Courts Cast Doubt On Common Bankruptcy-Blocking Tactic

Law360, New York (June 23, 2016, 12:05 PM EDT) -- Two recent decisions by bankruptcy courts, In re Lake Michigan Beach Pottawattamie Resort LLC, 547 B.R. 899 (Bankr. N.D. Ill. April 5, 2016) and In re Intervention Energy Holdings LLC, case no. 16-11247 (Bankr. Del. June 3, 2016), have cast doubt on the viability of a strategy often used by lenders to undermine borrowers' ability to file a bankruptcy petition. While the two decisions rely on different rationales, the result is that lenders should recalibrate their expectations regarding whether borrowers can be prevented from filing bankruptcy through drafting or structural means.

In both cases, the lenders sought the dismissal of voluntary...

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