Creditor Exposure in Retail Bankruptcies
Rejection of Leases
Bankruptcy Code 365 provides that subject to court approval, the debtor may assume or reject any executory contract or unexpired lease. This gives the debtor the power to pick and choose amongst their executory contracts and leases. In the retail context, this allows the debtor to shed the leases for its underperforming locations, while keeping the leases for its profitable locations. When used properly, rejection of leases can slim down a retailer to a core of profitable locations and increase its prospects post-bankruptcy. However, not all retailers take full advantage of their power to reject leases.
Preference Exposure
In any large retail bankruptcy case, there is a strong possibility that creditors will be sued by the debtor's estate to avoid preferential transfers. The preference period is defined as the 90 days prior to a bankruptcy filing.
The Bankruptcy Code permits the debtor to recover from creditors payments made shortly before the bankruptcy filing where the payment gave the creditor more than other, similarly situated, creditors would receive through the bankruptcy process. The preference statutes are simply an attempt to achieve equity between creditors. Creditors are almost always better off attempting to get payment of their claims and then dealing with any efforts to recover the money when, and if, such attempts are made in bankruptcy.
Bankruptcy Code 547 defines a preference as
- Payment on an antecedent (as opposed to current) debt;
- Made while the debtor was insolvent;
- To a non insider creditor, within 90 days of the filing of the bankruptcy;
- That allows the creditor to receive more on its claim than it would have, had the payment not been made and the claim paid through the bankruptcy proceeding.
Defenses to the recovery of a preference are found in Bankruptcy Code 547(c). They include:
- Contemporaneous exchanges;
- Amounts of subsequent credit extended and unpaid;
- Payments made in the ordinary course of the business of the debtor and the creditor on ordinary business terms; and
- Security interests that secure debts that bring new value to the debtor.
These defenses need to be raised in an answer to a preference complaint. The burden of proof lies with the creditor to establish that despite the elements of a preference; the transfer is protected by one or more of these defenses.
Ronald Page, Jr. of Ronald Page, PLC has extensive experience representing lenders, landlords, vendors, and other creditors in retail bankruptcy cases. His offices are located outside of Richmond, Virginia and he is able to advise you regarding the Movie Gallery Bankruptcy.
- Preparing For Bankruptcy - Income Makes a Difference When Filing For Chapter 7 Bankruptcy
- Automatic Stay in Bankruptcy - How Long Does the Automatic Stay Last?
- Debt Settlement Versus Bankruptcy - Which is Better?
- Bankruptcy - Learn What Bankruptcy Really is and Help Your Debt Case With Debt Relief
- Liens in Bankruptcy Cases
- What to Expect During Your Bankruptcy Filing
- Bankruptcy and Buying a Home Tips
- Green Shoots in the Economy - Bankruptcy Increases by 100
- Reasons For a Corporation to Consider Filing For Bankruptcy
- How Long Does Bankruptcy Affect Your Life?
- San Bernardino Bankruptcy Lawyers - Helping You Through One of Life's Toughest Times
- Introducing Birth Bonds to Help Overcome Bankruptcy at Birth
- Ohio Chapter 13 - Which One Should I File?
- Chapter 7 Bankruptcy - Am I a Bad Person For Filing Bankruptcy?
- Chapter 7 Bankruptcy - Common Questions About Filing Bankruptcy
Bankruptcy court approves Visteon Chapter 11 plan
Town Hall Bankruptcy court approves Visteon Chapter 11 plan The Associated Press A federal judge has confirmed auto parts supplier Visteon's reorganization plan, clearing the way for the company's emergence from bankruptcy . Visteon, a ... Visteon Retiree Accord Eases Path to Bankruptcy Exit Visteon approved to exit bankruptcy Visteon wins approval of bankruptcy exit plan - -Tribune Board Sets Panel to Oversee Bankruptcy
Reuters Tribune Board Sets Panel to Oversee Bankruptcy ABC News By Tom Hals WILMINGTON, Delaware (Reuters) - Tribune Co's board has formed a special committee to oversee the media company's bankruptcy , which unraveled ... Tribune Co. forms panel to oversee bankruptcy reorganization Tribune Board Forms Committee to Oversee Newspaper's Reorganization Plan Tribune Co. forms committee after lenders withdrawYoung Buck files for Chapter 13 bankruptcy
SOHH Young Buck files for Chapter 13 bankruptcy The Tennessean AP August 31, 2010 Two days after the IRS conducted a surprise morning raid on his Hendersonville home, local rapper Young Buck voluntarily filed for ... Bankruptcy Won't Stop Young Buck's Feud With 50 Cent No-Cashville: Young Buck Files for Bankruptcy Rapper Young Buck Files For Bankruptcy - -Capmark Said to Settle With Lenders Owed $1.5 Billion in Bankruptcy Case
Barclays Lawyer Says Lehman Letter Was Adequately Explained
Bankruptcy trustee requesting liquidation for Rosecroft
Tronox Lets Shareholders File Rival Bankruptcy Plan
Innkeepers, HSH Delaware, Crucible, P&C Poultry, GM, Garlock: Bankruptcy
JAL submits plan to emerge from bankruptcy
Reuters JAL submits plan to emerge from bankruptcy MarketWatch NEW YORK (MarketWatch) -- Japan Airlines Corp. on Tuesday submitted a bankruptcy -emergence plan to a Tokyo court, according to The Wall Street Journal. The ... JAL To Slash Workforce As Part Of Restructuring Japan Airlines slashes workforce Heard on the Street: JAL Failure, ANA Tail Wind for Now - -Полтора миллиона американцев могут стать банкротами
Вести.Ru Полтора миллиона американцев могут стать банкротами Вести.Ru Число банкротств потребителей в США по итогам текущего года может вырасти до 1,6 млн человек с 1,4 млн человек годом ранее, свидетельствуют данные отраслевой группы American Bankruptcy Institute. Впервые с 2005 года квартальный уровень банкротства превысил 400 тысяч. Пять лет назад Конгресс ...