Bankruptcy For Business Lawyers Ii

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A ppt on the basics of bankruptcy for business lawyers. Please email me if you would like a copy. Steven.Silton@gmail.com

A ppt on the basics of bankruptcy for business lawyers. Please email me if you would like a copy. Steven.Silton@gmail.com

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  • 1. Bankruptcy for Business Lawyers Thomas Wallrich and Steven Silton
  • 2. INTERSECTION OF BUSINESS LAW AND BANKRUPTCY
  • 3. INTERSECTIONS OF BUSINESS AND BANKRUPTCY
    • Business client in financial trouble.
      • Trade Debt.
      • Tax Debt.
      • Change in interest rates.
    • Vendor in financial trouble.
      • Vendor in bankruptcy.
      • Vendor not in bankruptcy.
    • Customer or receivable debtor in bankruptcy.
    • Owners and/or Officers in financial trouble.
    • Business opportunities in bankruptcy.
  • 4. Questions
    • What happens to unsecured
    • creditors?
    • What happens to secured obligations?
    • What happens to leases?
    • What happens to unfulfilled contracts?
    • What can be done about tax obligations?
    • Who controls the debtor’s assets?
    • Who can buy the debtor’s assets?
    • What are the risks of doing business with a debtor?
  • 5. Biblical Times
    • 7 Years till forgiveness
    • Deuteronomy 15:1-4
  • 6. Bankruptcy in History
    • IN ROMAN TIMES- 12 tablets 451-450 B.C.
    • Cessio Bonorum
    • BK Law enacted by Julius Caeser
  • 7. U.S. Law
    • Constitution provides for regulation of Bankruptcy laws by congress.
    • Five Bankruptcy Laws.
    • 1800
    • 1841
    • 1867
    • 1898
    • 1978 and amendments.
  • 8. Forms of Bankruptcy
    • Chapter 7
    • Chapter 11
    • Chapter 13
  • 9. Automatic Stay 11 U.S.C 362
    • All creditor action and litigation stayed without any further action by debtor.
  • 10. Relief from Stay
    • Section 362 (d)(1).
    • For “cause” including a lack of adequate protection.
    • Considerations for cause:
      • Existence of insurance coverage;
      • Judicial economy;
      • How far has the litigation progressed;
      • Specialized area of law;
      • Is full relief available without the debtors;
      • Creditors probability of success;
      • Interest of the debtor.
  • 11. Cash Collateral
    • Section 363 (a)
    • The most fundamental right a debtor has is to use it’s own cash.
    • Need the consent of creditor or court order.
    • Helpful to have a understanding with secured creditor prior to filing.
    • Contested cash collateral hearing often determines ability to reorganize.
  • 12. Adequate Protection
    • Section 361. All interest in non-cash assets must be protected against loss or diminution in value in Chapter 11.
    • Manners of adequate protection:
      • Periodic cash payments;
      • Replacement lien;
      • Other relief.
  • 13. Executory Contracts-Unexpired Leases
    • Section 365.
    • Debtor has absolute right to assume or reject executory contracts and leases.
    • Breathing spell following filing to review which leases and contracts are profitable and or necessary for the business operations.
    • Debtor may unilaterally choose to reject.
  • 14. Determination of Interest
    • Lease or security interest affects treatment.
    • Determined by state law.
    • If lease, governed by Section 365, otherwise by Section 506 (determination of extent of secured claim) and by Section 361 (adequate protection).
  • 15. Leases and Executory Contracts Timing
    • 120 deadline.
    • Extended only once for 90 days.
    • No further extension without consent of landlord.
  • 16. Sales of Property of the Estate
    • Section 363(f).
    • Allows the debtor to sell property free and clear of liens if:
      • Sale does not violate non-bankruptcy law;
      • Entity consents;
      • Sale price is in excess of outstanding liens;
      • Such interest is in a bona fide dispute; or,
      • Such entity could compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
  • 17. Section 363 and Beyond
    • Additional property can be sold, including:
      • A life estate;
      • Licenses (i.e. Liquor license, profits, etc.);
      • Claims.
      • Reorganization often exists of the sale of property out of a bankruptcy and distribution of proceeds (commonly referred to as a 363 Bankruptcy)
  • 18. Conversion or Dismissal
    • Section 1112(b)(4).
    • Cause includes:
      • Continuing loss;
      • Gross mismanagement;
      • No insurance;
      • Unauthorized use of case;
      • Failure to comply with court order.
  • 19. Plan and Disclosure Statement
    • Section 1123 defines content of plan.
    • Section 1125 defines content of disclosure statement.
    • Contract Between Debtor and Creditors.
    • Plan classifies similar claims and defines distributions.
    • Debtor has exclusive right to file a plan for 120 days.
  • 20. Claims in Bankruptcy
    • Definition. Section 101 (5). Any right to payment. Or any right to an equitable remedy which gives rise to a right to payment.
    • Procedure.
      • Properly filed proof of claim is prima facie proof of validity.
      • Section 502 (b) states grounds for allowance/objections to claims.
  • 21. Secured Claims
    • Section 506.
    • Claim is secured only to the extent of the value of collateral.
    • Adequate protection is provided to the extent of security interest.
  • 22. Priority Claims
    • Section 507 lists which claims have priority treatment:
      • Approved administrative expenses;
      • Taxes;
      • Section 502 (f) gap claims;
      • Certain wages, salaries and commissions up to $10,000.
      • Employee benefit contributions.
  • 23. Preference Claims
    • Section 547:
      • Transfer;
      • To or for the benefit of a creditor;
      • For or on account of an antecedent debt.
      • Made within 90 days (1 year for insiders) of filing;
      • Made will debtor was insolvent;
      • Which gives creditor more than he would have received in a liquidation.
  • 24. Fraudulent Conveyances
    • Section 544 and 548.
    • Transfer for less than adequate consideration.
    • Timing (2 years) or under state law.
  • 25. Bankruptcy Court Litigation
    • Jurisdiction.
    • Venue.
  • 26. 2005 Amendments Ten things you need to know about business bankruptcy after bankruptcy reform
  • 27. 2005 Amendments Automatic Stay
    • A number of exceptions including what could be construed as a good faith exception.
  • 28. 2005 Amendments
    • Changes to the administration of small business bankruptcies.
    • New restrictions on preferences.
    • Venue and other changes to preference litigation.
    • Chapter 15.
  • 29. 2005 Amendments
    • Changes to lease and executory contract provisions.
    • Expanded grounds for appointment of trustee or examiner.
    • Expanded ability to solicit acceptance.
    • Utilities have much greater power.
    • Secured creditors stronger. Unsecured creditors more regulated.
  • 30. Back to the Questions-Intersections
  • 31. INTERSECTION REVISITED
    • Business client in financial trouble.
      • Trade Debt.
      • Tax Debt.
      • Change in interest rates.
      • Answers:
      • Review cash flow without unsecured creditor payments.
      • Review secured creditor structure (cash collateral).
      • Review bad leases and contracts.
      • Review creditor claims.
      • Review pending litigation.
  • 32. INTERSECTION REVISITED
    • Vendor in financial trouble.
      • Vendor in bankruptcy.
      • Vendor not in bankruptcy.
      • Answers:
      • Reviewing existence of security.
      • Analyze potential preferences.
      • Review reclamation issues.
  • 33. INTERSECTIONS REVISITED
    • Customer or receivable debtor in bankruptcy.
      • Answers:
      • Review status of bankruptcy.
      • Don’t pay without court order.
      • Make sure you are paying right person.
    • Owners and/or Officers in financial trouble.
      • Answers:
      • Watch out for tax issues.
      • No key employee compensation arrangements.
      • Monitor pension funds contributions.
      • Avoid fiduciary traps.
  • 34. INTERSECTIONS REVISITED
    • Business opportunities in bankruptcy.
      • Answers:
      • Understand your clients’ markets.
      • Educate your clients’ on ability to purchase property from debtors.
      • Maintain relationship with local trustees, turnaround companies and liquidators.
  • 35. INTERSECTION REVISITED
    • Inform clients that an official letter from a “Trustee” for a demand for a repayment of a preference should not be honored without review.
    • File claims as soon as received. Watch for objection to claims which are often done in bulk. File right claim.
  • 36. The End