Some interesting and trendsetting news from Japan’s bankruptcy courts surfaced at the end of the summer of 2018. Nobuaki Kobayashi, the trustee of a hacked Japanese cryptocurrency exchange’s bankruptcy estate, opened an online claims submission process for interested parties to recoup their losses. What made this a potentially trailblazing event, was that Kobayashi, as trustee, had the ability to make distributions in bitcoin and BCH (bitcoin cash), in lieu of paying the claims’ value in fiat currency. More than some would say this is a significant procedural achievement for creditors and is likely a harbinger of the future.
The U.S. Bankruptcy Code (Title 11), under § 363, allows a Chapter 11 bankruptcy debtor, acting in the capacity of a debtor-in-possession, to sell assets at auction, thus giving the debtor more control in their ultimate disposition than in a Chapter 7 liquidation case where a trustee may sell or transfer assets without the participation of a debtor-in-possession.
“Sears, America’s Store,” also known as Sears Holdings, after a 125-year run as one of America’s leading retailers, filed for bankruptcy protection October 15th after an extended number of years of barely remaining solvent. The company survived this long as a result of having billions of dollars of its CEO’s own money with which to maneuver financially. Eddie Lampert, the CEO of Sears for the past five years, will step down from his position as CEO, effective immediately, but will continue as Sears’ chairman of the board.
In the case, In re Fagerdala USA-Lompoc, Inc., 891 F.3d 848 (9th Cir. 2018), the Ninth Circuit affirmed a creditor’s ability to block a debtor’s “cramdown” by purchasing junior debt to protect its own claim. The court reversed the bankruptcy court’s decision to designate claims for bad faith pursuant to 11 U.S.C. § 1126(e). In doing so, the court thereby sanctioned the creditor’s motive of purchasing claims to block the Chapter 11 plan for the purpose of protecting a pre-existing claim. Thus, Fagerdala illustrates that, in bankruptcy proceedings, at least in the Ninth Circuit, creditors may purchase claims to protect their economic interests.
The Seventh Circuit Court of Appeals’ recent decision in Illinois Department of Revenue v. Hanmi Bank challenges the prevailing view that as a matter of law an underwater senior creditor always could retain the entire proceeds of a free-and-clear sale with junior creditors receiving nothing. The Seventh Circuit’s decision may allow junior creditors in future bankruptcy cases a recovery based on the theory that a free and clear sale under § 363 of the Bankruptcy Code (Title 11) creates a premium for those assets that a junior creditor may potentially be entitled to share.
As reported here recently, SB 1235 has been signed into law by Governor Brown. The legislature believes this new law will protect small business owners and empower more small businesses to succeed. Many of the bill’s supporters, including small business owners, believe the passing of this bill was critical not only to the economic health of California but to the entire nation as California becomes the first state to enact truth-in-lending laws that protect small business owners.
Under legislation signed September 30, 2018, by Governor Brown, California will become the first jurisdiction in the United States to provide small business owners with the same protections that Truth-in-Lending laws have provided consumers for more than fifty years.
Under the Residential Mortgage Lending Act (RMLA), the Commissioner of Business Oversight (the “Commissioner”) of the State of California has multiple functions, powers, and duties (Cal. Fin. Code §50301). The Commissioner may also review the business dealings of any residential mortgage lender and servicer California licensee for compliance with the RMLA (Cal. Fin. Code §50302).
The primary purpose of licensing laws is to ensure that license applicants are ethically, financially, & professionally qualified to serve consumers. Under the Residential Mortgage Lending Act (RMLA), licensees have certain duties to fulfill. in Cal. Fin. Code §50124(a), the RMLA creates specific affirmative duties for licensees. A residential mortgage lender or servicer must do all of the following:
There are a variety of ways that a factoring service may benefit a business, thus helping it overcome the typical challenges related to consistency and growth, especially those obstacles encountered by a smaller business enterprise. Factoring doesn’t increase the debt of the business. There is no need or requirement for the encumbering of assets, i.e., collateral.