One of the primary roles of a Chapter 7 trustee is to ensure that the bankruptcy estate is preserved prior to liquidation. It is no wonder, then, that the Trustee’s avoidance powers are well defined by the Bankruptcy Code. Nevertheless, a string of recent cases out of the Middle District of Florida has illustrated that… Continue Reading
Category Archives: Commercial Lending
Subscribe to Commercial Lending RSS FeedDebts Non-Dischargeable When Use of Proceeds Intentionally Misrepresented
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionWhen an individual obtains a loan with no intention of repaying the lender, it is well established that such a debt is not dischargeable in bankruptcy. If, however, a debtor does not misrepresent its intent to repay the lender, but instead materially misrepresents the purpose of the loan, is the debt dischargeable in the debtor’s… Continue Reading
Let the Stripping Begin: Lower Courts in the Eleventh Circuit Cautiously Embrace McNeal
Posted in Bankruptcy, Commercial LendingIt was only a matter of time before judges in the lower courts of the Eleventh Circuit began to accept the appellate court’s decision in McNeal. Two such opinions have recently been published in the Middle Districts of Florida and Georgia, and they address McNeal with as much contempt as many commentators have previously expressed…. Continue Reading
In re Davenport: The Eleventh Circuit sets Minimal Standards for Creditor Reliance in Fraud Case
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionThe Bankruptcy Code protects lenders which reasonably rely upon a debtor’s financial statements when approving a loan. The Eleventh Circuit was recently faced with an “enterprising” debtor who attempted to challenge the reasonableness of a bank’s reliance on his falsified financial statements. Ultimately the court rejected the debtor’s arguments that the bank should have more… Continue Reading
In re Sundale, Ltd.: Bankruptcy Court May Have Final Say in Certain State-law Counterclaims
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionAs we have discussed in previous posts, the Supreme Court has held that not all counterclaims which arise within the context of a bankruptcy case are “core” proceedings, such that the bankruptcy court may make a final and binding determination on the claim. This is troublesome to creditors because further litigation of the claim has… Continue Reading
Insiders as Equity Investors: Competition Protects Lenders from Absolute Priority Rule Circumvention
Posted in Bankruptcy, Commercial Lending, Debt and Judgment Collection, Loan WorkoutsUnder the absolute-priority rule, unpaid creditors normally receive the equity in a reorganized business. If a plan of reorganization proposes a “new value” investment in exchange for equity, however, the rule does not strictly apply. In the case of Bank of American National Trust & Savings Ass’n v. 203 North LaSalle Street Partnership, the Supreme… Continue Reading
Forward Contracts for Commodities not Avoidable as Preferential Transfers
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionBecause debtors may avoid certain transfers and contracts entered into during the ninety days before they filed their bankruptcy petition, trade creditors are understandably nervous about entering into contracts with customers who may appear to be on the edge of insolvency. Such anxiety is especially acute when the nature of the creditor’s business necessitates entering… Continue Reading
Though not Precedent, McNeal Proves Persuasive in Southern District of Florida
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionMortgage modification has long been an angst-ridden topic for consumer creditors. The issue once again rose to the forefront in May of 2012, when the Eleventh Circuit issued the unpublished opinion of In re McNeal, wherein the court allowed a Chapter 7 debtor to “strip off,” or avoid, a wholly unsecured junior mortgage. As discussed… Continue Reading
Documentary Stamp Tax: a Quick Review of the Basics
Posted in Commercial Lending, Commercial Real Estate Lending, Residential Real Estate Lending, State Tax IssuesHappy new year to our blog readers! In 2013, we are all hoping for an improved economy and, with it, an increase in the volume of commercial and consumer loans. Remember that Florida has certain transactional taxes for which lenders are the responsible collecting parties including documentary stamp taxes. In case you are new to… Continue Reading
The Extraordinary Remedy of Discharging Third Party Liability in Bankruptcy Proceedings
Posted in Bankruptcy, Commercial LendingRecently the Fifth Circuit handed down a thorough opinion regarding Chapter 15 cross-border insolvency and its effects on domestic and foreign creditors. Beyond the Chapter 15 context, however, the court of appeals in In re Vitro S.A.B. de CV was faced with whether or not a bankruptcy court could allow the non-consensual discharge of a… Continue Reading
Formal Objection to Confirmation not Necessary to Appeal “Absolute Priority” Violation
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionCramdown. The very word makes the hair on the back of lenders’ necks stand up, because in the past, there was little a lender could do once the bankruptcy court confirmed a Chapter 11 plan. However, in the 2011 decision of In re Lett, the Eleventh Circuit loosened the stranglehold and allowed a creditor to appeal the confirmation… Continue Reading
First Challenge to McNeal Reveals Lien Stripping Challenges for Chapter 7 and 13 Debtors
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionNearly five months after McNeal was decided by the Eleventh Circuit, a challenge has arisen within the Eastern District of New York, which has historically been fertile ground for bankruptcy law. In Wachovia Mortgage v. Smoot, the court rejected a debtor’s attempt to strip off a wholly unsecured junior mortgage in a Chapter 7 proceeding,… Continue Reading