Mitigating Settlement Agreement Risks In Bankruptcy
Law360, New York (May 11, 2015, 10:14 AM EDT) -- There are numerous issues to be taken into consideration regarding settlement agreements in the context of a bankruptcy filing. Most notably, if the party asserting a claim files for bankruptcy relief, any settlement agreement must be approved by the bankruptcy court, which examines whether the settlement agreement being entered into is fair to the debtor's estate, its creditors and other parties in interest. Additionally, when parties settle before a Chapter 11 case is filed, there is a risk that the settling party will obtain a discharge in bankruptcy of its payment obligation, thereby leaving the releasing party in a situation in which it does not receive the full amount of the settlement but also cannot bring its original claim. Although this problem generally occurs when the settlement agreement involves payments being made over time, there is still a risk even when the settlement agreement provides for the settlement amount to be paid in one fell swoop, namely, the risk that a payment will be classified as a voidable fraudulent transfer or preference....
Law360 is on it, so you are, too.
A Law360 subscription puts you at the center of fast-moving legal issues, trends and developments so you can act with speed and confidence. Over 200 articles are published daily across more than 60 topics, industries, practice areas and jurisdictions.