Vendor Issues
by: Jennifer Rood
Bernstein Shur Sawyer and Nelson
Manchester, N.H. and Portland, Maine
The success of any chapter 11 proceeding depends in large part on a
healthy, balanced relationship between the debtor and vendors, many of whom will also
be creditors in the upcoming reorganization. Some vendors supply key materials or
services; other have placed the debtor on COD terms or otherwise restricted its access to
credit. Ongoing communication and careful analysis is required with respect to each
substantial vendor both to insure a proper source of supply and to limit potential abuses
by creditors.
Read the full article. (Materials from the 2007 Northeast Bankruptcy Conference)
More Leverage for Suppliers, but No Quick Payday
by: Stuart Larsen
Kahn Kleinman, LPA; Cleveland
As most savvy collection managers know, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) granted suppliers a priority in payment for goods received by the debtor within 20 days before bankruptcy. The new statute undoubtedly increased the chances that suppliers will achieve a significant recovery. However, the courts have made it clear that Congress did not guarantee suppliers instant gratification on their newly created administrative priority claims.
Reclamation Rights after BAPCPA
by: Hon. Cecelia G. Morris
U. S. Bankruptcy Judge; Poughkeepsie, N.Y.
Prior to the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Bankruptcy Code §546(c) restricted the bankruptcy trustee’s ability to assert his or her strong-arm and avoidance powers against a seller of goods with “any statutory or common-law right” to reclaim such goods. For example, where a seller discovers that the buyer has received goods on credit while insolvent, §2-702 of the Uniform Commercial Code (UCC) allows the seller to “reclaim” goods by demanding their return within 10 days after the buyer received them. The right of reclamation under UCC §2-702 is explicitly subject to the rights of a buyer in the ordinary course of business or a good-faith purchaser. See In re Pester Ref. Co., 964 F.2d 842, 845 (8th Cir. 1992).
Read the full article. (Materials from the 2007 Southeast Bankruptcy Workshop)