Sheppard Mullin

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Conventional wisdom says that it is nearly impossible to obtain a discharge of student loan debt in bankruptcy. Indeed, Section 523(a)(8) expressly excepts student loans from discharge, unless the exception of such indebtedness from discharge would impose an undue hardship upon the debtor. But two recent developments may signal that this bedrock principle is eroding – i.e., (i) the Seventh Circuit’s affirmance of a bankruptcy court’s ruling that an impoverished but otherwise healthy woman’s student loan debts were dischargeable, and (ii) the recent introduction of a Congressional bill that would make it easier to discharge privately issued student loan debt.
Continue Reading Student Loans: Nondischargeability Questioned in Seventh Circuit and Beyond

By Michael M. Lauter 

In an unpublished decision in In re The Village at Lakeridge, LLC, BAP Nos. NV-12-1456 and NV-12-1474 (B.A.P. 9th Cir. Apr. 5, 2013), the United States Bankruptcy Appellate Panel of the Ninth Circuit held that a vote on a plan of reorganization submitted by a non-insider claimant is not to be disregarded under Bankruptcy Code section 1129(a)(10) merely because the claimant purchased the claim from an insider. In other words, the transferee of a claim does not step into the shoes of the transferor vis à vis the transferor’s status as an insider.…

Continue Reading Claims Trading From The Inside Out: Ninth Circuit BAP Holds That A Non-Insider Claimant’s Vote On A Plan Is Not Discounted Merely Because The Claimant Purchased Its Claim From An Insider

By Danielle Kennedy

Round one of the fight between the City of Stockton, California and its creditors is finally over. On April 1, 2013, Bankruptcy Judge Christopher M. Klein held that Stockton satisfied the eligibility requirements for a Chapter 9 debtor.

Back on June 28, 2012, Stockton filed a petition seeking to adjust its debts under Chapter 9 of the United States Bankruptcy Code.…

Continue Reading Judge Rules In Favor Of Stockton And Accepts Chapter 9 Petition

By Eugene Kim 

In a recent Fifth Circuit decision, Western Real Estate Equities, LLC v. Village at Camp Bowie I, L.P., No. 12-10271 (5th Cir. 2013), the court held that the acceptance vote from a minimally and “artificially impaired” class of claims meets the 11 U.S.C. § 1129(a)(10) requirement for the confirmation of a non-consensual “cramdown” chapter 11 plan.…

Continue Reading Lenders Beware — Fifth Circuit has lowered the bar for cramdown plan confirmation

By Reed Mercado 

In a recent decision from the California Court of Appeals entitled Jolley v. Chase Home Finance, LLC, the Court severely curtailed lenders’ ability to dispose of lender liability claims on summary judgment, thereby adopting a marked departure from existing law. In so doing, the Court admonished lenders that the “world [has been] dramatically rocked in the past few years by lending practices colored by short-sighted self-interest.”…

Continue Reading Lenders Beware — California decision may ignite next wave of lender liability litigation

By Aaron Kleven

The bankruptcy of the largest U.S. city to file a chapter 9 bankruptcy petition has yielded a decision with serious implications for municipal creditors. Specifically, the United States Bankruptcy Court for the Eastern District of California overruled the objections asserted by retired employees of the City of Stockton, California and authorized the City to suspend the retiree’s health benefits during the City’s Chapter 9 case. Ass’n of Retired Employees of the City of Stockton, et al. v. City of Stockton, California (In re City of Stockton), 56 Bankr.Ct.Dec. 250 (Bankr. E.D. Cal.). Bankrutcy Judge Klein acknowledged the potential hardship to the retirees, but citing Section 904 of the Bankruptcy Code stated that the court has no power to interfere with the property or revenues of the debtor during Chapter 9.…

Continue Reading Bankrupt Municipality May Reduce Retiree Benefits

By Christine Swanick, Carren Shulman, Wilda Wahpepah, and Shawn Watts

On March 4, 2013, ‘SA’ NYU WA, Inc., a tribally-chartered corporation wholly owned by the Hualapai Indian Tribe, filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court, District of Arizona. This is a very important case for tribes and any party conducting business with tribes because the petition will raise a question of first impression for the Bankruptcy Court. The Bankruptcy Court will have to decide whether a tribal corporation is eligible to be a debtor under the Bankruptcy Code.…

Continue Reading Tribal Corporate Bankruptcy Petition Raises Issues of First Impression for Bankruptcy Court

By Kristy Young

The California Supreme Court recently held that a borrower may rely upon oral promises to support a fraud claim against its lender even when such oral promises contradict the written agreement.

In Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Association, 55 Cal. 4th 1169 (2013), borrowers, after falling behind on their loan payments, restructured their debt. In the fully integrated written agreement, the borrowers agreed to a modified payment schedule and pledged eight properties as additional collateral. In exchange, the lender agreed to delay enforcement action for three months.
Continue Reading Lenders Beware – Oral Statements may Trump Written Agreements

By Alan Martin and Matthew Holbrook

On June 28, 2012, Stockton, California became the most recent municipality to file for bankruptcy under chapter 9, after having concluded a mandatory mediation process with its creditors. See, In re City of Stockton, California, Case No. 12-32118 (Bankr. E.D. Cal.). Many parties affected by a potential filing by other similarly situated California public entities are seeking to understand the process that precedes a Chapter 9 filing and how to plan for a possible filing. This summary provides an overview of the protocol before a California entity may file for Chapter 9 protection.
Continue Reading Chapter 9 – California and Federal Bankruptcy Law/Relative Bargaining Positions