Making a bad check good - preference risks caused by bounced check

Article Abstract:

The lesson of the Fourth Circuit's decision in In re Barefoot is that creditors must keep their security interests until they have received payment and made sure the check is good. The creditor in Barefoot released its security interest before finding out that the debtor's first check in payment was dishonored. The debtor went bankrupt less than 90 days after making good on the dishonored check, and the bankruptcy trustee successfully requested that the sum be declared a voidable preference under Section 547(b) of the Bankruptcy Code and returned.

Bankruptcy law, Debtor and creditor

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A flexible approach to classification of claims

Article Abstract:

The bankruptcy court considered in Kleigl Bros. Universal Electric Stage Lighting Co the Bankruptcy Code 1129(b) requirement that a chapter 11 plan cram down be equitable and not discriminate against nonaccepting classes. The case concerned the terms of payment under a Chapter 11 plan to a union and other general unsecured creditors. The bankruptcy court decided that allowing the union 75% recovery for its unsecured claims and the other unsecured creditors only 15% was discriminatory but the fairest possible result under the circumstances.

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Loans from shareholders during Chapter 11 case prime existing undersecured mortgagees

Article Abstract:

The issue in In re 495 Central Park Avenue Corp was whether shareholders making loans to a debtor corporation in a bankruptcy proceeding then hold a lien with a higher priority than existing mortgagees. The bankruptcy court allowed the shareholders the new value exception to the absolute priority rule, giving their loan to the debtor senior priority that primed the existing first mortgage. The property improvements and increase in property value made possible by the loan were held to be sufficient reason for granting senior lien status.

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