Bankruptcy Blogs

(See entire posting on this issue at February 10, 2009)

In a majority opinion dated December 15, 2009, the Ninth Circuit Bankruptcy Appellate Panel held that a chapter 11 debtor may not equitably subordinate a creditor's claim and transfer the lien securing that claim, when such creditor is, itself, in bankruptcy, before first obtaining relief from the automatic stay under section 362 of the U.S. Bankruptcy Code in such creditor's bankruptcy case. Lehman Commercial Paper v. Palmdale Hills Prop. (In re Palmdale Hills Prop., LLC), 2009 Bankr. LEXIS 4294 (B.A.P. 9th Cir. Dec. 15, 2009).  

Given the state of commercial real estate, the prospect for defaults by commercial borrowers has greatly increased. The last time there was a significant downturn in the commercial real estate sector in the early 1990s, owners of buildings and other real estate often turned to Chapter 11 bankruptcy as a method of buying time and, in some cases, lowering or at least restructuring the amount of secured debt against the real property through a plan of reorganization. This raises the question -- will the same story play out again in this downturn?

In In re S & B Surgery Center, Inc., 421 B.R. 546 (Bankr. C.D. Cal. 2009), Judge Samuel L. Bufford addressed the question of whether a creditors' committee MUST maintain an information website in order to comply with bankruptcy code section 1102(b)(3).