Outside of section 506(b) of the Bankruptcy Code, which affords secured creditors a right to enforce their contractual entitlements to fees, the Bankruptcy Code does not expressly give creditors a right to seek reimbursement of fees incurred during a debtor’s bankruptcy. Section 503(b)(3)(D) of the Bankruptcy Code, however, permits a creditor to seek reimbursement of fees and expenses incurred by the creditor in making a “substantial contribution” to the case. In assessing a creditor’s “substantial contribution,” where does the bankruptcy court draw the line between the consequences of a creditor acting out of self-interest to capture the maximum value from the debtor’s estate as opposed to the effects of a creditor acting to uphold the integrity of the bankruptcy system? Does the motive even matter if the results benefit the estate? In a recent decision, the Bankruptcy Court for the Eastern District of Pennsylvania adopted a framework for answering these questions.
Background

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Small banks and credit unions should work together to put pressure on legislators and regulators to reduce unnecessary and cumbersome regulations.

BankThink
(posted 1 week 1 day ago)

One of the most frequent questions I get is: "How am I going to pay the attorney's fees and costs for a bankruptcy?"

Yes, we know you're seemingly strapped, but you actually have more resources than you realize.

Here are some:

1) Stop paying on the debt you are going to discharge anyway. In bankruptcy, almost all debts are dischargeable (wiped out). (There are a few, such as governmental fines, recent taxes, etc., but your bankruptcy attorney will identify them and discuss them with you.) The majority, such as credit cards, unsecured lines of credit, judgments, will be gone. Stop paying immediately and save up that money to finance your case. These are professional lenders, they understand.

And, by the way, once you hire an lawyer, you can stop the collector calls by simply telling them you have hired a bankruptcy attorney to prepare a case. Give them the name of your attorney, because they will call to confirm, and the calls will stop.

Professional lenders know they will be violating a court order by calling once you have filed, and since they don't know when you will file, as a matter of company policy, they usually stop the calls altogether. Whew.

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As I’ve mentioned before, Kentucky law is quirky in many respects.  Unlike most states, Kentucky’s fraudulent transfer statute is essentially bespoke, adopting neither the Uniform Fraudulent Transfer Act or the Uniform Fraudulent Conveyance Act.  Kentucky’s Constitution requires that lawyers swear an oath that they’ve never participated in (or seconded) a duel.  Kentucky’s Constitution also adopts wholesale the common law in effect in Virginia on the day that Kentucky became a state.  While interesting, these are not likely to cause most commercial lawyers any alarm.

The Kentucky statute that ought to cause alarm, and which has created abundant litigation in Kentucky for regional or national creditors, is Kentucky’s statute regarding the enforceability of guaranty agreements.  To be valid, guaranty agreements in Kentucky must comport with KRS 371.065, which provides:

Creditors' Sidebar
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International treaties take years to complete as it is, so imagine the complexities at play in a hypothetical international insolvency treaty.
But at least people are starting to talk about it.
On Friday, at the International Global Restructuring Organization’s annual conference in Modena, Italy, Chief New York Bankruptcy Judge Cecelia Morris will speak about the bankruptcy of the city of Detroit, insolvency risk in Puerto Rico and the ongoing problems in Argentina. Judge Morris told Bankruptcy Beat that while formal international insolvency agreements related to sovereign states may be a few years off, getting the restructuring experts in the same room as the financial players is a huge part of moving closer.
“Financial people want to know that they’re protected,” Judge Morris said.
The U.S. is of course a long way ahead of many countries in terms of corporate restructuring, and even has Chapter 15 of the Bankruptcy Code in place for foreign companies with U.S. interests. Educating people in other countries on working with a group of creditors, especially when politics are involved, can be difficult.

WSJ.com: Bankruptcy Beat
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The Backstreet Boys perform during a concert at the City Hall in Vienna on July 15.
European Pressphoto Agency

The Backstreet Boys’ bankruptcy battle is over.
New court filings show the pop singers have settled their claims against their creator, Lou Pearlman, whose bankruptcy filing preceded the onetime music mogul’s arrest on fraud charges.
The Boys (all of whom are well over the age of 30) said Mr. Pearlman and his Trans Continental Records owed them roughly $3.5 million. As we previously reported, those claims were challenged last year by a bankruptcy trustee on the grounds that they lacked the necessary proof to back them up.
The fighting continued into this year when a bankruptcy judge ordered lawyers for the band and the trustee to work it out. And so they did, according to papers filed Tuesday in a Florida bankruptcy court.

WSJ.com: Bankruptcy Beat
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The Volcker Rule's data-intensive requirements are creating headaches for banks that still rely on manual processes and use multiple, disparate systems for securities and different derivatives trading.

BankThink
(posted 1 week 1 day ago)

Authored by Scott J. Kennelly and Scott St. Amand and Scott J. Kennelly and Scott St. Amand of Rogers TowersThe advent of social media has brought about many changes in the world of litigation, not the least of which is the availability of information that previously would have been impossible to discover.  It is hardly an exaggeration that between Facebook, Instagram, Twitter and other social media platforms, millions of people post their every move online.  In fact, there are “apps,” such as Foursquare, that update a user’s location in real time.  With this potentially unlimited record of a litigant’s daily behavior, practitioners are chomping at the bit to acquire such information.
Because the discovery of social media in litigation is so new, there is limited case law on the subject.  As the case law emerges, however, one of the leading questions revolves around what information can be considered “public” and what information is “private”.  Is a Facebook post public if the user has selected privacy settings which allow only a limited group of friends to read the post or see his or her pictures?

Florida Banking Law Blog
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24 companies have adopted fee-shifting bylaws since May, according to Professor John Coffee in his testimony before the SEC Investor Advisory Committee. Fee-shifting bylaws impose a “loser pays” rule that transfers a company’s costs and expenses in shareholder litigation to the plaintiff shareholder if the plaintiff is unsuccessful.  

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Debt holder losses on defaulted debt were in line with Moody’s Investor Service predictions, a new analysis of hundreds of bankruptcies by the credit ratings agency showed. Read the Daily Bankruptcy Review article here.
(Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit our homepage, scroll to the bottom and click “try for free.”)
GT Advanced Technologies Inc. will stop making sapphire materials under its agreement with supplier Apple Inc., Reuters reports.
A Brazilian court accepted a request for bankruptcy by MMX Sudeste Mineracao SA, part of businessman Eike Batista’s mining company, The Wall Street Journal reports.
An expert said Detroit can survive after bankruptcy, but there are risks, Reuters reports.

WSJ.com: Bankruptcy Beat
(posted 1 week 1 day ago)