1. Overview Of BAPCPA Health Care Provisions.
    2. New Definitions Applicable To Health Care Cases.
      1. "Health Care Business."
      2. "Patient" And "Patient Records."
    3. Appointment And Duties Of Patient Care Ombudsman.
      1. Exceptions To Appointment Of Patient Care Ombudsman.
      2. Duties Of Patient Care Ombudsman.
        1. Duty To Issue Periodic Report On Status Of Patient Care.
        2. Duty To Inform Court Of Significant Decline In Patient Care.
        3. Duty To Preserve Confidentiality Of Patient Records.
      3. Ombudsman Compensated Same As Professional Person.
      4. Judicial Interpretation Of Section 333.
    4. Trustee's Duty To Transfer Patients From A Closing Health Care Business.
    5. Disposal Of Patient Records.
      1. Duty To Publish Notice In "Appropriate" Newspaper.
      2. Duty To Attempt To Notify Patients By Mail.
      3. Duty To Notify Appropriate Federal Agency By Certified Mail.
      4. Destruction Of Patient Records Permitted Once All Notice Requirements Fulfilled.
      5. Costs Related To Disposal Of Patient Records Entitled To Administrative Priority.
    6. New Exception To Automatic Stay For Secretary Of Health And Human Services.
    7. Sales Of Assets Of Non-Profit Business Subject To Applicable Non-Bankruptcy Laws.
  9. STRUCTURED FINANCE/SECURITIZATION
    1. Overview Of The Year.
    2. Introduction.
    3. Particular Legal Issues In Structured Financing.
      1. Introduction.
      2. Filing A Petition Under The Code.
      3. Substantive Consolidation.
      4. True Sale.
    4. The Case Law To Date.
    5. The Effect Of Revised Article 9 On Securitizations.
      1. The Factual Background Of Commercial Money Center.
      2. The Lower Court Holding In Commercial Money Center.
      3. The Decision Of The Bankruptcy Appellate Panel.
    6. The Sarbanes-Oxley Act.
    7. Other Developments.
      1. Litigation Involving Securitization Transactions.
      2. State Legislation Creating Safe Harbors For Securitization.
    8. Conclusion.
  10. PENSION, UNION, RETIREE, AND RELATED BENEFIT ISSUES IN BANKRUPTCY
    1. When Is A Pension Plan Property Of The Estate For Exemption Purposes?
    2. Pension Plans May Not Always Be Exempt From Garnishment.
    3. The IRS Will Not Always Receive Secured Creditor Status For Distribution Purposes Notwithstanding A Lien On An ERISA-Qualified Plan.
    4. Conversion Of Assets From Individual Retirement Account To A Fully Exempt Pension Plan.
    5. Termination Of Pension Plans In Bankruptcy.
      1. Involuntary Termination Of Pension Plans In Bankruptcy.
      2. The Debtor's Ability To Terminate A Pension Plan.
      3. The Debtor's Ability to Terminate Multiple Pension Plans.
      4. Administrative Claim For Beneficiaries Under Terminated Plan.
      5. Levy Rights Against Pension Plan.
      6. Standing Issues.
      7. Valuation Of Claims.
    6. Pension Plans And The Debtor's Collective Bargaining Agreement.
      1. The Impact Of The Denial Of A Debtor's Motion to Reject Its Collective Bargaining Agreement.
      2. Third Parties May Not Participate In A Hearing To Reject The Collective Bargaining Agreement.
      3. The Debtor's Duty To Negotiate With The Parties To A Collective Bargaining Agreement.
      4. A Debtor's Rejection Of Its Collective Bargaining Agreements.
      5. The Threat Of A Strike Following Rejection Of A Collective Bargaining Agreement.
      6. Claims Prior To the Rejection Of A Collective Bargaining Agreement.
    7. Retiree Benefits.
      1. Impact Of Plan Language On Right To Terminate In A Bankruptcy.
      2. Timing Of Section 1114 Relief.
      3. The Appointment Of A Committee Of Retired Employees.
      4. BAPCPA Amendments To Section 1114.
    8. Retention Bonuses and Severance Payments Paid By A Debtor To Its Employees.
  11. INTERESTING CASES AND DEVELOPMENTS
    1. Right To Convert From Chapter 7 To Chapter 13 Not Absolute.
    2. Authority To File For Bankruptcy Relief Notwithstanding Receivership Order.
    3. Authority To File For Bankruptcy Relief Following Corporate Dissolution.
    4. Single Asset Real Estate Cases.
    5. Provision Of Utility Services Under Section 366.
    6. Disgorgement Of Attorneys' Fees And Other Issues Regarding Professionals' Compensation.
    7. Automatic Stay.
    8. Amendment Of Claims.
    9. Purchase Of Assets May Give Rise To Potential Liability Under Federal Antitrust Laws.
    10. Doctrine Of Merger May Effect Contractual Right To Attorneys' Fees.
    11. Payment In Exchange For Release Of Liability May Preclude Subrogation Under Section 509(a) Of The Code.
    12. Insurer's Subrogation Right Is Not Property Of The Estate.
    13. Supreme Court Narrowly Interprets Probate Exception To Federal Court Jurisdiction.
    14. Supreme Court Finds Sovereign Immunity Abrogated In Bankruptcy Proceedings.
    15. Massachusetts Bankruptcy Court Clarifies Standard Of Proof For The Appointment Of A Chapter 11 Trustee.
    16. In Some Cases, Possession Is Nine-Tenths Of The Law.
    17. Employee Stock Options Are Property Of The Estate.
    18. In Pari Delicto Defense Applies To Bankruptcy Trustees.
    19. Rejection Damage Claims Cannot Be Set Off Against Prepetition Debts.
    20. Bankruptcy Professionals Seeking To Be Paid Should Diligently Comply With Section 330 Of The Code.
    21. Directors Of An Insolvent Subsidiary Owe Fiduciary Duties To Creditors And Subsidiary.
    22. The Delaware Chancery Court Disapproves Of A Financially Healthy Corporation's Attempt To Use The Code To Avoid A Stockholder Vote Requirement For The Sale Of Substantially All Of The Company's Assets.
    23. Excess Proceeds Of Letters Of Credit Belong To Debtors-Beneficiaries' Estates.

TABLE OF AUTHORITIES

TOPIC INDEX - SELECTED TERMS