All posts in Chapter 11

Attorneys Fees Gone Amuck

By | June 7, 2012 | Chapter 11 | 3 Comments

What can I say?  Ted Olsen, partner at Gibson, Dunn & Crutcher, known for his part in the Bush v. Gore fiasco in 2000, and for his part in the Perry – same sex marriage case in California – and Prop 8 – is billing $1,800 per hour for his part in a chapter 11 case.  As Jacqueline Palank writes in the WSJ Bankruptcy Blog:

Bankruptcy attorneys, as we’ve noted, also belong to the exclusive but growing $1,000-or-more club, although their presence is somewhat more controversial given the distressed companies they’re representing. Bankruptcy tends to be where we encounter top-dollar fees—like Theodore Olson’s stunning $1,800 hourly rate in the LightSquared Chapter 11 case—because they’re subject to a federal judge’s approval and therefore are easily visible in publicly filed court papers.

According to the same article, there are now some 700 or so partners who bill $1,000 per hour or more in bankruptcy cases.

Dewey LeBoeuf Bankruptcy Website

By | June 4, 2012 | Chapter 11 | No comments

The website for the Dewey & LeBoeuf case is here.

Corporate Fraud is Discharged in Chapter 11

By | June 4, 2012 | Chapter 11 | 9 Comments

I found out the hard way that corporate fraud is discharged in chapter 11 (provided of course that a plan is confirmed that is not a liquidating plan).  I say the hard way because I advised Judge Wayne Johnson recently that I was going to file a non-dischargeability complaint in the corporate chapter 11 and he said something like, “you can’t do that,” and I responded something like, “Oh yes I can.”  He then read me sections 523 and 1141 and I backed off and promised to review the code before filing anything.   The issue came up last week when someone posted the same question on a listserve and Prof. Mark Scarberry from Pepperdine responded explaining the reasoning behind the rule.

Mark wrote:

Section 523(a) applies, by its terms, only to debtors who are individuals (flesh-and-blood human beings). Section 523(a) refers to section 1141 and thus applies to chapter 11 discharges of individuals. Section 1141(d)(2) confirms that result by providing that the chapter 11 discharge does not discharge an individual debtor from debts that are excepted from the discharge by section 523.

Section 727 applies only in chapter 7 cases. See section 103(b). (Note that the exceptions from discharge in section 523(a) are irrelevant in a chapter 7 case where the debtor is not an individual, because section 727(a)(1) prevents any such non-individual debtor from receiving a chapter 7 discharge.)

Here is my best understanding of the policy behind the non-applicability of section 523(a) to non-individual chapter 11 cases.

Read more…

The Section 1111(b) Election

By | June 3, 2012 | Books & Articles, Chapter 11 | 1 Comment

I promised the folks who attended the Nuts & Bolts Program at UWLA yesterday that I would post my article on the Section 1111(b) election.  The Section 1111 fin

Judge Robert Kwan Rules that the Absolute Priority Rule Still Applies in Individual Chapter 11 Cases

By | May 26, 2012 | Absolute Priority Rule, Case Briefs, Chapter 11, Judges Corner | 1 Comment

In re Arnold,  — B.R. — , 2:12-bk-15623 (Bkrtcy, C.D. Ca. May, 2012  Kwan.J.)

Issue:   Does the absolute priority rule still apply in individual chapter 11 cases?

Holding:   Yes.

Judge Robert Kwan

The debtors here filed a individual chapter 11.  They own a number of pieces of real property.  They filed a chapter 11 disclosure statement and plan and US Bank objected on the basis that the disclosure statement did not contain adequate information and that the plan was patently unconfirmable because it violates the absolute priority rule.  The US Bank unsecured claim was based on a deficiency on property which the debtors had guaranteed.

Judge Kwan agreed with US Bank and refused to approve the disclosure statement.  As to whether the disclosure statement contained adequate information, the court found that the options given to unsecured creditors were confusing, did not advise creditors which option would apply, and did not advise creditors of the significance of various court rulings on the various options.  The disclosure statement also advised creditors that the debtors would make a new value contribution of $250,000 “at their election” but did not say where that money was going to come from and therefore the feasibility of making the contribution.

Read more…

GMAC Mortgage – Residential Capital – Files Chapter 11 – Will Sell Its Assets

By | May 21, 2012 | Chapter 11, Current Events | 5 Comments

Here is a letter that was sent to a debtor by GMAC announcing the chapter 11 filing.

The declaration with the First Day Motions states:  “The purpose of these Chapter 11 cases is to facilitate an orderly sale of the Debtors’ most valuable assets and an orderly wind-down of Debtors’ remaining assets. The Debtors have negotiated and entered into two separate asset purchase agreements. The first, with Nationstar Mortgage LLC as the proposed stalking horse bidder (“Nationstar”), for the sale of their mortgage loan origination and servicing businesses (the “Platform Sale”), and the second, with AFI as the proposed stalking horse bidder for the sale of their legacy portfolio consisting mainly of mortgage loans and other residual financial assets (the “Legacy Sale” and collectively with the Platform Sale, the “Asset Sales”).”

U.S. Bankruptcy Court Southern District of New York (Manhattan) Bankruptcy Petition #: 12-12020-mg

Judge Martin Glenn

Date filed:   05/14/2012

Debtor Residential Capital, LLC 1177 Avenue of the Americas New York, NY 10036 NEW YORK-NY Tax ID / EIN: 20-1770738 aka Residential Capital Corporation

represented by  Larren M. Nashelsky Morrison & Foerster LLP 1290 Avenue of the Americas New York, NY 10104 212-468-8000 Fax : 212-468-7900 Email: lnashelsky@mofo.com

U.S. Trustee United States Trustee 33 Whitehall Street 21st Floor New York, NY 10004 (212) 510-0500

Bankruptcy Basics and Review Program

By | May 3, 2012 | Chapter 11, Chapter 13, Chapter 7, Community, Programs | 11 Comments

Hosted by University of West Los Angeles School of Law

Bankruptcy Basics and Review

MCLE Specialization Bankruptcy Credit (approved for 12 MCLE credits)

Professor M. Jonathan Hayes, Senior Adjunct Professor of Law UWLA and Certified Bankruptcy Specialist

James T. King, Certified Bankruptcy Specialist

June 1-2, 2012; 9:30 a.m – 4:30pm

This two day program will focus on Chapter 7, 11, and 13. The program is for attorneys who have some basic knowledge of bankruptcy and are interested in learning more.  Paralegals and staff are welcome.  The first day will focus on consumer bankruptcy, Chapter 7 and 13 and the second day will focus on Chapter 11, corporate and individual cases.  You can sign up for one day or both.

See the flyer here.

Hope to see you there!

ABI Forms Commission to “Overhaul Chapter 11”

By | April 30, 2012 | Chapter 11, Current Events | No comments

The ABI has formed a commission to overhaul chapter 11.  You can read the WSJ article here.  “The Chapter 11 system is itself in distress, having been asked to do far more than it was designed to do and to operate in an entirely different environment,’ said bankruptcy attorney Richard Levin of Cravath, Swaine & Moore, who helped craft the 1978 Code as a congressional staffer.”  “The meeting introduced the commission mission and its membership—declared a “who’s who of the insolvency world” by committee co-chair and Maine attorney Robert Keach—to the handful of people who showed up.”

Transcript Available of Supreme Court Argument Yesterday in RADLAX Hotel

By | April 24, 2012 | Cases, Chapter 11, Supreme Court | 1 Comment

The transcript of oral argument yesterday can be accessed here.   It sure looks to me like secured creditors are going to retain the right to credit bid.  Kennedy asked no questions.

Judge Mark Houle Tentative on the Chapter 13 Addendum

By | April 22, 2012 | Chapter 11, Chapter 13 | No comments

Judge Mark Houle in Riverside has written a very nice tentative on the addendum and specifically whether it has been preempted by new Bankruptcy Rule 3002.1.  You can get the tentative ruling here.  Addendum-TENTATIVE- Houle His position is that the addendum remains alive and well.

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