PRESS-NEWS.org - Press Release Distribution
PRESS RELEASES DISTRIBUTION

Supreme Court Reverses Third Circuit's Decision on Credit Bidding

Chapter 11 filers must carefully consider the rights of secured creditors in Chapter 11 bankruptcy proceedings, a recent Supreme Court decision confirms.

2012-10-20
October 20, 2012 (Press-News.org) The Supreme Court of the United States has reversed a ruling of the Third Circuit Court of Appeals on a Chapter 11 bankruptcy issue known as credit bidding. The Supreme Court unanimously ruled that Chapter 11 reorganization plans cannot sell the property of a secured creditor without giving that creditor the opportunity to credit bid on it.

Two Important Terms: Credit Bidding and Cramdown

In order to understand the Supreme Court's recent decision, it is necessary to understand two key Chapter 11 bankruptcy terms: credit bidding and cramdown. In the Chapter 11 bankruptcy process, filers develop a reorganization plan that may include auctioning property to pay off their debts. This property may include collateral used by creditors to secure a loan. For example, a small office building may be used as collateral on the mortgage of that building.

At the auction, secured creditors usually have the option of credit bidding on the collateral property. This means they can offer to forgive part of the debt the filer owes instead of a cash bid on the property. For example, the creditor who owns the mortgage on the small office building may offer the filer forgiveness of half of the loan as a bid on the property, while third parties may offer cash bids.

A cramdown is another common Chapter 11 term. Since Chapter 11 does not liquidate assets but allows filers to come up with a reorganization plan, often creditors must reach a compromise with the filer on the amount of debt owed. A cramdown allows the filer to get their reorganization plan approved despite creditors' grievances. In other words, the reorganization plan is "crammed down" the throats of creditors. Cramdowns allow bankruptcy courts to modify loan terms to make them equitable for all parties.

The Supreme Court's Unanimous Decision Reinforces a Creditor's Right to Credit Bidding

In the Supreme Court's unanimous opinion, Justice Antonin Scalia explained that there are three ways courts can determine whether or not a reorganization plan is fair for objecting secured creditors. First, a secured creditor can keep the lien and the filer can make deferred payments. Or, the property can be sold clear of the lien and the creditor is paid with the proceeds of the sale. Lastly, the reorganization plan may pay the secured creditor the "indubitable equivalent" of the loan amount.

In the case before the Supreme Court, the bankruptcy filer, RadLAX, proposed a Chapter 11 reorganization plan after it ran out of money in a hotel redevelopment project near the Los Angeles Airport. In the plan, RadLAX required that their secured creditor bid on its collateral property in cash rather than with credit. Knowing that this would prompt objections from the creditor, the filer tried to cramdown the plan, claiming that the cash bidding provided an "indubitable equivalent" of the property's worth.

The Third Circuit Court of Appeals upheld this interpretation of bankruptcy rules, but the Supreme Court reversed the Circuit Court's opinion, calling the interpretation "hyperliteral and contrary to common sense". In its opinion, the Supreme Court explained that the filer's interpretation ignores section 363k of the bankruptcy code, which allows secured creditors to use loan forgiveness to bid on its collateral properties rather than cash.

The Supreme Court's decision will require Chapter 11 bankruptcy filers to carefully consider the protections secured creditors enjoy in the bankruptcy code. However, it does not affirm that bankruptcy filers cannot cramdown reorganization plans that meet the requirements of bankruptcy rules but are still objectionable to secured creditors. If you are considering Chapter 11 bankruptcy but have concerns about the objections of your secured creditors, please contact an experienced bankruptcy attorney.

Article provided by Scura, Mealey, Wigfield & Heyer, LLP
Visit us at www.scuramealey.com


ELSE PRESS RELEASES FROM THIS DATE:

Female Crash Test Dummies Now Used in Car Safety Tests

2012-10-20
Car accidents have the potential to cause very serious injuries. Although nothing can completely erase the risk of harm that comes with a crash, good vehicle design can go a long way to minimize the severity of crash victims' injuries. Most people are probably aware that automobile manufacturers use crash-test dummies to measure the risk of injury in a car accident. These measurements are then translated into consumer safety ratings. However, many people may be surprised to learn that most of these safety rankings apply only to average-sized males. Until recently, automakers ...

National Safety Groups Promote Construction Fall Prevention

2012-10-20
Construction zones are inherently dangerous, with job duties that often require working at extreme heights. Every year, 225 construction workers die and another 10,000 are injured in preventable falls. In 2010, 264 out of 774 total construction worker deaths were caused by falls. Now, several safety agencies, including the Occupational Safety and Health Administration (OSHA), have launched campaigns to prevent falls and construction worker deaths. Safety Groups Team Up for Construction Fall Safety OSHA, the National Institute of Occupational Safety and Health (NIOSH) ...

Possession of Child Pornography Sentences Often as Severe as Sexual Abuse

2012-10-20
The sexual abuse of children is a serious matter. Public discussion has most recently centered on the Penn State scandal as many within the media debate the proper punishment that should be served not only against Jerry Sandusky but against the university as well. While this discussion is taking up media attention, another related discussion is gaining momentum among legal and legislative professional communities. This controversial topic focuses on the fact that over the past 22 years federal sentences for the possession of child pornography have increased dramatically, ...

Uninformed Students Have Highest Risk of Credit Card Troubles

2012-10-20
There's no doubt about it, going to college is expensive. Between rent, food, books and the ever-increasing price of tuition, many Texas students find it hard to make ends meet. Since few students have the time to work as many hours as it would take to support themselves and still do well in school, many go into debt to pay the bills. When student loans don't provide enough support, they turn to credit cards. Although credit cards can be helpful for college students, they can also be very dangerous if not used carefully. A few mistakes or missed payments could start ...

More Employers Failing to Pay Proper Wages and Overtime in Florida

2012-10-20
American workers are filing more lawsuits against employers than ever before. In 2012, wage and hour lawsuits are the highest they have been in 20 years. As of March 31, 2012, there were 7,064 federal wage and hour cases filed compared to the 1,184 cases filed in 2000. What are Wage and Hour Lawsuits? The federal Fair Labor Standards Act (FLSA) and Florida state's employment laws dictate an employee's rights, as well as the legal remedy to enforce those rights. For example, in Florida: - Workers must be paid a minimum wage of $7.67. - Employees who receive tips ...

State Farm Under Investigation for Texas Hurricane Ike Insurance Denials

2012-10-20
When you purchase insurance and pay your premiums every month, you expect that the insurance company will uphold its end of the bargain when a loss occurs. Unfortunately, this isn't always the case. Like all businesses, insurance companies are concerned about protecting their bottom lines. Sometimes, they try to save money by wrongfully denying valid claims. When it comes to dealing with insurance companies, small injustices happen every day. However, when a big event hits, it is much easier for insurance bad faith to be brought into the light. As a case in point, ...

Florida Man Fired for High Medicals Costs for Daughter's Cancer Treatments

2012-10-20
A Florida man has sued his employer for wrongful termination, claiming that he was fired, not for falsifying time sheet records, as the company claims, but because of his daughter's high medical costs. The case shows employees that it is possible to hold employers responsible for wrongful termination. Man Asserts He Was Fired Due to Daughter's High Medical Expenses The Palm Beach County man was fired at his job at a bank on the pretext that he falsified his timesheet. However, the man believes the real reason he was let go was the high cost of his late daughter's ...

Poor Crash Test Ratings Should Put Nevada Car Buyers on Alert

2012-10-20
Recently, the Insurance Institute for Highway Safety (IIHS) put 11 luxury vehicles through a new test called the small overlap test. The results were rather disturbing: Only two vehicles earned a "Good" rating and several rated "Poor", including at least one current IIHS "Top Pick" for safety. The IIHS Luxury Car Safety Tests The small overlap test evaluates a vehicle's ability to withstand an impact to the driver's side front corner. This is the type of motor vehicle accident can occur, for example, when a vehicle crashes into a telephone ...

Teen Lives Being Saved by New Licensing Programs

2012-10-20
Over the last 15 or so years, young people anxiously awaiting the freedom that comes with turning 16 years old and receiving a driver's license have seen the process of obtaining their licenses become longer and more restrictive. All 50 states now have graduated driver's license programs. The purpose of these licensing programs is to ensure that young drivers gain experience in the safest possible manner; often by restricting new drivers from driving late at night, ensuring an experienced driver is in the passenger seat, and limiting the number of passengers allowed ...

Chicago Police Say Odor of Marijuana Justified Search, Judge Not So Sure

2012-10-20
The right to be free from unreasonable searches and seizures is one of the most important constitutional protections afforded to the American public. Among other things, this right means that police may not search your vehicle unless they have an objective and compelling reason to suspect that a crime has been committed. When police conduct a search that violates your right to be free from unreasonable searches, any evidence that is uncovered as a result cannot be used against you in court. All too often, police take note of strong odors of marijuana or some other drug ...

LAST 30 PRESS RELEASES:

Algorithms could help improve judicial decisions

Scientists uncover a multibillion-year epic written into the chemistry of life

Monitoring diseases through sweat becomes accessible to everyone

Mathematical model driven evolutionary therapy dosing exploiting cancer cell plasticity

Biodiversity in the margins: Merging farmlands affects natural pest control

1 in 8 pregnant people have a disability, but significant gaps exist in the provision of accessible care

Statins associated with decreased risk for CVD and death, even in very old adults

Climate change is moving tree populations away from the soil fungi that sustain them

Secrets of sargassum: Scientists advance knowledge of seaweed causing chaos in the Caribbean and West Africa

Bioinformatics approach could help optimize soldiers’ training for improved readiness and recovery

Earth scientists describe a new kind of volcanic eruption

Warmer wetter climate predicted to bring societal and ecological impact to the Tibetan Plateau

Feeding infants peanut products protects against allergy into adolescence

Who will like beetle skewers? What Europeans think about alternative protein food

ETRI wins ‘iF Design Award’ for mobile collaborative robot

Combating carbon footprint: novel reactor system converts carbon dioxide into usable fuel

Investigating the origin of circatidal rhythms in freshwater snails

Altering cellular interactions around amyloid plaques may offer novel Alzheimer’s treatment strategies

Brain damage reveals part of the brain necessary for helping others

Surprising properties of elastic turbulence discovered

Study assesses cancer-related care at US hospitals predominantly serving minority populations compared with non-minority serving hospitals

First in-human investigator-initiated clinical trial to launch for refractory prostate cancer patients: Novel alpha therapy targets prostate-specific membrane antigen

Will generative AI change the way universities communicate?

Artificial Intelligence could help cure loneliness, says expert

Echidnapus identified from an ‘Age of Monotremes’

Semaglutide may protect kidney function in individuals with overweight or obesity and cardiovascular disease

New technique detects novel biomarkers for kidney diseases with nephrotic syndrome

Political elites take advantage of anti-partisan protests to disrupt politics

Tiny target discovered on RNA to short-circuit inflammation, UC Santa Cruz researchers find

Charge your laptop in a minute? Supercapacitors can help; new research offers clues

[Press-News.org] Supreme Court Reverses Third Circuit's Decision on Credit Bidding
Chapter 11 filers must carefully consider the rights of secured creditors in Chapter 11 bankruptcy proceedings, a recent Supreme Court decision confirms.