Bankruptcy Litigation Strategies for Secured Lenders and Other Creditors

Minimizing Risks of Fraudulent Conveyance, Preference Challenges and Avoidance Actions

Recording of a 90-minute CLE webinar with Q&A


Conducted on Tuesday, October 12, 2010

Recorded event now available

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Program Materials

This CLE webinar will prepare counsel to lenders and creditors to deal with the common pitfalls in avoidance and preference litigation when the borrower is insolvent or in bankruptcy. The panel will outline best practices to protect security interests and other payment rights.

Description

Lenders and creditors face a myriad of preference and avoidance challenges in bankruptcy from the debtor-in-possession as well as other creditors, including disputes among creditors in intercreditor agreements.

For secured lenders, the sufficiency and validity of its security interests against the debtor’s collateral are closely scrutinized and challenged. Lenders must take care in perfecting the lien at the inception of the transaction and protecting their rights during a subsequent loan workout.

In navigating the bankruptcy process to maximize recovery on their loan or debt, unsecured creditors and lenders must consider Section 547 preference rules and defenses when seeking payment from the debtor or otherwise structuring transactions to maximize recovery.

Listen as our authoritative panel of bankruptcy attorneys discusses the common pitfalls facing secured lenders and other creditors in the bankruptcy process, litigation trends and best practices for lenders and creditors to protect their collateral or payment right against avoidance actions.

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Outline

  1. Challenges to perfection and priority of collateral under UCC
    1. How could a construction lender with perfect filings lose to an equipment manufacturer’s self-help repossession?
  2. Fraudulent conveyance challenges
    1. Is the parent “downstream” guaranty for subsidiary debt still beyond successful attack?
    2. Is the subsidiary “upstream” guaranty for parent debt worth the paper it is printed on?
    3. Is a subsidiary “cross-stream” guaranty of another subsidiary After TOUSA, are
    4. Is the solvency savings clause or a limitation on the amount of a guaranty better practice?
    5. Is the Ponzi scheme victim immune from successful attack because he gave value or had good faith?
  3. Preference challenges
    1. Has the Deprezio patch held?
    2. Is the guarantor’s waiver of subrogation rights still needed?
    3. Vendors; protection in reclamation rights and mechanics liens
    4. Contractor problems with inchoate rights in mechanics liens and surety claims
    5. What can be done to protect a litigation settlement?
    6. Should the Ponzi scheme victim lose to the bankruptcy trustee’s administrative expenses for cleaning up the schemer’s mess?
  4. Intercreditor disputes
    1. Should the subordinated creditor agree to the “indefeasible” payment of the senior creditor?
    2. What happens when the subordinated creditor agrees, collects at a refinancing, and distributes to its investor members?

Benefits

The panel will review these and other key questions:

  • What are the key steps for lenders and their counsel to avoid the most common pitfalls in perfecting security interests to withstand challenges in the event of the borrower's bankruptcy?
  • What are the best practices for the lender during a loan workout to strengthen its position and minimize its risks in bankruptcy or foreclosure sale?
  • How do the bankruptcy concepts of fraudulent transfer and preference impact lender and creditor post-default actions?
  • What steps can an entity in litigation with an insolvent borrower take to protect their settlement?

Faculty

F. Thomas Rafferty
F. Thomas Rafferty

Principal
Ober Kaler

He represents secured and unsecured creditors, lender agents, indenture trustees, debtors, guarantors, receivers,...  |  Read More

David S. Musgrave
David S. Musgrave

Principal
Ober Kaler

He represents banks and financial institutions in a wide range of creditors’ rights matters, and provides counsel...  |  Read More

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