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Tori Lynn Remington

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Tori is an associate in the firm’s Finance and Financial Restructuring + Insolvency practice groups. She has been involved in complex chapter 11 proceedings and litigation matters, representing various parties in interest, including debtors-in-possession, DIP lenders, stalking horse purchasers, and creditors. Tori also has experience in the Court of Chancery representing assignees in Delaware ABCs.

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In bankruptcy cases, preference actions are often asserted under Section 547 of the Bankruptcy Code against a creditor to reclaim funds paid to the creditor in the 90 days prior to the bankruptcy. While the most common defenses to a preference action are the ordinary course of business defense, the new value defense, and the contemporaneous exchange for new value defense, there are other less traditional defenses that a knowledgeable creditor should consider to reduce or even eliminate preference liability.

In the complex landscape of bankruptcy proceedings, the motion to sell assets under Section 363 of the Bankruptcy Code marks a pivotal moment that demands attention from creditors and other stakeholders. This legal mechanism allows a debtor to offload assets, potentially offering a fresh start under new ownership while aiming to maximize returns for creditors. Contrary to what some creditors might believe, their active involvement in this process is crucial. It’s not just about observing from the sidelines; stakeholders have a vested interest in ensuring the process unfolds in a way that protects their rights and maximizes their potential recovery.

Under Section 341 of Title 11 of the U.S. Code, the U.S. Trustee convenes a meeting of a debtor’s creditors, known as the 341 Meeting. This meeting serves to examine the debtor’s financial position and verify the facts stated in the bankruptcy filing. While not mandatory, creditors can use this opportunity to ask questions about the debtor’s financials and the bankruptcy case, providing them with insights into potential claim treatments and the debtor’s bankruptcy plan.

In the competitive world of commerce, sellers of goods can enhance their prospects for payment by leveraging a Purchase Money Security Interest (PMSI). This legal claim, when properly perfected, can provide a seller with priority over other creditors, even if those creditors have perfected a lien on the same type of collateral first.

In Chapter 11 bankruptcy cases, two critical documents are the disclosure statement and the plan. These documents represent the culmination of a case and provide a roadmap for the debtor’s path forward. A Chapter 11 plan can be a plan of reorganization, where the debtor emerges from bankruptcy as a reorganized entity, or a plan of liquidation, where the debtor’s remaining assets are liquidated and the proceeds are distributed to creditors. The plan outlines how creditor claims will be paid and, in the case of reorganization, provides that a debtor is fully discharged from its prior debts.

Bankruptcy proceedings often involve preferences, a complex issue that can be mitigated or eliminated through several affirmative defenses provided by the Bankruptcy Code. This article focuses on one such defense: the contemporaneous exchange defense, codified in 11 U.S.C. § 547(c)(1). This defense encourages creditors to continue business with companies potentially facing bankruptcy and protects transfers intended as a contemporaneous exchange for new value given to the debtor.

In the realm of bankruptcy sales, the role of a stalking horse bidder in a Section 363 sale is crucial. This bidder sets the baseline bid, protecting the debtor from receiving unreasonably low bids for its assets. In return, the stalking horse bidder receives certain protections, such as a break-up fee and reimbursement of reasonable expenses, which are outlined in the asset purchase agreement.

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In the event of a company filing for bankruptcy, creditors often face the risk of preference exposure, where the company may seek to reclaim funds paid to the creditor prior to the bankruptcy filing. However, the Bankruptcy Code offers affirmative defenses that can help creditors reduce their preference exposure or liability. One such defense is the new value defense, also known as the subsequent new value defense. This defense, outlined in 11 U.S.C. § 547(c)(4), is designed to encourage creditors to continue their engagement with financially distressed companies.