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Why Courts in the Eleventh Circuit Should No Longer Apply Denham’s Small and Recurring Numerosity Exclusion

May 11, 2016 Banking & Financial Services Industry Legal Blog

An involuntary bankruptcy case is typically commenced by a petition joined by at least three petitioning creditors. However, an involuntary petition may be filed by a single petitioning creditor if the debtor has 11 or fewer “qualified” creditors. This is often called the “numerosity” requirement. The Bankruptcy Code, in Section 303(b)(2), expressly defines which creditors count in the numerosity requirement. In determining whether there are 11 or fewer creditors, certain creditors are ignored, including (a) any employees of the debtor who are also creditors, (4) any “insiders” of the debtor who are creditors, and (3) any creditors who received voidable transfers under §§ 544, 545, 547, 548, or 724(a) of the Bankruptcy Code.

Bankruptcy Asset Sales: How a “Free and Clear” Section 363 Sale Affects the Purchaser’s Liability

October 14, 2014 Banking & Financial Services Industry Legal Blog

By: Brandon C. Meadows

When purchasing assets from a bankruptcy estate, purchasers often rely on the protections of 11 USC 363(f) of the Bankruptcy Code, which allows property to be sold “free and clear of any interest in property” if one of five statutory conditions are met. Those conditions are:
1.Applicable non-bankruptcy law permits a sale free and clear of interests;
2.The interest holder consents to the sale;
3.The interest is a lien and the sale price exceeds the aggregate value of all liens on the property;
4.The interest is in bona fide dispute; or
5.The holder could be compelled in a legal or equitable proceeding to accept money satisfaction of its interest in the property.

Critical Vendor Payments: What are They and When do Bankruptcy Courts Authorize Them?

September 15, 2014 Banking & Financial Services Industry Legal Blog

By Austin B Calhoun

Vendors are sometimes presented with customers going into bankruptcy. Vendors experienced in this dilemma are aware of preference actions pursuant to 11 U.S.C. § 547(b), whereby the trustee seeks to recover from the vendor all payments received from the debtor within the 90 day period prior to petition. There are various mechanisms and defenses a vendor can employ to block preference action recovery. One such tool is the critical vendor doctrine. This blog examines the steps a vendor must take to successfully implement the critical vendor doctrine in Florida bankruptcy courts.

Lenders and Vendors Beware: Deprizio can Spoil Your Insider Guarantees – but a Waiver may Protect You

April 22, 2014 Banking & Financial Services Industry Legal Blog

Lenders and trade vendors often sagely require personal guarantees from the insiders of their debtor. In the event of debtor bankruptcy, a creditor may look to the insider-guarantor to satisfy the debt. The creditor’s ability to be made whole, then, is directly related to the financial position of the insider-guarantor. There is a problem: the Deprizio doctrine can erode the insider-guarantor’s financial position. Under the doctrine, the bankruptcy Trustee may disgorge assets from the guarantor that could otherwise satisfy the debt. Luckily, there is a solution to the Deprizio problem: a carefully crafted guaranty agreement that waives the guarantor’s claim against the bankruptcy debtor. This blog post explains the problem and clarifies the solution.

Obtaining Relief from a Default Final Judgment in Bankruptcy

November 27, 2013 Banking & Financial Services Industry Legal Blog

What do you do when a client comes to you stating that a default final judgment was entered against them and they want out of it? The answer is you move to set it aside for cause, which is a viable plan of action under state law as well as federal bankruptcy law. Entry of a final judgment after default is not necessarily the end of the road for your client. In certain circumstances, it may just be the beginning.

Untimely Proofs of Claim Filed in a Bankruptcy Action

August 5, 2013 Banking & Financial Services Industry Legal Blog

When a debtor files a bankruptcy action, creditors may or may not have the opportunity to file a proof of claim evidencing the amount owed to the creditor on the date the bankruptcy action was filed. The court sets a deadline for filing the proof of claim, to which all creditors must strictly adhere. But what if a creditor misses the deadline? Is all hope lost, or is there a mechanism to still get the claim in and receive a portion of any distribution? Well, whether an untimely claim is valid or not really turns on notice.

Collectability of Condominium Assessments Pre- and Post-Petition in Bankruptcy

July 25, 2013 Community Association Industry Legal Blog

It is common knowledge that when a company or individual files for bankruptcy, all collection activity stops. What is commonly not known is that condominium assessments are, in a manner of speaking, exempt from that rule. The fact is, all collection activity does not have to stop and you can still recover assessments that come due after the bankruptcy action is filed. Let’s read on to see exactly how all this works.

Appointment of Receivers in Debt Collection: A Brief Overview of Pro’s and Con’s

July 9, 2013 Banking & Financial Services Industry Legal Blog

Very often in a debt collection action, whether a breached contract, defaulted secured note or otherwise, there will be a debtor who is trying to deplete corporate assets (frequently real property) before the inevitable judgment can be rendered. Sometimes depletion isn’t intentional, it is just a byproduct of the business judgment issues that created the problem in the first place. In those circumstances where assets are being wasted, and many more, creditors should consider seeking the appointment of a state court receiver. Receivers can serve as watchdogs for the business, ensuring that status quo is maintained so that the creditors are able to recover whatever assets may remain with an orderly liquidation. In the matters we handle for lenders (and other creditors), receivers come in very handy in the active management of the collateral properties. Appointment of receivers is not a remedy for every case, however, as it often has just as many challenges associated as it does benefits. This Blog post seeks to explore those benefits and drawbacks.

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