New Regulatory Approaches to Short Selling in the U.S. and the EU

Fri, 12 Mar 2010 22:05:51 GMT

By: Kay A. Gordon, Dr. Wilhelm Hartung, Cary J. Meer, Philip J. Morgan, Mark D. Perlow, Neil Nick Robson, Richard Guidice, Jr

Changes in the regulatory approach to the short selling of listed securities have recently been announced in both the United States (U.S.) and the European Union (EU). In the U.S., rule amendments were recently adopted by the Securities and Exchange Commission that generally restrict market participants' ability to sell short listed securities whose price has dropped by at least 10% in a single day. In the EU, a new regulatory proposal would (to the extent adopted by the EU member states) require private disclosure of net short positions above a 0.2% threshold to the applicable regulator, and public disclosure to the market of such positions above a 0.5% threshold. We summarize in this alert what these changes entail and what each will mean for market participants.

To view the complete alert online, click here.

Winter 2010 Edition Of Bankruptcy Resource Now Available

Fri, 12 Mar 2010 15:29:42 GMT

The Winter 2010 edition of the Absolute Priority newsletter, published by the Cooley Godward Kronish LLP Bankruptcy & Restructuring group, of which I am a member, has just been released. The newsletter gives updates on current developments and trends in the bankruptcy and workout area. Follow the links in this sentence to access a copy of the newsletter or to register to receive future editions. You can also subscribe to the blog to learn when future editions of the Absolute Priority newsletter are published, as well as to get updates on other bankruptcy topics.

The latest edition of Absolute Priority covers a range of cutting edge topics, including:

The Third Circuit's consideration of credit bidding in Chapter 11 plan sales;
The ability of unsecured creditors to recover postpetition attorney's fees;
The increase in "prepackaged" bankruptcy filings; and
Section 503(b)(9) administrative claim developments.

This edition also reports on some of our recent representations, including the successful Chapter 11 reorganization of our client, retailer Crabtree & Evelyn, Ltd., and our work for official committees of unsecured creditors in Chapter 11 bankruptcy cases involving major retailers. Recent committee cases include Eddie Bauer, Uno Restaurant Holdings, Ritz Camera, Filene's Basement, BT Tires Group, Gottschalk's, Bernie's Audio Video TV Appliance, G.I. Joe's, Against All Odds, Samsonite Company Stores, Mervyn's Holdings, The Ski Market, and Lenox Sales, among others.

I hope you find the latest edition of Absolute Priority to be of interest.

Bankruptcy in Ontario: What Happens to My House and Car?

Thu, 11 Mar 2010 18:11:59 GMT

A house and a car may be exempt in a bankruptcy in Ontario, depending on their value.

Question: Hi, my boyfriend is heavily in debt and we would like to seek some advise. He has $70,000 in credit card and line of credit debt and is having a hard time coping up with the payments since he only works part time. The only assets he has is his car that he has paid off a long time ago and the house his parents bought which is named after him, his sister and brother. If he decides to file for bankruptcy in Ontario what will happen to the house that is house and also to his car? I hope you can help us. Thank you very much!

Answer: If you file bankruptcy in Ontario, you are required to either surrender your house to the trustee, or pay to the trustee the equity in your house. Equity is the value of the house (the difference between the value of the house, and the amount owing on the mortgage and other charges). If there is no equity, you could keep your house (provided you keep the mortgage in good standing). In your brother’s case, if the house is owned jointly by him, his sister, and his brother, he would only be required to pay his share of the equity (presumably one third).

He should get an appraisal on the house, and confirm the balance owing on the mortgage, and then meet with a trustee to discuss his options.

For the car, if there are no loans against it, you can keep a car worth up to $5,650 if you go bankrupt. Since his car is old, it is probably not worth more than that amount, although again he can have it appraised to be sure.

More information can be found in this article on what happens to your house if you file bankruptcy in Ontario, and what happens to my car if I file bankruptcy in Ontario.

For a review of his exact situation, he should consult an Ontario bankruptcy trustee for a no charge initial consultation.

Massive Increase in Personal Bankruptcy in Ontario

Tue, 09 Mar 2010 16:51:43 GMT

Massive increase in bankruptcy and proposal filings in Ontario: debt levels high; more problems in the future if interest rates increase.

Bankruptcy and Proposal Filings

In 2009 the number of consumer bankruptcies and consumer proposals increased by 31% in Canada in 2009, after growing by over 14% in 2008. In total, 151,712 Canadians filed a bankruptcy or proposal in 2009, the largest number on record by a wide margin. In Ontario, 66,935 people filed a bankruptcy or proposal, an increase of 32.7% over 2008.

An interesting trend emerged in the last three months of 2009: more residents of Ontario have chosen to file a consumer proposal, instead of going bankrupt, primarily due to new bankruptcy rules.

On September 18, 2009 new bankruptcy rules came into force, increasing the cost and length of a bankruptcy for bankrupts with surplus income. The debt limit for eligibility to file a consumer proposal was increased, increasing the attractiveness of a consumer proposal as a debt management option. As a result, there was a spike in bankruptcy filings in the two weeks prior to September 18, as debtors rushed to file bankruptcy to take advantage of the old rules. After September 18 the number of bankruptcy filings dropped, while consumer proposal filings continued to increase.

In Ontario in 2009 there were 46,521 consumer bankruptcies, and 20,414 consumer proposals. Bankruptcies increased by 28.5%, but consumer proposals increased by 43.3%.

Why did bankruptcy and proposal filings increase by record amounts in 2009?

Obviously the recession has caused great financial hardship. As the unemployment rate increases, so too does the growth in personal insolvency filings. The unemployment rate in Ontario rose through the first half of 2009, peaking at 9.5% in May, so the growth in consumer filings is not surprising. (In Canada, the unemployment rate rose from 6.1% to 8.3% during 2009). However, high unemployment is only one reason for the high bankruptcy rates in 2009.

Residents of Ontario continue to borrow at record rates, and in 2009 household credit per person in Canada reached a record level of $40,207. After five consecutive years of double digit growth, the rate of growth for household debt finally slowed to a comparatively low growth rate of 7.8%. However, given the tightening of credit markets and the continuing recession, growth in debt of 7.8% is still a worry for the Canadian consumer, and no doubt contributed to the growth in insolvencies.

While household credit per person grew by 6.4% in 2009, personal disposable income grew by only 0.6% in the first nine months of 2009. This means that, by the end of the third quarter of 2009, Canadians were carrying household debt of 140.8% of their personal disposable income, the highest level in history. This means that for every dollar a Canadian earns, they have $1.41 in debt. Two years ago Canadians carried $1.28 in debt for each dollar earned.

This is a worrisome development for all Canadians carrying debt, because it’s not only the level of debt that is a problem, but the cost of carrying the debt. While consumer debt has continued to increase, consumers have benefited from historically low interest rates. Unfortunately, low interest rates mean Canadians have continued to borrow, leading to record levels of debt. As long as interest rates remain low this may not be a problem, but if interest rates increase, Canadians will be unable to service their debt. This week the government announced that the economy is improving, so it is likely that the Bank of Canada will start to raise interest rates later this year. If that happens, the cost of carrying debt goes up, and more Canadian will experience financial problems.

The message is clear: excessive personal debt is a ticking time bomb, and unless Canadians take steps to deal with their debt, an increase in interest rates or a further reduction in employment will lead to a continued trend of higher personal insolvencies.

For many debtors this is the first time in their lives they have experienced debt problems, and they don’t know where to turn for advice. They are embarrassed to talk to family or friends. Unfortunately many debtors are now turning to unscrupulous debt consultants, who charge a fee and then simply refer the debtor to a bankruptcy trustee. We strongly urge debtors to investigate their advisors before paying anything. Confirm that they are licensed by the federal government, or a provincial agency. At Hoyes, Michalos & Associates we do NOT charge any up-front fees; no reputable trustee charges an up front fee. More information is available in this article on Debt Consultant Scams.

For more information on personal bankruptcy statistics for 2009 see our article bankruptcy statistics for 2009 and 2008, with detailed personal bankruptcy statistics for major cities in Ontario. Our Bankruptcy Trend Report: 2009 contains our detailed analysis.

If you are treading water, trying to service your debts, please call our 310-PLAN help line (no area code required anywhere in Ontario), or contact us by e-mail, or complete our free on-line evaluation, and we will review your situation and help you make a plan to deal with your debts; we will do our best to help you avoid becoming a bankruptcy statistic.

DOL Proposes Revamped Rule on Investment Advice

Tue, 09 Mar 2010 14:34:05 GMT

By: Catherine S. Bardsley, Mark J. Duggan, John J. Nestico, David Pickle, William A. Schmidt, William P. Wade, Kristina M. Zanotti.

The U.S. Department of Labor (“DOL”) has issued a new proposed regulation (the “Proposal”) in the most recent installment of its ongoing efforts to implement the statutory exemption for participant advice added to ERISA and the Internal Revenue Code as part of the Pension Protection Act of 2006 (“PPA”). The Proposal, which deals solely with advice to plan participants (as opposed to plan sponsors), would replace the final regulation and related class exemption regarding participant advice that was issued in January 2009. Notably, the Proposal would cut back significantly on what would have been permitted under that regulation and class exemption, particularly as it would have applied to advice to IRAs.

To view the complete alert online, click here.

What if an Equity Sponsor is also a Lender in your Bank Group?

Mon, 08 Mar 2010 19:05:50 GMT

This post was written by my partner Ben Brimeyer, a member of the Financial Industry Group in Reed Smith's Chicago office.

In today's challenging economic climate, private equity sponsors are trying to figure out how to fill funding gaps in acquisition financings -- and how to provide additional capital to their troubled portfolio companies. In lieu of providing additional equity, some sponsors are requesting the ability to participate as a lender in the senior debt facilities of the portfolio company. Also, on occasion, it's the lenders who need to find someone to take a piece of a new loan, and the equity sponsor is the only one standing by ready to do so.

If the lenders decide to allow the sponsor to become a lender in their debt facilities, what steps should they take to best protect themselves, given the different hats this new lender will be wearing?

Voting rights. Given the sponsor's ability to control the borrower, the sponsor should not have the same set of voting rights available to the other lenders. The sponsor should have the ability to protect its investment, but should generally be a silent participant, without the ability to interfere with actions the lenders may need to take. The sponsor’s commitment should be removed from the calculation of required lenders, and the voting terms should provide that the vote of the sponsor won’t be required other than for a very specific set of items (typically 100% vote issues):

Increase the commitment of the sponsor-lender
Reduce the interest rate on the sponsor-lender's loans
Reduce the principal amount owing to the sponsor-lender
Change the pro rata treatment of the loans
Subordinate the loans

Information/Meetings. It is important to ensure that the sponsor, as both the equity owner and a lender, does not have the same access to information, rights to attend bank group meetings and ability to require action by the agent as the other lenders have. In this regard, the sponsor-lender should not be allowed to:

Require the agent or any lender to take any action or exercise any remedy
Attend any meeting between the agent and the lenders to which the borrower is not invited
Receive any information or communication from the agent or any lender that is not sent to or by the borrower (i.e., shared among the lenders only)
Provide information obtained in its capacity as a lender to any member of management of the borrower

Bankruptcy. In a bankruptcy, the sponsor-lender’s interests differ significantly from the rest of the lenders, since the sponsor as equity owner receives a different set of rights. To protect the lenders from actions which may be taken by the sponsor-lender in a bankruptcy, the sponsor should agree not to impede any actions being taken by the agent, so long as the sponsor-lender is being treated equally with the other lenders. The sponsor-lender should also agree that its vote in bankruptcy shall be cast in the same proportion as that by the other lenders, which results in the sponsor essentially being dragged along proportionally to the votes of the other lenders. This is particularly important if the sponsor-lender will hold more than one third of the debt, providing a potential blocking position on issues requiring a lender vote in a bankruptcy.

Allowing the sponsor to participate in the senior loans may be essential to completing a transaction or providing a portfolio company with additional liquidity. It can be done, but with careful consideration of the challenges it presents to the rest of the lender group.

U.S. Supreme Court Says Attorneys are Debt Relief Agencies under BAPCPA, Upholds Ban on Advising Clients to Incur Additional Debt

tiffany@infra-strategy.com (Kevin Chern) — Mon, 08 Mar 2010 17:39:16 GMT

For nearly five years, courts across the country have been asked to determine whether or not BAPCPA's Debt Relief Agency designation applies to bankruptcy lawyers and whether the disclosure requirements and limitations on advice set forth in BAPCPA were Constitutional...

The Inner Workings of Bankruptcy Practice at Fremont College

Mon, 08 Mar 2010 13:10:35 GMT

There are two things that I love; open minds and a captive audience. On Wednesday, March 3rd, I was invited to speak to the paralegal students at Fremont College in Cerritos, California, on the topic of The Inner Workings of Bankruptcy Practice. With the current Great Recession in full swing, personal finance and bankruptcy has touched us all. These students were ripe with personal questions and questions on behalf of clients they have in their respective fields. Among the students were Realtors and tax preparers who know all too well that the people they meet may well need to file for bankruptcy in order to accomplish their financial goals.

We discussed the history of bankruptcy; the various bankruptcy chapters; the 2005 enactment of the BAPCPA; and what really caused the economic meltdown. These are unprecedented times and I felt that during the rapid fire questions brought forth by these eager minds. I shared my own personal experiences and explained the important role that paralegals have to a bankruptcy practice and the new world of 'virtual paralegals.' The virtual paralegal can work from any computer to assist our practice without having to sit in our office. We can cut costs and be more efficient in our work by using virtual paralegals.

I love that Fremont College is an ABA Accredited program in paralegal studies and that they reach out to the community to bring current and relevant information to help prepare their students for life after their degrees are earned. I just want to give a big Thank You to Fremont College for inviting me to speak to their paralegal students. I would like to personally thank William Kamstra for making the connection and Gerry Mendoza, Assistant Director of Student and Career Services, for pulling this together and making it happen.

Does bankruptcy in Ontario stop a collection agency judgment?

Mon, 08 Mar 2010 10:53:00 GMT

Question: I was told today by a 3rd party collection agency that if I have not made a credit card payment in 7 months-(Owe on one $13,000.00) then they can take me to court and if I have not yet filed for bankrupcy (we think we must as we can not pay the cards), when I do, if judgment is received before We file it does not account in the bankruptcy in Ontario- meaning I would still owe.

We owe a lot due to trying to run a small business and we have hit the wall if we have to pay minimum payments to cards. We are considering bankruptcy but if a judgement is reached how is handled in? are we still liable?

Answer: No. The point of bankruptcy is to discharge your debts. If you file bankruptcy, all court actions from credit card companies stop. If they have a judgment it is "stayed", which is a fancy word meaning the credit card company or the collection agency can't use the judgment to garnishee your wages. In fact, your trustee will contact the court and advise them that you have filed bankruptcy, which will stop further court proceedings, and suspend any that are already in progress.

Your Ontario bankruptcy trustee can provide you with more information.

Does bankruptcy in Ontario stop a collection agency judgment?

Mon, 08 Mar 2010 10:53:00 GMT

We owe a lot due to trying to run a small business and we have hit the wall if we have to pay minimum payments to cards. We are considering bankruptcy but if a judgement is reached how is handled in? are we still liable?

Answer: No. The point of bankruptcy is to discharge your debts. If you file bankruptcy, all court actions from credit card companies stop. If they have a judgment it is “stayed”, which is a fancy word meaning the credit card company or the collection agency can’t use the judgment to garnishee your wages. In fact, your trustee will contact the court and advise them that you have filed bankruptcy, which will stop further court proceedings, and suspend any that are already in progress.

Your Ontario bankruptcy trustee can provide you with more information.

Bankruptcy Lawyer or Trustee?

Thu, 04 Mar 2010 14:33:00 GMT

Question: It is my understanding that the bankruptcy trustee works mainly for the creditors. Does that mean that I should see a lawyer before I consider discussing my debt and credit issues?

Answer: Good question. It is a common misconception that a bankruptcy trustee works for the creditors. A bankruptcy trustee doesn’t work for the creditors, but they also don’t “work” for the debtor.

A bankruptcy trustee in Ontario is appointed by the court to administer the bankruptcy. The trustee’s job is to ensure that all rules are followed, by both the creditors and the bankrupt person. For example, the bankrupt is required to report their income each month, and to provide the trustee with information to file their taxes, so the trustee makes sure all information is provided.

However, if a creditor was to try to garnishee the bankrupt’s wages after the bankruptcy starts, that’s against the rules, so the trustee would obtain a court order to stop that.

The bankruptcy trustee is the “middle man”, like a referee in a hockey game, making sure both sides follow the rules.

Your question is: should I talk to a lawyer before I talk to a bankruptcy trustee? A lawyer works entirely for you, so if you want someone just to advise you, then yes, you can see a lawyer. However, for a lawyer to review your situation and advise you may cost a lot of money, and most people in financial trouble can’t afford the cost of a lawyer.

Our advice is to do your own research first, before visiting a trustee. There are many web sites that discuss ways to deal with deal with debts. Some sites focus on consumer proposals; others discuss personal bankruptcy in Canada. By researching your options, you will have a list of questions to ask your trustee, which should allow you to decide for yourself which option is best for you.

Bankruptcy Lawyer or Trustee?

Thu, 04 Mar 2010 14:33:00 GMT

Question: It is my understanding that the bankruptcy trustee works mainly for the creditors. Does that mean that I should see a lawyer before I consider discussing my debt and credit issues?

Answer: Good question. It is a common misconception that a bankruptcy trustee works for the creditors. A bankruptcy trustee doesn't work for the creditors, but they also don't "work" for the debtor.

A bankruptcy trustee in Ontario is appointed by the court to administer the bankruptcy. The trustee's job is to ensure that all rules are followed, by both the creditors and the bankrupt person. For example, the bankrupt is required to report their income each month, and to provide the trustee with information to file their taxes, so the trustee makes sure all information is provided.

However, if a creditor was to try to garnishee the bankrupt's wages after the bankruptcy starts, that's against the rules, so the trustee would obtain a court order to stop that.

The bankruptcy trustee is the "middle man", like a referee in a hockey game, making sure both sides follow the rules.

Your question is: should I talk to a lawyer before I talk to a bankruptcy trustee? A lawyer works entirely for you, so if you want someone just to advise you, then yes, you can see a lawyer. However, for a lawyer to review your situation and advise you may cost a lot of money, and most people in financial trouble can't afford the cost of a lawyer.

Our advice is to do your own research first, before visiting a trustee. There are many web sites that discuss ways to deal with deal with debts. Some sites focus on consumer proposals; others discuss personal bankruptcy in Canada. By researching your options, you will have a list of questions to ask your trustee, which should allow you to decide for yourself which option is best for you.

2009 Records the highest number of Insolvencies in History.

webmaster@bankruptcycanada.com (Earl Sands) — Wed, 03 Mar 2010 21:53:39 GMT

2009 Records the highest number of Insolvencies in History.

Advice for Possible Bankruptcy Situation

Wed, 03 Mar 2010 20:26:00 GMT

Question: I need advise on this situation. I have a house with a mortgage with very little equity. It is for sale. If sold the sale proceeds probably wouldn’t cover more than the mortgage penalty, real estate fees and outstanding property taxes. Part 2 – I have a line of credit/credit card debts/CRA debt (also [...]

If I claim bankruptcy, I want to keep the van and continue to make the payments.

Do I claim bankrutpcy for just my corporation or personally too. The one credit card is in the business name; the line of credit is personal and two other credit cards are in my name personally.

I am also paying child support monthly. Any income I earn each month is paid to my corporation. My debts exceed any income.

What will happen potentially if I claim bankruptcy and if I earn sales commissions in the future under a new company/corporation which I will open after bankrupting this one? Would they take the house if I don’t sell it? What else do I need to consider and how much would it cost to go through bankruptcy and how are those fees paid? Thanks for your advice.

Question: You are asking many complicated questions. To fully answer the questions we would require more information. We suggest you contact an Ontario bankruptcy trustee who will give you a free initial consultation, and review all of your options in detail.

In general, yes, you can keep your van and keep making the payments on it, even if you go bankrupt.

In general, it would be you personally that would go bankrupt, not your corporation.

As for your income, when you are bankrupt you report your income each month to your trustee, and you are required to pay half of your surplus income into your bankruptcy estate. If you earn large commissions, the cost of your bankruptcy goes up.

Again, due to the complexity of your situation, a face to face meeting with a trustee is essential to fully explore all options.

Advice for Possible Bankruptcy Situation

Wed, 03 Mar 2010 20:26:00 GMT

Question: I need advise on this situation. I have a house with a mortgage with very little equity. It is for sale. If sold the sale proceeds probably wouldn't cover more than the mortgage penalty, real estate fees and outstanding property taxes. Part 2 - I have a line of credit/credit card debts/CRA debt (also GST for my corporation). These would total approximately $75K. I also have a van with a loan of $512 per month and it has no equity.

If I claim bankruptcy, I want to keep the van and continue to make the payments.

Do I claim bankrutpcy for just my corporation or personally too. The one credit card is in the business name; the line of credit is personal and two other credit cards are in my name personally.

I am also paying child support monthly. Any income I earn each month is paid to my corporation. My debts exceed any income.

What will happen potentially if I claim bankruptcy and if I earn sales commissions in the future under a new company/corporation which I will open after bankrupting this one? Would they take the house if I don't sell it? What else do I need to consider and how much would it cost to go through bankruptcy and how are those fees paid? Thanks for your advice.

In general, yes, you can keep your van and keep making the payments on it, even if you go bankrupt.

In general, it would be you personally that would go bankrupt, not your corporation.

Again, due to the complexity of your situation, a face to face meeting with a trustee is essential to fully explore all options.

SURPLUS INCOME / sharing an appartment

Wed, 03 Mar 2010 20:11:54 GMT

Question: My question is in regards to the surplus income and how its being calculated. The way I understand it is that everybodies income that lives at the residence is considered when the surplus income is being calculated. What happens if you just share an appartment expences 50/50 with somebody. Which means that the other party does have nothing to do with the person that has declared a bancruptcy. How does the trustee calculate the SURPLUS income. Because the way understand it is that is order for the trustee to calculate the SURPLUS INCOME he has to know all the income at that residence. What is the third party refuses to get involved and offer any information in regards to himself.

A person that has declared bancruptcy:

Living at home and paying for a room?
Living with friends?
Living with boy/girlfriend?

What happens if these people don't wanna get involved?????

Thanks

Answer: Surplus income is not based on the number of people you live with; it's based on the family unit. In most cases that's the same, but if you are sharing a house with friends, your friends are not really part of your family, so their income would not be included in your surplus income calculation. Your trustee can explain in more detail based on your situation.

SURPLUS INCOME / sharing an appartment

Wed, 03 Mar 2010 01:57:00 GMT

A person that has declared bancruptcy:

Living at home and paying for a room?
Living with friends?
Living with boy/girlfriend?

What happens if these people don’t wanna get involved?????

Thanks

Answer: Surplus income is not based on the number of people you live with; it’s based on the family unit. In most cases that’s the same, but if you are sharing a house with friends, your friends are not really part of your family, so their income would not be included in your surplus income calculation. Your trustee can explain in more detail based on your situation.

How to Avoid Lender Liability - Part 2

Tue, 02 Mar 2010 18:45:41 GMT

In my last post, I gave some suggestions for reducing the risk of lender liability in a workout situation. This time, let's talk some more about what to do when you're working through a workout, and focus on what happens when you're getting ready to seek remedies.

As a general rule, it is a good idea to act "reasonably" in a default situation.

There is usually an implied requirement of "good faith and fair dealing" in a contract-based relationship, whether under general state contract law or under the UCC. Good faith and fair dealing essentially requires that you follow commercially reasonable standards of behavior and be fair to the borrower. In some states it means that you have to act "honestly" (the definition varies). This concept is applied to your agreement regardless of what the contract otherwise appears to say. And this is true all the time, of course, not just after a default.

Here's an example of how this plays out in a loan agreement. Secured loan agreements usually say that any kind of default gives the lender the right to terminate the loan and foreclose on all the assets. In practice, however, even though the agreement would appear to permit a lender to foreclose on assets if (for example) the borrower is just five days late in delivering its financial statements, it would be unusual for a lender to do so. Indeed, many courts would find that type of action to violate the implied covenant of good faith and fair dealing, as the remedy would appear to the court to be out of proportion to the harm suffered by the lender. That said, the law does respect your right to negotiate your own terms, and a judge won't normally rewrite the terms you agreed to. You shouldn't be asked to do more than what you agreed to, but you will be required to do what you agreed to do fairly and in good faith.

What else can you do to reduce the risk of lender liability when seeking remedies after a default?

Give notice. Even though notice may not be required under your loan agreement, in some situations it may be wise to give the borrower some notice before taking any action. This is especially true if you are contemplating actions like foreclosure, that have harsh results. Depending on the situation (and this does differ from case to case), giving notice may be fairly easy and may not do any harm to the lender's position -- and it may help demonstrate to a court later that the lender acted reasonably, giving the borrower a chance to explore alternatives.
Follow a consistent procedure. It helps if you have established policies and procedures for seeking remedies and for the decision process to get there. This seems like a good business practice generally, as it not only establishes consistency in dealing with borrowers, but it also helps to ensure that the options you want to have considered are actually considered -- and that a measured and appropriate response is given. Also, be aware that if your normal practice is to ignore defaults of the type at issue and then you suddenly deviate from that practice and terminate the loan, some courts have found this behavior objectionable.
Figure out what the assets are worth, and what you're likely to be paid. If you have sufficient security and you are unlikely to lose anything if you forbear or take lesser steps against he borrower, you might want to consider these other options. Some courts may find your exercise of remedies inappropriate if it can be shown that you would've had full recovery by forbearing on the default; similarly, your exercise of remedies can be called into question if you recover more than the loan agreement would've given you otherewise. In these situations, you might do some clever thinking to see if you can get an appropriate result with less harm to the borrower. For example, maybe forbearance makes sense, or maybe you can do things over a longer period of time, foreclose on only certain types of assets, or seek other types of remedies, while otherwise allowing the business (or portions of it) to continue. Lots of options here.

There's no way to completely eliminate the risk of liability, but taking careful action can help mitigate this risk. Applying principles of "good faith and fair dealing" will help.

On The Rise: Bankruptcy Dollar Amounts Will Increase On April 1, 2010

Tue, 02 Mar 2010 15:20:55 GMT

It hasn't gotten much publicity yet, but certain dollar amounts in the Bankruptcy Code will be increased for cases filed on or after April 1, 2010. You can find a chart listing all of the changes on this Federal Register page, which printed last month's official notice from the Judicial Conference of the United States.

Among the most meaningful increases for Chapter 11 and other business bankruptcy cases:

The total amount of claims required to file an involuntary petition rises to $14,425 from $13,475;
The employee compensation priority under Section 507(a)(4) increases to $11,725 from $10,950;
The consumer deposit priority under Section 507(a)(7) rises to $2,600 from $2,425;
The dollar amount in the bankruptcy venue provision, 28 U.S.C. Section 1409(b), that requires actions for non-consumer, non-insider debt to be brought against defendants in the district in which they reside, has increased to $11,725 from $10,950; and
The minimum amount required to bring a preference claim against a defendant in a non-consumer debtor case, specified in Section 547(c)(9), rises from $5,475 to $5,850.

Other adjustments will affect consumers more than business debtors. For example, the debt limit for an individual to qualify to file a Chapter 13 bankruptcy case will rise to $1,081,400 of secured debt, and certain exemption amounts will also rise.

Although the changes aren't substantial, be sure to keep them in mind when assessing cases filed after April 1st.

Bankruptcy Stats Take Center Stage in Health Care Reform Debate

tiffany@infra-strategy.com (Kevin Chern) — Mon, 01 Mar 2010 16:11:50 GMT

Statistics have long told us that a significant percentage of personal bankruptcy filings in the United States stemmed from medical problems. A 2001 study indicated that medical problems were a contributing factor in at least 46.2% of personal bankruptcies. By...

Recent Articles in Bankruptcy from LexMonitor

New Regulatory Approaches to Short Selling in the U.S. and the EU

Winter 2010 Edition Of Bankruptcy Resource Now Available

Bankruptcy in Ontario: What Happens to My House and Car?

Massive Increase in Personal Bankruptcy in Ontario

DOL Proposes Revamped Rule on Investment Advice

What if an Equity Sponsor is also a Lender in your Bank Group?

U.S. Supreme Court Says Attorneys are Debt Relief Agencies under BAPCPA, Upholds Ban on Advising Clients to Incur Additional Debt

The Inner Workings of Bankruptcy Practice at Fremont College

Does bankruptcy in Ontario stop a collection agency judgment?

Does bankruptcy in Ontario stop a collection agency judgment?

Bankruptcy Lawyer or Trustee?

Bankruptcy Lawyer or Trustee?

2009 Records the highest number of Insolvencies in History.

Advice for Possible Bankruptcy Situation

Advice for Possible Bankruptcy Situation

SURPLUS INCOME / sharing an appartment

SURPLUS INCOME / sharing an appartment

How to Avoid Lender Liability - Part 2

On The Rise: Bankruptcy Dollar Amounts Will Increase On April 1, 2010

Bankruptcy Stats Take Center Stage in Health Care Reform Debate