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Question

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Answer

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5 elements of a voidable preference under § 547(b)

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"1. to or for benefit of creditor

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5. enables C to receive more than C would receive if (A) chapter 7, (B) transfer had not been made and (C) C received payment to the extent provided by Title 11"

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New Value exception to voidable preference

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"§ 547(C)(1) transfer was

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(B) was in fact a substantially contemporaneous exchange"

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Ordinary Course of Business exception to voidable preference

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"Old § 547(c)(2) – transfer was

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(B) made according to ordinary business terms."

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For purposes of § 547, D is presumed to be insolvent

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during the 90 days prior to filing - § 547(f).

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Who has burden in preference case?

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"T has burden of proving avoidability of transfer under § 547(b).

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see § 547(g)"

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548(a)(1)(A) fraudulent transfer

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T may avoid any transfer of an interest of D in property, or any obligation incurred by D, that was made or incurred within 1 (soon to be 2) year prior to petition, if D made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which D was or became indebted.

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548(a)(1)(B) fraudulent transfer

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"T may avoid any transfer of an interest of D in property, or any obligation incurred by D, that was made or incurred within 1 (soon to be 2) year prior to petition, if D:

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(New section relates to employment contracts.)"

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BFP safe harbor for fraudulent transfer

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548(c) - Except to the extent that a transfer or obligation is voidable under 544, 545 or 547, transferee or obligee that takes "for value and in good faith" has a lien on or may retain interest transferred or enforce obligation incurred, to the extent such transferee or obligee gave value to D in exchange for such transfer or obligation.

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New section on self-settled trusts

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548(e) - Trustee may avoid any transfer of an interest of D in property made within 10 years if to self-settled trust by D who is beneficiary and transfer was made with actual intent to hinder, delay or defraud a C.

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Reach back for fraudulent transfers

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"used to be 1 year; 2 years for cases filed after 1 yr. after enactment of 2005 amendments;

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most state laws go back as far as relevant SOL"

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Section that generally provides that T may avoid fraudulent transfer if a C could

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544(b)

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548, in conjunction with 544(b) and Moore v. Bay is defective in that it

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does not distinguish between present and future creditors

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"Step-Transaction Doctrine"

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substance over form - collapses 2 transactions into 1. example is LBO - when bank gives loan to firm, firm is solvent; when firm immediately pays out dividend, firm is not (or barely) solvent. Collapsing these 2 events permits T to go after Lender (as opposed to just (old) shareholders who received dividend. Most courts will not disallow lender from participating in estate.

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When sub guarantees parent's debt and both file,

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creditors of sub could try to void guarantee as fraudulent transfer.

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362(a)(1) - filing operates as a stay of

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the commencement or continuation of a judicial proceeding that was or could have been commenced prior to filing, or to recover a prepetition claim

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362(a)(2) - filing operates as a stay of

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the enforcement against D or property of the estate of a prepetition judgment

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362(a)(3) - filing operates as a stay of

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any act to obtain possession of property of the estate or property from the estate or to exercise control over property of the estate

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362(a)(4) - filing operates as a stay of

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any act to create, perfect or enforce any lien against property of the ESTATE

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362(a)(5) - filing operates as a stay of

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any act to create, perfect or enforce against property of the DEBTOR any lien to the extent such lien secures a prepetition claim (362(a)(4)) stays any act to create, perfect or enforce any lien against PROPERTY OF THE ESTATE (I think cut off on petition date)

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362(a)(6) - filing operates as a stay of

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any act to collect, assess, or recover a prepetition claim against D

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362(a)(7) acts as a stay of

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the setoff of any prepetition debt owing to D against any claim against D

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Under 362(b)(1), the stay is not applicable to

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the commencement or continuation of a criminal action or proceeding against D

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Does the filing of a petition act as a stay of an act to perfect, or to maintain or continue the perfection of, an interest in property?

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Under 362(b)(3), not to the extent that T's rights and powers are subject to such perfection under 546(b) or such act is accomplished within the time period in 547(e)(2)(A)

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Under 362(c), the stay of an act against property of the estate, continues until

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such property is no longer property of the estate

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Under 362(c)(2), the stay of any act (other than against property of the estate) continues until

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the earliest of the case is closed or dismissed

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362(d) provides for relief from the stay

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"(1) for cause, including lack of AP, or

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362(e) provides that 30 days after a request for relief under 362(d),

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such stay is terminated, unless the court, after notice and a hearing, orders such stay continued...

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Under 362(e), the court shall order the stay continued pending the conclusion of the final hearing under 362(d) if

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there is a reasonable likelihood that the party opposing relief will eventually prevail.

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Under 362(f), upon request of a party in interest, the court, with or without a hearing, shall grant such relief from the stay as is

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necessary to prevent irreparable damage to the interest of an entity in property, if such interest will suffer such damage before there is an opportunity for notice and a hearing under 362(d) or (e).

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Who has burden of proof in a 362(d) or (e) hearing?

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Under 362(g)(1) the party requesting relief has burden of proving D's (lack of?) equity in property and (2) party opposing relief has burden of proving all other issues.

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362(e) is a ___ hearing"

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"362(d) is a lift stay (final) hearing

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Is there a perfection safe harbor in 547?

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"547(e)(2):

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1129(a)(1) requirement for confirmation

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The plan complies with the applicable provisions of this title.

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1129(a)(2) requirement for confirmation

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The proponent of the plan complies with the applicable provisions of this title.

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1129(a)(3) requirement for confirmation

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The plan has been proposed in good faith and not by any means forbidden by law.

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1129(a)(4) requirement for confirmation

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Any payment for services or costs and expenses has been approved by the court as reasonable.

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1129(a)(7) requirement for confirmation

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"With respect to each impaired class of claims or interests -

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1129(a)(8) requirement for confirmation

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"With respect to each class of claims or interests -

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1129(a)(9) requirement for confirmation

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This is long and complicated and deals with the entitlements of secured creditors.

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1129(a)(10) requirement for confirmation

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If a class of claims is impaired under the plan, at least one class of claims that is impaired has accepted the plan (excluding insiders).

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1129(a)(11) requirement for confirmation

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Confirmation of the plan is not likely to be followed by the liquidation, or the need for further reorganization, of D (unless proposed in plan).

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1129(a)(13) requirement for confirmation

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The plan provides for the continuation of payment of all retiree benefits at the level established pursuant to 1114 prior to confirmation, for the duration of time D has obligated itself to provide such benefits.

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1129(b)(1) requirement for confirmation

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Notwithstanding section 510(a) (which states that a subordination agreement is enforeceable), if all of the applicable rquirements of 1129(a) other than (8) are met, the court shall confirm the plan if it does not distribimate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan.

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1129(b)(2)(A) - For purposes of cramdown, "fair and equitable with respect to a class" includes the following requirements with respect to a class of secured claims -

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"the plan provides:

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1129(b)(2)(B) - For purposes of cramdown, "fair and equitable with respect to a class" includes the following requirements with respect to a class of unsecured claims -

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"(i) the plan provides that each holder receive or retain property of a value, as of the effective date, equal to amount of claim or

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1129(b)(2)(C) - For purposes of cramdown, "fair and equitable with respect to a class" includes the following requirements with respect to a class of interests -

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"(i) plan provides that each holder receive or retain property of a value, as of the effective date, equal to the greatest of the allowed amount of any fixed liquidation preference, any fixed redemption price or the value of such interest; or

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1129(c) states that

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court may only confirm one plan (unless confirmation order has been revoked under 1144). If 1129(a) and (b) are met for two plans, court shall consider the preferences of creditors and equity security holders in determining which plan to confirm.

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Under section 361, AP may be provided by

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"(1) cash payment(s),

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Section 363(b)(1) provides that

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the trustee, after notice and a hearing, may use, sell, or lease, other than in the OCB, property of the estate.

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Section 363(c)(1) provides that

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the trustee may enter into transactions, including the sale or lease of property of the estate, in the OCB, without notice or a hearing, and may use property of the estate in the OCB without notice or a hearing.

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Under section 363(c)(2), the trustee may not use, sell, or lease cash collateral under (c)(1) (in OCB) unless

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"(A) each entity that has an interest in such cash collateral consents or

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Section 363(e) provides that

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a secured creditor can request AP

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Under section 363(f), the trustee may sell property under 363(b) or (c) free and clear if

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"(1) permitted by applicable non-bankruptcy law,

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Can trustee use, sell, or lease property under 363 if there is an ipso facto clause?

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Yes, under 363(l).

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BFP exception to 363 lease or sale.

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REversal or modification on Under 363(m), appeal of 363 authorization of slae or lease does not affect validity of sale or lease to BFP.

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Who has the burden of proof in a 363 hearing?

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"363(o) (soon to be (p)) -

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What is 364(a) credit?

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Unsecured credit or debt in OCB allowable under section 503(b)(1) as an administrative expense.

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What is 364(b) credit?

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The court, after notice and hearing, may authorize the trustee to obtain unsecured credit or incur debt other than under 364(a) (i.e. not in OCB), allowable under section 503(b)(1) as an administrative expense.

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What is 364(c) credit?

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"If T is unable to obtain unsecured credit allowable under section 503(b)(1) as an administrative expense, the court, after notice and a hearing, may authorize the obtaining of credit or incurring of debt -

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What is 364(d) credit?

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"(1) The court, after notice and a hearing, may authorize the obtaining or credit or incurring of debt secured by a senior or eqal lien on property that is subject to a lien if:

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What is the 364(e) safe harbor?

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Reversal or modification on appeal of 364 authorization does not affect validity of any debt so incurred, to [BFP].

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Section 365(a) provides that

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subject to court approval, T may assume or reject any executory contract or unexpired lease of D.

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Under section 365(b)(1), if there has been a default in an executory contract or unexpired lease, T may not assume such contract or lease unless, at the time of assumption, T

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"(A) cures, or provides AP that T will promptly cure, such default;

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Under section 365(b)(2), the obligation to cure a default under 365(b)(1) does not apply to

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ipso facto default

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Under section 365(c), T may not assume or assign any executory contract or unexpired lease, whether or not such contract or lease prohibits or restricts assignment, if

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"(1)(A) applicable law excuses other party from accepting performance from or rendering performance to entity other than D, where or not contract or lesae so prohibits; and (B) such party doesn ot consent; or

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Under 365(d)(2), when may T assume or reject ecxecutory contract or unexpired lease of residential real property or of personal property?

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Any time before confirmation, but on the request of any party to such contract or lease, the court may order T to determine within a specified period of time whether to assume or reject such contract or lease.

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Under section 365(d)(3), T shall perform all obligations of D arising from and after the order for relief under any

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"unexpired lease of nonresidential real property, until such lease is assumed or rejected.

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The new section 365(d)(4) requires that an unexpired lease of nonresidential real property shall be deemed rejected if T does not assume or reject by the earlier of

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"(i) 120 days after order for relief or

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Section 365(e)(2) provides that section 365(e)(1) (which provides that an executory contract or unexpired lese may not be terminated or modified because of an ipso facto clause), does not apply if

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"(A) (i) applicable law excuses the other party from accepting performance from or rendering performance to T or to an assignee of such contract or lease, whether or not prohibitted by such contract or lease; and

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Under section 365(f), except as provided in 365[(b) and] (C), notwithstanding a provision restricting assigment, T may assign an executory contract or unexpired lease only if

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"(2)(A) T assumes such contract or lease; and

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Under section 365(g), except as provided in (h)(2) and (i)(2), the rejection of an executory contract or unexpired lease constitutes

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"a breach of such contract or lease -

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Under section 366(a), except as provided in (b) [and (c)], a utility may not

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alter, refuse or discontinue service to, or discriminate against, T or D solely on the basis of filing or prepetition debt.

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Under 366(b), a utility may alter, refuse, or discontinue service if

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neither T nor D, within 20 days after filing, furnishes adequate assurance of payment.

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The new section 366(c) states

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"(1) a stringent definition of ""assurance of payment"". States that administrative expense priority shall not constitute assurance of payment.

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What is the Countreyman definition of executory contract?

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There is sufficient performance remaining by both parties such that if either defaults it would be a material breach.

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NLRB v. Bildisco definition of executory contract

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"Performance is due to some extent on both sides" - more broad than Countreyman.

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What is a floating lien?

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A fairly standard feature of working capital loans under which the lender is granted a security interest in A/R, inventory and other property, and proceeds thereof. The cash proceeds from the collateral become the lender's collateral.

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What could be thought of as fraudulent conveyance insurance?

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A fairness opinion in an M&A deal.

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May a court extend the 10-day appeal period?

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No. The 10-day mandate in rule 8002 is jurisdictional.

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Res judicata

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equals claim preclusion. Sort of like double jeopardy for civil cases - requires same parties and also bars claims that could have been litigated.

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Equitable estoppel

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provides relief for parties who have been induced into behavior through another party's false representation.

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4041 "reorganization test" for terminating a pension plan

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debtor will be unable to pay its debts and continue in business outside of chapter 11.

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When a debtor seeks to terminate multiple pension plans simultaneously under the reorganization test of 4041, should a court apply the test to each plan independently, or all of the plans in the aggregate?

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Aggregate - In re Kaiser Aluminum, 3rd Circuit Court of Appeals, 2006.

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Summary judgement is proper when

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there exists no genuine issue of material fact and the moving party is entitled to judgement as a matter of law. Fed. R. Civ. P. 56(c). Courts must draw all reasonable inferences in favor of the nonmoving party.

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Holdings of Dow Corning (6th Circuit - 2006)?

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"1. There is a presumption that default interest should be paid to unsecured creditors in a solvent debtor case.

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Are post-petition plan support agreements unlawful solicitations under 1125(b) in Delaware?

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"Stations Holding (2002, Walrath) - post-petition plan support agreement indicating support for a plan to implement an acquisition deemed to be ""solicitation"" in violation of 1125(b) - plan votes of those who executed plan support agt were voided.

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New section 1125(g) provides:

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notwithstanding 1125(b), a pre-petition solicitation of a pre-pack can continue post-petition.

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Holding of Century Glove (3rd. Cir. 1988)

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In order to be an impermissible solicitation under 1125(b), you need a specific request for an official vote for an actual plan.