Bankruptcy Code With No Repo Safe Harbor — An Evaluation

Law360, New York (May 7, 2015, 10:28 AM EDT) -- The American Bankruptcy Institute's 2012-2014 Commission to Study the Reform of Chapter 11 of the U.S. Bankruptcy Code released its final report and recommendations in December 2014. One of the commission's recommendations was to eliminate the safe harbor for real estate mortgage loan repurchase agreements. This safe harbor, also known as Section 559 of the Bankruptcy Code, permits the repo buyer to liquidate the purchased assets free from the operation of the automatic stay coming into effect upon commencement of a repo seller's bankruptcy.

If adopted by lawmakers, such an amendment of the Bankruptcy Code would dramatically affect the manner in...

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