Perspective
Jul. 1, 2011
Shift in Balance of Power Between Lenders and Borrowers in Bankruptcy
Two recent bankruptcy cases pave the way for borrowers to separately classify deficiency claims. By Paul S. Arrow of Buchalter Nemer
A Chapter 11 bankruptcy case is often a negotiation more than anything else. But in the bankruptcy world, the normal balance of power between a lender and borrower is altered: the borrower is given a number of bargaining chips that it lacks in the real world. For example, an automatic stay prevents a lender from exercising any rights and remedies notwithstanding a borrower's defaults. Also, in a process called "cramdown," a borrower...
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