Minimizing Risk Of Borrower Bankruptcy

Law360, New York (October 11, 2017, 12:55 PM EDT) -- Generally, courts will not enforce contractual restrictions between a borrower and a lender that deprive the borrower of the right to commence a voluntary bankruptcy case without the lender’s consent, holding such provisions to be void as contrary to federal public policy.[1] Despite this line of cases, there remains no definitive test that prevents a lender from limiting the right of a borrower to commence a bankruptcy. Accordingly, lenders and investors continue to experiment with creative structures to prevent a borrower’s bankruptcy filing. Two recent bankruptcy...
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