Download ppt - Fighting About Involuntary Bankruptcy Petitions

FIGHTING ABOUT INVOLUNTARY

BANKRUPTCY PETITIONS

Part of the the Commercial Bankruptcy Litigation 2015 Series

Premier Date: September 8, 2015

FIGHTING ABOUT INVOLUNTARY BANKRUPTCY PETITIONS

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MEET THE FACULTY

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PANELISTSJeff Bast Bast AmronKirk Burkley Bernstein – Burkley, P.C.Adam Nach Lane & Nach, P.C.


MODERATORBeau Hays,

Hays, Potter & Martin

Practical and entertaining education for business owners and executives, Accredited Investors, and their

legal and financial advisors.

For more information, visit www.financialpoisewebinars.com

DISCLAIMER:

THE MATERIAL IN THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY. IT SHOULD NOT BE CONSIDERED LEGAL ADVICE. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE WHAT

MAY BE BEST FOR YOUR INDIVIDUAL NEEDS

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CLLA is the leader in providing expertise, insight and results to and for attorneys, credit grantors and their

partners in the credit and business communities. For more information, visit www.clla.org.

DISCLAIMER: THE MATERIAL IN THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY. IT SHOULD NOT BE CONSIDERED LEGAL ADVICE. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE WHAT MAY BE

BEST FOR YOUR INDIVIDUAL NEEDS

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ABOUT THIS EPISODE

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It generally only takes three creditors to sign an involuntary bankruptcy petition. But that is just the first step in trying to force a company to become a debtor in bankruptcy. Attend this webinar to learn about when your client may want to sign an involuntary bankruptcy petition and the risks involved in doing so. This webinar will also discuss what to do if an involuntary petition is filed against your client.

EPISODES IN THIS SERIES

EPISODE #1 How to Defeat a Single Asset Real Estate Case5/5/15

EPISODE #2 Professional Responsibility in Bankruptcy Cases 6/2/15

EPISODE #3 Valuation Fights in Bankruptcy 7/7/15

EPISODE #4 Overview of Fraudulent Transfer Litigation 8/4/15

EPISODE #5 Fighting About Involuntary Bankruptcy Petitions 9/8/15

EPISODE #6 Cash Collateral and DIP Loans 10/6/15

EPISODE #7 Anatomy of Preference Litigation 11/3/15

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(Dates below are premier dates; all webinars also available on demand)

11 U.S. Code § 303(a) and (b) - Involuntary cases

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Review the Schedules and Statement of Financial Affairs(a) An involuntary case may be commenced only under chapter 7 or 11 of this title, and only against a person, except a farmer, family farmer, or a corporation that is not a moneyed, business, or commercial corporation, that may be a debtor under the chapter under which such case is commenced.

(b) An involuntary case against a person is commenced by the filing with the bankruptcy court of a petition under chapter 7 or 11 of this title— (1) by three or more entities, each of which is either a holder of a claim against such person that is not contingent as to liability or the subject of a bona fide dispute as to liability or amount, or an indenture trustee representing such a holder, if such non contingent, undisputed claims aggregate at least $10,000 more than the value of any lien on property of the debtor securing such claims held by the holders of such claims;


11 U.S. Code § 303(a) and (b) - Involuntary cases

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(2) if there are fewer than 12 such holders, excluding any employee or insider of such person and any transferee of a transfer that is voidable under section 544, 545, 547, 548, 549, or 724 (a) of this title, by one or more of such holders that hold in the aggregate at least $10,000 of such claims;

(3) if such person is a partnership— (A) by fewer than all of the general partners in such partnership; or

(B) if relief has been ordered under this title with respect to all of the general partners in such partnership, by a general partner in such partnership, the trustee of such a general partner, or a holder of a claim against such partnership; or

(4) by a foreign representative of the estate in a foreign proceeding concerning such person.


A creditor holding claims against a debtor may file an involuntary bankruptcy petition only under Chapter 7 (liquidation) or Chapter 11 (reorganization) of the Bankruptcy Code. Under Chapter 7, the debtor's assets are liquidated to pay creditor claims. Under Chapter 11, creditors are paid from the cash flow of the debtor's business.

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Chapter 7 or Chapter 11

How Involuntary Filing Works One or more creditors files a petition with the bankruptcy

court Once the petition is filed, the debtor has 20 days to respond

to the petition If the debtor does not respond, the court will allow the

bankruptcy and the debtor will have no choice but to participate.

If the debtor does respond, a hearing will be set, and if the judge decides based on the evidence that the petition was filed in good faith and that the debtor is not paying the debts, the judge will order that the bankruptcy go forward.

If the judge finds in the debtor's favor, however, he or she will dismiss the case and might require the creditors that filed the case to pay the debtor's costs and fees.

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11 U.S. Code § 303(c), (b), (e) and (f) - Involuntary cases

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(c) After the filing of a petition under this section but before the case is dismissed or relief is ordered, a creditor holding an unsecured claim that is not contingent, other than a creditor filing under subsection (b) of this section, may join in the petition with the same effect as if such joining creditor were a petitioning creditor under subsection (b) of this section.

(d) The debtor, or a general partner in a partnership debtor that did not join in the petition, may file an answer to a petition under this section.

(e) After notice and a hearing, and for cause, the court may require the petitioners under this section to file a bond to indemnify the debtor for such amounts as the court may later allow under subsection (i) of this section.

(f) Notwithstanding section 363 of this title, except to the extent that the court orders otherwise, and until an order for relief in the case, any business of the debtor may continue to operate, and the debtor may continue to use, acquire, or dispose of property as if an involuntary case concerning the debtor had not been commenced.


11 U.S. Code § 303(h) – Involuntary cases

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(h) If the petition is not timely controverted, the court shall order relief against the debtor in an involuntary case under the chapter under which the petition was filed. Otherwise, after trial, the court shall order relief against the debtor in an involuntary case under the chapter under which the petition was filed, only if—

(1) the debtor is generally not paying such debtor’s debts as such debts become due unless such debts are the subject of a bona fide dispute as to liability or amount; or

(2) within 120 days before the date of the filing of the petition, a custodian, other than a trustee, receiver, or agent appointed or authorized to take charge of less than substantially all of the property of the debtor for the purpose of enforcing a lien against such property, was appointed or took possession.

11 U.S. Code § 303(i) - Involuntary cases

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(i) If the court dismisses a petition under this section other than on consent of all petitioners and the debtor, and if the debtor does not waive the right to judgment under this subsection, the court may grant judgment—

(1) Against the petitioners in favor of the debtor for -

• (A) costs; or • (B) a reasonable attorney’s fee; or

(2) Against any petitioner that filed the petition in bad

faith, for - •(A) any damages proximately caused by such filing; or

• (B) punitive damages.

11 U.S. Code § 305 - Abstention

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(a) The court, after notice and a hearing, may dismiss a case under this title, or may suspend all proceedings in a case under this title, at any time if— (1) the interests of creditors and the debtor would be better served by such dismissal or suspension; or

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(2) (A) a petition under section 1515 for recognition of a foreign

proceeding has been granted; and (B) the purposes of chapter 15 of this title would be best served by

such dismissal or suspension.

(b) A foreign representative may seek dismissal or suspension under subsection (a)(2) of this section.

(c) An order under subsection (a) of this section dismissing a case or suspending all proceedings in a case, or a decision not so to dismiss or suspend, is not reviewable by appeal or otherwise by the court of appeals under section 158 (d), 1291, or 1292 of title 28 or by the Supreme Court of the United States under section 1254 of title 28.

11 U.S. Code § 305 - Abstention

11 U.S. Code § 502 - Allowance of claims or interests

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(f) In an involuntary case, a claim arising in the ordinary course of the debtor’s business or financial affairs after the commencement of the case but before the earlier of the appointment of a trustee and the order for relief shall be determined as of the date such claim arises, and shall be allowed under subsection (a), (b), or (c) of this section or disallowed under subsection (d) or (e) of this section, the same as if such claim had arisen before the date of the filing of the petition.

11 U.S. Code § 549 – Post petition transactions

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(a) Except as provided in subsection (b) or (c) of this section, the trustee may avoid a transfer of property of the estate— (1) that occurs after the commencement of the case; and

(2) (A) that is authorized only under section 303 (f) or 542 (c) of this title; or

(B) that is not authorized under this title or by the court.

(b) In an involuntary case, the trustee may not avoid under subsection (a) of this section a transfer made after the commencement of such case but before the order for relief to the extent any value, including services, but not including satisfaction or securing of a debt that arose before the commencement of the case, is given after the commencement of the case in exchange for such transfer, notwithstanding any notice or knowledge of the case that the transferee has.

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MORE ABOUT THE FACULTY

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[email protected]

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[email protected] (Beau) W. Hays, is a principal in Hays Potter & Martin LLP, has acted as lead counsel in litigation matters, specializing in commercial disputes and bankruptcy law for over twenty years. He has successfully prosecuted federal Miller Act cases and bankruptcy creditors’ cases in federal and state courts around the country.

In 1995, with HPM partner Emory Potter, Mr. Hays founded the commercial law firm of Hays & Potter, PC, which was recognized nationwide as a pre-eminent source of counsel and expertise in service of the business credit community. Mr. Hays is a Past President of the Commercial Law League of America (CLLA), having served as Recording Secretary of the League, Chair of the Creditors’ Rights Section, Chair of the Southern Region, and a representative to the Board of Governors. In addition to being active in the Bankruptcy Section of CLLA, he is an Associate Member of the National Association of Bankruptcy Trustees. Mr. Hays was a founding member of the Creditors Rights Section of the State Bar of Georgia, and has served as Legislative Liaison for that Section.

He is an editor for the National Association of Credit Management’s Handbook of Credit and Commercial Laws, focusing on chapters related to materialman’s liens and construction bonds, and is regularly invited to speak on creditors’ issues, construction law, and bankruptcy for the National Association of Credit Management and many of its constituent credit groups. He is regularly an advocate for creditor’s rights at the state and federal level.

Mr. Hays earned his J.D. at the University of North Carolina School of Law, where he was a member of the Holderness Moot Court Bench. He received a B.A. in Political Science at the University of North Carolina at Chapel Hill. He is admitted to practice in Georgia, the U.S. District Court for the Northern, Middle, and Southern Districts of Georgia. He is a member of the State Bar of Georgia and has earned the AV Preeminent® peer review rating by Martindale-Hubbell.

mailto:[email protected]


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JEFF BAST

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[email protected]

Jeff’s practice focuses on bankruptcy and insolvency, emphasizing corporate reorganization, restructuring, creditors’ rights, workouts, and commercial litigation in several industries, including real estate, retail, healthcare, telecommunications, internet and technology, hotels, textiles, transportation, franchise operations, travel, aviation, manufacturing, and financial institutions.

He also provides insolvency-related advice and has extensive experience with all aspects of bankruptcy litigation, appeals and legal opinions for complex transactions.

He now represents corporate debtors, shareholders, trustees, receivers, indenture trustees and creditors’ committees, as well as financial institutions and other secured and unsecured creditors in complex workouts, reorganizations and liquidations



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KIRK BURKLEY

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[email protected] is the supervising partner of the firm’s Bankruptcy and Restructuring practice group. The Bankruptcy and Restructuring group handles national cases and acts as an efficient, one-stop shop for our clients’ bankruptcy and restructuring needs. Kirk is experienced in representing secured and unsecured creditors in bankruptcy, financial restructuring and workout situations, including the representation of numerous unsecured creditors’ committees, equipment lessors, financial institutions and commercial landlords.Kirk has also represented owners, contractors and subcontractors in construction disputes and regularly advises developers and lenders on large real estate transactions. Additionally, Kirk has developed unique experience in many facets of shareholder litigation in different industries.Kirk is certified in Business Bankruptcy and Creditors’ Rights Law from the American Board of Certification. He frequently appears before the United States District Courts for the Western, Middle and Eastern District of Pennsylvania, as well as the Pennsylvania state courts. He is also admitted to practice in the United States District Court for the Northern and Southern Districts of West Virginia.Kirk has quickly been defined as a well-respected lawyer in his field, as is evidenced by being named a “Pennsylvania Rising Star” from 2005 to 2012 and a “Super Lawyer” in 2013 by Philadelphia Magazine. He has lectured for the National Association of Credit Management (NACM), American Bankruptcy Institute and the Pennsylvania Bar Institute. He is a regular panelist for NBI and Lorman Educational Services on various legal topics.In 2013, Bernstein-Burkley, P.C. was ranked by U.S. News Media Group and Best Lawyers as a “Metropolitan First Tier Law Firm” in the areas of:Bankruptcy and Creditor Debtor Rights/Insolvency and Reorganization LawLitigation – Bankruptcy



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ADAM NACH

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[email protected]

CLLA Member, Adam Nach is the managing partner of Lane & Nach, PC . Mr. Nach was the judicial law clerk to the former Chief Bankruptcy Judge for the District of Arizona, Robert G. Mooreman. He is a frequent lecturer on bankruptcy law and creditors’ rights and has written extensively on such matters, for the Norton Bankruptcy Institute, the National Association of Bankruptcy Trustees, the Arizona State Bar, and the National Business Institute. Mr. Nach is also admitted to the Arizona State Bar and 9th Circuit Court of Appeals and the United States Supreme Court. Mr. Nach is a Board Certified Bankruptcy Law Specialist – State Bar of Arizona and Board Certified – Creditors’ Rights Law – American Board of Certification.


Who We AreCLLA is the leader in providing expertise, insight and results for attorneys, credit grantors and their partners in the credit and

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IMPORTANT NOTE:

THE MATERIAL IN THIS PRESENTATION IS FOR GENERAL EDUCATIONAL PURPOSES ONLY. IT SHOULD NOT BE CONSIDERED LEGAL, INVESTMENT, FINANCIAL, OR ANY OTHER TYPE OF ADVICE ON WHICH YOU SHOULD RELY.YOU SHOULD CONSULT WITH AN APPROPRIATE PROFESSIONAL ADVISOR TO DETERMINE WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS.

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