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In this issue:

Equity Turned on Its Head: The Applicability of In Pari Delicto to a Bankruptcy Trustee

File (Chapter 11) Now or Risk Being Broken into Pieces

Vanishing Assets: Debtors As Licensees of Intellectual Property

Bankruptcy Amendments Improve Preference Defenses



Equity Turned on Its Head: The Applicability of In Pari Delicto to a Bankruptcy Trustee
(Munsch Hardt Kopf & Harr, P.C.)
The Latin phrase in pari delicto refers to a plaintiff's participation in the same wrongdoing as the defendant. A troubling line of cases has recently emerged regarding the applicability of the in pari delicto defense to bankruptcy trustees. Defendants are using this defense and these rulings to their advantage to prevent victims from recovering for wrongdoing and to set wrongdoers free. Unfortunately, some courts have blessed this perverted use of the defense, stripping trustees and creditors' committees of valuable claims. (Read article)
File (Chapter 11) Now or Risk Being Broken into Pieces
(Haynes and Boone, LLP)
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 will dramatically change Chapter 11 reorganizations and could result in companies being liquidated because they cannot reorganize under the new strictures. If a company is undergoing financial problems, is short on unencumbered assets, will need its key executives to lead a reorganization that might take some time to deal with its creditors and landlords, or does not want its confidential business information distributed among all of its creditors (including its competitors), the company should seriously consider filing for reorganization before Oct. 17 when most of BAPCPA takes effect. Waiting for better times could prove fatal. (Read article)
Vanishing Assets: Debtors As Licensees of Intellectual Property
(Patton Boggs LLP)
In today's technology and knowledge oriented business world, almost all businesses are licensees of various types of intellectual property rights. Some licenses are very small cogs of a business that are easily replaceable (a license to use pc software) and others are the very underpinnings of a business that are virtually irreplaceable (a license for a key manufacturing process or the right to use a name or likeness on a product). In those bankruptcy cases in which the debtor's licenses are critical to the business, whether the debtor can assume or assume and assign those licenses likely will be critical to the success of the bankruptcy, and ultimately the return to creditors. (Read article)
Bankruptcy Amendments Improve Preference Defenses
(Jenkens & Gilchrist)
Beginning with cases filed on Oct. 17, 2005, unsecured creditors will have improved preference defenses to use to defeat attempts by debtors or trustees to obtain the return of payments deemed preferences under the Bankruptcy Code. The main focus of the legislation is to modify consumer bankruptcy provisions, most notably imposing the requirement that a consumer must pass a "means test" as a condition to filing a chapter 7 bankruptcy proceeding. However, there are significant modifications of corporate bankruptcy provisions as well, including changes to the preference statute. (Read article)
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