Chapter 11 Filings are Up – WAY Up!
ACA International recently released a report advising Chapter 11 filings increased 16% in May 2015 over May 2014. 16%! Overall, bankruptcy filings have decreased (consumer & commercial combined), which is a good sign – in theory. If business filings continue to increase, which could happen, creditors could begin to see a drop in business, or worse, an increase in debt write-offs. My advice? Take extra steps to qualify your customers – run periodic credit reports, viability reports & monitor their payment behaviors – and, of course, ensure you are a SECURED creditor! You can read the full press release from ACA International here.
Yes, according to Regina Stango Kelbon & Jillian Zvolensky of Blank Rome LLP. In “A Look at the Friendly Foreclosure Option,” the authors discuss, in great detail, the good & the bad of an Article 9 Sale.
“When a debtor defaults on a loan secured by personal property, the secured lender has several options for repayment. One option is to sell the collateral securing the debt pursuant to Article 9 of the Uniform Commercial Code (UCC).  From the senior secured lender’s viewpoint, an Article 9 sale may be a preferred option to maximize its recovery because the process is expedited, avoids the administrative costs and delays associated with an alternative bankruptcy sale, and divests junior security interests by operation of law.”
Overall, the authors appear to support a sale under Article 9, if it is something the parties can agree to – but there are recognized “pitfalls” to this type of sale:
- Real Property – An Article 9 sale cannot be used for real property.
- Strict Adherence to Article 9 – Failure to adhere to the statutory requirements or follow commercially reasonable standards may result in challenges to the sale. A court may order or restrain the sale.
- Rebuttable Presumption – The secured lender’s noncompliance with the statutory requirements of Article 9 may result in the elimination or reduction of its deficiency claim. If the secured lender’s compliance is questioned, Article 9’s rebuttable presumption rule places the burden of proving compliance on the secured lender.
- Successor Liability – If a buyer has concerns about successor liability, it may desire the additional protections afforded by a bankruptcy court “free and clear” order.
- Nonconsensual Foreclosure – An Article 9 sale may not be practical if the debtor is unwilling to cooperate… Additionally, an uncooperative debtor is more likely to challenge the sale based on lack of commercial reasonableness or to file a bankruptcy petition before the sale is consummated.
Read the full article, for more information!
If a claimant does not identify the “true” owner in a notice of intent, is the subsequent mechanic’s lien filing valid? The Colorado Court of Appeals answered this exact question in the case of Moore Electric Company v. Ambassador Builder Corporation. Read this week’s post to learn more!
Infographic: UCC Debtor Name – Driver’s License Decision Tree
One of the biggest UCC filing blunders is incorrectly identifying the debtor. As you know, if your debtor is an individual or a sole proprietor, you can’t rely on Articles of Incorporation or a Corporate Certificate for identification purposes – you need to rely on their driver’s license (for 48 states at least). But, what if your debtor doesn’t have an unexpired driver’s license? What if your debtor has two different forms of identification? Check out the Driver’s License Decision Tree to learn more!
Check out these free webinars from NCS:
June 17: FREE Webinar – Join NCS & the SCRA for The Nuances and Importance of the Military Affidavit in the Collection Process
June 24: FREE Webinar – Bond Claims & Public Construction
July 7: FREE Webinar – UCC Remedies Upon Debtor’s Default