While post-petition shipments, and goods delivered to a debtor within 20 days before bankruptcy, will both enjoy administrative expense treatment, they leave the creditor exposed to the risk of administrative insolvency until...more
An involuntary bankruptcy can be a powerful tool in a creditor’s arsenal. Involuntary bankruptcies are rarely filed, however, because of the significant risk of liability for the petitioning creditor if the case is...more
Parties often include bankruptcy and insolvency provisions in their agreements to protect themselves should the contract counterparty file for bankruptcy or take other insolvency-related steps. While many of these provisions...more
Trade creditors are usually grouped with “general unsecured creditors” in bankruptcy, but some have liens that can elevate their claim priority. To achieve this, the lien must be properly granted and perfected under...more
When a company files for bankruptcy, creditors often wonder if they will get paid. The answer depends on the priority and treatment of each claim in the bankruptcy process.
Troutman Pepper's Creditor’s Rights Toolkit...more
Often, after filing a proof of claim, a creditor can go months or even years, without hearing anything regarding their claim. Then, unexpectedly, the creditor's proof of claim faces an objection, possibly on multiple grounds,...more
An assignment for the benefit of creditors (ABC) is a process by which a financially distressed company (referred to as the assignor) transfers its assets to a third-party fiduciary (referred to as the assignee). The assignee...more
A fraudulent transfer is an attempt to avoid a debt by improperly transferring assets to a third party, or a transfer of assets for less than fair value made while the company is insolvent or will become insolvent as a result...more
In most bankruptcies, the company decides to file for relief. In involuntary bankruptcies, creditors force the company into bankruptcy. Involuntary petitions are an extreme remedy, and therefore the requirements and standards...more
When a borrower struggles to meet the payment obligations of a debt instrument, the borrower and creditor may work together to modify some of the terms to give the borrower a little breathing room or provide the creditor with...more
Unlike traditional Chapter 11 “free fall” bankruptcy cases, some debtors enter bankruptcy with pre-packaged or pre-negotiated plans, offering major advantages such as reduced case length. These plans, largely drafted and...more
Assignments for the benefit of creditors, or ABCs, continue to grow in popularity as a tool for the orderly wind-down of companies.
Originally published in Law360 - March 21, 2024....more
The ordinary course of business, new value, and contemporaneous exchange for new value defenses are the most frequently used defenses in a preference action. However, there are additional, less common defenses that a...more
Sales under Section 363 of the Bankruptcy Code have become commonplace in bankruptcy cases as a mechanism to liquidate a debtor's assets and maximize value for creditors. Selling the debtor's assets to a third party offers...more
The purpose of the 341 Meeting is to examine the debtor’s financial position and to confirm facts stated by the debtor in the bankruptcy filing. While creditors are not required to attend the 341 Meeting, creditors have an...more
A seller of goods may gain priority over other creditors, and enhanced prospects for payment, by taking and perfecting a purchase money security interest (PMSI) in the goods sold to a customer. This article will explain what...more
Disclosure statements and plans contain considerable information, and the most pressing issues for a creditor can vary depending on the nature of the creditor’s claim and its relationship with the debtor. This is determined...more
Preferences are a common issue in bankruptcy proceedings. The Bankruptcy Code provides several affirmative defenses to assist creditors in mitigating or eliminating their preference exposure. One such affirmative defense is...more
The Internal Revenue Code permits a business bad debt deduction when a customer fails to pay for the services rendered or the products supplied by your business. However, the ability to claim an ordinary deduction with...more
3/22/2024
/ Bankruptcy Code ,
Commercial Bankruptcy ,
Creditors ,
Debtor-Creditor ,
Debtors ,
Financial Services Industry ,
Insolvency ,
Internal Revenue Code (IRC) ,
IRS ,
Tax Deductions ,
Tax Liability
Serving as the stalking horse bidder in a Section 363 sale can provide a buyer with financial and legal protections, as well as better position the buyer to ultimately acquire the debtor’s assets. This article addresses the...more
3/7/2024
/ 363 Sales ,
Asset Protection ,
Asset Purchase Agreements ,
Asset Purchaser ,
Bids ,
Commercial Bankruptcy ,
Creditors ,
Debtors ,
Distressed Assets ,
Distressed Debt ,
Stalking Horse Bids
There are two similar but distinct mechanisms through which a creditor might net amounts owed to the debtor against amounts owed by the debtor — setoff and recoupment. Understanding the distinction between them, and how...more
2/21/2024
/ Bankruptcy Code ,
Bankruptcy Court ,
Bankruptcy Plans ,
Chapter 11 ,
Commercial Bankruptcy ,
Credit ,
Creditors ,
Debt ,
Debtors ,
Financial Services Industry ,
Recoupment ,
Sale of Assets ,
Setoff Rights
Troutman Pepper's Creditor’s Rights Toolkit is a series that provides practical insights to help creditors confront the challenges of commercial bankruptcy.
A claims agent is a third party retained by the debtor to take on...more
8/22/2023
/ Bankruptcy Code ,
Bankruptcy Court ,
Chapter 11 ,
Commercial Bankruptcy ,
Contract Terms ,
Creditor's Committee ,
Creditors ,
Debtors ,
Non-Debtors ,
Secured Debt ,
Unsecured Debt ,
Vendors
Troutman Pepper's Creditor’s Rights Toolkit is a series that provides practical insights to help creditors confront the challenges of commercial bankruptcy.
A secured creditor is a creditor whose claim is supported by a...more
While section 503(b)(9) claims deserve priority payment over general unsecured claims, they do not provide a basis for stripping a debtor’s defenses in determining the allowed amount of a section 503(b)(9) claim....more