News + Insights

A Primer for Creditors Navigating the Bankruptcy System

Written By Jameson A. Doub and Thomas C. Wolff

Bankruptcy filings affect businesses across America. The Bankruptcy Code is complex and difficult to navigate.  But when used properly, it can help creditors to minimize losses when a customer files bankruptcy. …

Charging Order Limitations – You Can't Charge What They Don't Own

Written By Lilian L. Faulconer and Lance P. Martin

In North Carolina, a creditor who obtains a judgment against an individual with an ownership interest in a limited liability company or limited liability partnership may enforce its unsatisfied judgment by petitioning the …

Collection Costs of a Non-Discharged Debt Also Are Non-Discharged

Written By Jameson A. Doub and Thomas C. Wolff

Bankruptcy offers debtors an opportunity for a "fresh start," the primary draw for many individuals seeking to unburden themselves of their debt.   A bankruptcy discharge relieves a debtor of their legal obligation t…

Don't Disrespect the Receivership

Written By Lilian L. Faulconer and Lance P. Martin

A recent decision by the North Carolina Business Court highlights the risks of interfering with property that is part of a receivership estate. The North Carolina Commercial Receivership Act celebrated its three-year anni…

740,000 Reasons to Think Twice Before Putting a Company in Bankruptcy

Written By Lance P. Martin

A recent decision from a bankruptcy court in Delaware provides a cautionary tale about the risks of involuntary bankruptcy.  In the Delaware case, the debtor managed a group of investment funds. The business was all …

Bankruptcy Destroyed My Perfect (Landlord-Tenant) Relationship!

Written By Joanne H. Badr and Lance P. Martin

February brings us Valentine's Day, and we bring you a tale as old as time. Two people meet, maybe online, maybe at a Chamber of Commerce mixer, maybe over lunch arranged by a broker.  They hit it off and commit to a…

A Discharge Lesson Courtesy of the Worst Person in the World

Written By Lance P. Martin

Alex Jones, the despicable, chest-thumping, conspiracy-peddling radio host, for years, blabbered on his radio show that the Sandy Hook Elementary School shooting was a hoax.  When the families of the murdered childre…

What the "Biggest Holiday Inn in the World" Can Teach Us About Default Interest in Bankruptcy

Written By Lance P. Martin

When a borrower triggers a monetary default under a loan by failing to make required payments, most loan documents allow the lender to accelerate the loan and invoke a default interest rate and penalties. But what happens…

Top 10 Most Popular Articles of 2023

Written By Joanne H. Badr and Joseph A. Schouten

As we approach the New Year, it's time to reflect on the articles that have most resonated with readers throughout 2023. Ward and Smith attorneys have provided valuable insights into various legal considerations. Here are…

How to Get Your Own "Free" Private Investigator in Bankruptcy

Written By Lance P. Martin

Subchapter V of Chapter 11 of the Bankruptcy Code, which turned three earlier this year, created a more streamlined and less expensive Chapter 11 reorganization path for small business debtors. It also created a new posit…

Secured Lender Duffs Golf Course Valuation Hearing

Written By Lance P. Martin

In Chapter 11, value is king.  Secured creditors have rights in proportion to the value of their collateral.  When a secured creditor and the debtor can't agree on value, appraisals and appraiser testimony becom…

Fourth Circuit Says "Do the Math" For Attorneys' Fees Awards

Written By Lilian L. Faulconer and Lance P. Martin

In North Carolina, a loan agreement can require a borrower to pay attorneys' fees upon default to reimburse the lender for collection expenses. The law provides that you can specify a percentage up to 15% of the amount du…

No Discharge for Bonnie, No Discharge for Clyde.

Written By Lance P. Martin

The Bankruptcy Code generally allows a debtor to wipe out all pre-bankruptcy debts and get a fresh start in life.  But not all debts are equal.  Some debts can't be discharged, meaning they survive bankruptcy, a…

When Can You Freeze and Seize a Judgment Debtor’s Bank Account?

Written By Lance P. Martin

What can you do to collect on a judgment, and when can you do it?  And does it matter if you're going after the judgment debtor directly, or after the property of the judgment debtor in the hands of a third party?&nb…

The Case of the Inexcusably Ignorant Refinance Loan

Written By Lance P. Martin

A recent decision from the North Carolina Court of Appeals illustrates the wrong way to refinance a loan.  In Midfirst Bank v. Brown, a refinancing lender cancelled a deed of trust that should have been assigned to i…

Foreclosure Warning: Property Possessed but Not Owned by a Debtor May Be Subject to the Automatic Stay

Written By Lilian L. Faulconer and Lance P. Martin

Creditors know that a bankruptcy petition automatically halts efforts to collect pre-petition debts from the debtor outside of bankruptcy.  The "automatic stay" provides fundamental protection to debtors, mandating a…

Fireworks, Hot Dogs, and Bankruptcy?

Written By Lilian L. Faulconer and Lance P. Martin

As the townsfolk of Lubbock, Texas readied for the annual Fourth on Broadway Independence Day fireworks show and celebration, local car dealer Reagor-Dykes wanted to be front of mind.  So as it had the previous year, …

Can actions be inadvertent and intentional simultaneously? For automatic stay violations, the answer is "Yes."

Written By Lance P. Martin and Thomas C. Wolff

Creditors know that when a debtor files bankruptcy, the "automatic stay" prohibits further collection activity to give a debtor breathing room to reorganize his affairs.  If a creditor willfully violates the stay, it…

Corporate Bad Behavior Is Not Dischargeable Under Subchapter V

Written By Lance P. Martin

If a business engages in bad behavior like intentional interference with contract and tortious interference with business relations, then it may not use Subchapter V of Chapter 11 to discharge debts based on that bad behav…

"My Lawyer Made Me Do It" is Not an Absolute Defense to Bankruptcy Court Sanctions

Written By Lance P. Martin

Last year, we offered a lesson and a moral from a North Carolina district court decision reversing a $115,000 sanctions order by a North Carolina bankruptcy court.  The lesson from the case was that the bankruptcy co…

Not So Fast: Limits of "Settlement Negotiation" Protections

Written By Isabelle M. Chammas and Joseph A. Schouten

Understanding How and Why "Settlement Negotiations" May Be Used Against You To promote honest and open discussions in resolving disputes, courts have adopted rules to specifically safeguard the information disclosed and e…

Even Indirect Income from Cannabis Can Get You Banned From Bankruptcy

Written By Lance P. Martin and Tyler J. Russell

Despite widespread trends in state-level legalization and decriminalization of high-THC cannabis and growing acceptance of cannabis among Americans, cannabis and cannabis products remain illegal under federal law.  A…

How a Setoff Right Led to a Creditor Fight

Written By Lilian L. Faulconer and Lance P. Martin

A recent decision from the North Carolina Court of Appeals teaches a valuable lesson about how a creditor with the upper hand against another creditor should behave to avoid squandering its advantage and becoming mired in …

More Bad News for Non-Debtors Seeking Releases in Chapter 11

Written By Lance P. Martin

In January, we wrote about the Purdue Pharma mega-bankruptcy.  A United States District Court in New York vacated Purdue Pharma's confirmed Chapter 11 plan, holding it was improper for the plan to contain non-consensu…

Who Gets Released in Chapter 11?

Written By Lance P. Martin

In Chapter 11, a business or individual seeks to confirm a plan of reorganization that – upon compliance -- will release it from liability for certain claims and obligations.  But what about parties other than …

Can I Hold a Debtor’s Bank Account Hostage?

Written By Lance P. Martin

For creditors dealing with debtors in the shadow of bankruptcy, a common scenario repeats itself.  The creditor repossesses collateral, attaches an account, or sets off a bank account, and then the debtor files a ban…

A Paradigm Shift in Consumer Collections: How the CFPB's Final Rule is Certain to Affect Creditors and Debt Collectors

Written By Thomas C. Wolff

The Fair Debt Collection Practices Act (FDCPA) is a dense federal statute that governs debt collection.  If you have read some of my previous articles on the topic, you will recall that this set of laws, in conjuncti…

Use Clarity to Avoid Contempt in Bankruptcy

Written By Lance P. Martin

This is a story about contempt and clarity.  It comes to us from a July 2021 North Carolina district court decision reversing a $115,000 sanctions order by a North Carolina bankruptcy court.  The story offers a …

So You Have A Judgment… Now What?

Written By Tyler J. Russell and Thomas C. Wolff

In North Carolina, many lawsuits result in the entry of a judgment that establishes one party's right to collect payment of a certain amount of money from another party.  It may be easy to view the entry of judgment …

Their Aim Wasn't True – The NRA and Bad Faith Bankruptcy Filings

Written By Lance P. Martin

Bankruptcy offers a temporary sanctuary for parties seeking relief from a variety of problems – financial crisis, lawsuits, collection actions, repossessions, foreclosure, and pandemics.   Filing bankruptcy bef…

Struggling Hotels Can Provide Turn-Down Service, Can't Be Turned Down for Subchapter V Bankruptcy

Written By Lance P. Martin

Subchapter V of Chapter 11 of the Bankruptcy Code, which took effect in February 2020, creates a more streamlined and less expensive Chapter 11 reorganization path for small business debtors.  It has proven popular d…

Congratulations Bankruptcy Graduates! You Are Now Eligible for PPP Loans.

Written By Lance P. Martin

To be eligible for a Paycheck Protection Program ("PPP") loan, the applicant must certify on the borrower application that the applicant and any owner of 20% or more of the applicant are not “presently involved in an…

To Encourage Landlords to Work with Struggling Tenants, Congress Removes a Powerful Weapon Wielded by Bankruptcy Trustees

Since the COVID-19 pandemic began, many tenants have seen their revenues plummet or disappear entirely as a result of state and local regulations on whether they could operate, when, and at what capacity.  Many comme…

Congress Extends Higher Debt Ceiling for Small Business Bankruptcies

Written By Lance P. Martin

We previously informed you that if you are a small business that needed to file bankruptcy to save your company, then you may be able to take advantage of Subchapter V of Chapter 11 of the Bankruptcy Code.  The new s…

More Breathing Room for Commercial Tenants in Bankruptcy

Written By Lance P. Martin

The Consolidated Appropriations Act of 2021 ("CAA") took effect on December 27, 2020.  The mammoth spending and COVID-19 pandemic relief bill contains provisions related to commercial real estate leases in bankruptcy…

Supreme Court to Secured Creditors: "Hold on Loosely, But Don't Let Go."

Written By Lance P. Martin

Filing a bankruptcy petition automatically halts efforts to collect prepetition debts from the debtor outside of bankruptcy.  This "automatic stay" is a command to halt action, and creditors violate it at their own p…

Evict Like a Jerk and Suffer the Consequences

Written By Lance P. Martin

As the pandemic shows little signs of abating, and many sectors of the economy continue to struggle, the relationship between commercial landlords and tenants may be strained.  Commercial landlords may no longer be w…

What Do You Get When You Cross a $137,000 Cartier Necklace and a Debtor With Selective Amnesia? A Chapter 11 Trustee.

Written By Lance P. Martin

When a debtor files bankruptcy under Chapter 11, the bankruptcy court does not automatically appoint a trustee.  Unlike Chapter 7, where the court appoints a trustee to investigate the debtor's assets, liquidate asse…

Can a Business Owner Reorganize Guaranty Obligations Under Subchapter V?

Written By Lance P. Martin

We have previously informed you that if you are a small business that needed to file bankruptcy to save your company, then you may be able to take advantage of Subchapter V of Chapter 11 of the Bankruptcy Code.  The …

40,979 Reasons Not to "Press Charges" Against a Debtor in Bankruptcy

Written By Lance P. Martin

It is a cardinal sin to attempt to collect a debt or repossess collateral after a borrower files bankruptcy.  Bankruptcy triggers the automatic stay – a command, not a suggestion, that collection activity cease…

Controlling Expenses in Small Business Chapter 11 Cases

Written By Lance P. Martin

We previously informed you that if you are a small business that needed to file bankruptcy to save your company, you may be able to take advantage of Subchapter V of Chapter 11 of the Bankruptcy Code.  Subchapter V w…

Leases, Bankruptcy, and Coronavirus: Force Majeure Edition

Written By Lance P. Martin

Many businesses in bankruptcy or heading that way – particularly retail establishments – face an uncertain future as states and cities impose closures and phased re-openings.  If you lease your office, st…

Can a Debtor Choose Salvation Over Creditors?

Written By Lance P. Martin

In a Chapter 13 bankruptcy, debtors propose a plan to re-pay all or a portion of their debts. The amount to be repaid depends on how much the debtors earn, the amount and types of debt owed, and how much property they own…

Leases and Bankruptcy in a Time of Coronavirus

Written By Lance P. Martin

Many businesses in bankruptcy or heading that way – particularly retail establishments – face an uncertain future as states and cities move from closures to phased re-openings.  No one knows with certaint…

COVID-19 Closed My Business. Can I Still Reorganize in Bankruptcy?

Written By Lance P. Martin

We previously informed you that if you are a small business that needed to file bankruptcy to save your company, then you may be able to take advantage of Subchapter V of Chapter 11 of the Bankruptcy Code.  The new s…

Economic and Financial Uncertainty: How a Homeowners Association Can Protect Itself

Written By Tyler J. Russell and Thomas C. Wolff

In a short period of time, COVID-19 has changed the way we live and conduct business.  Sadly, the pandemic seems as though it will cause (or already has caused, depending on who you ask) a devastating impact on our l…

Can the New Small Business Chapter 11 Save Your B&B or Airbnb?

Written By Lance P. Martin

We previously informed you that if you are a small business that needed to file bankruptcy to save your company, you may be able to take advantage of Subchapter V of Chapter 11 of the Bankruptcy Code.  Subchapter V wa…

Can a Creditor Violate the Automatic Stay in Bankruptcy by Doing Nothing?

Written By Lance P. Martin

Filing a bankruptcy petition automatically halts efforts to collect pre-petition debts from the debtor outside of bankruptcy.  If a creditor wants to continue a lawsuit against a debtor outside of bankruptcy, reposse…

Harley-Davidson Dealer Violates Automatic Stay, Goes from Creditor to Judgment Debtor

Written By Lance P. Martin

If you lend money, you know – or should know – it is a cardinal sin to collect a debt or repossess collateral after a borrower files bankruptcy.  Bankruptcy triggers the automatic stay – a command, …

Is it Time to Re-Write Your Attorney's Fees Provision?

Written By Lance P. Martin

Bankruptcy court is not the first place that comes to mind when a lender thinks about full recovery on a loan.  Usually, debtors file bankruptcy because they can't pay all their creditors in the ordinary course of bu…

New Law More than Doubles Chapter 12 "Family Farmer" Debt Limit

Written By Lance P. Martin

On Friday, August 23, 2019, the President signed into law the Family Farmer Relief Act of 2019.  The Act increases the debt limit used to determine whether a family farmer is eligible for relief under Chapter 12 of t…

What Happens to My Lease in Bankruptcy?

Written By Lance P. Martin

Suppose you own farmland or retail commercial space and you lease your property.  What happens to your lease if the lessee files bankruptcy?  And what must be done if your lessee wants to continue to honor your …

Supreme Court: Rejection of a Trademark License by a Bankrupt Licensor Doesn't Terminate the License

Written By Norman J. Leonard

What happens if you are a trademark licensee and your licensor files for bankruptcy protection?  Can the licensor unilaterally terminate your license and prohibit you from using the license – even if you're in …

Fourth Circuit Provides Relief to Chapter 13 Debtors for Some Underwater Mortgages

Written By Lance P. Martin

In a victory for Chapter 13 debtors, the United States Court of Appeals for the Fourth Circuit recently issued a major decision that changes the way bankruptcy courts in North Carolina will deal with certain home mortgages…

Bankruptcy Discharge of Debts for Willful and Malicious Injury

Can a debtor discharge a debt arising out of a deliberate or intentional act that causes injury to you?  A recent article addressed the general issue of discharging debts in bankruptcy and various grounds for excepti…

Will My Judgment Get Discharged in Bankruptcy?

Written By Lance P. Martin

Bankruptcy is meant to provide a fresh start for the honest but unfortunate debtor.  A debtor who files Chapter 7 does so with the presumption that all his or her debts will be forgiven or "discharged." But what abou…

Can I Get Sued Over a Court-Authorized Foreclosure?

Written By Lance P. Martin

If a Clerk of Court authorizes a foreclosure sale and the trustee sells the property, can a borrower or other aggrieved party later sue to nullify the foreclosure sale or recover damages caused by the foreclosure?  I…

Are the Bankruptcy Courts Available for the Cannabis Industry?

Written By Lance P. Martin

Since 2012, ten states and the District of Columbia have legalized marijuana for adult recreational use.  Another 23 states have legalized some form of medical marijuana use.  At the federal level, the Agricultu…

Can I Recover Attorneys' Fees in Bankruptcy?

Written By Lance P. Martin

The United States Court of Appeals for the Fourth Circuit — which covers federal courts in North Carolina — recently handed a big victory to lenders whose borrowers file for bankruptcy protection.  In Sum…

You Can't Play Hide-And-Go-Seek in Chapter 11

Written By Lance P. Martin

In a Chapter 11 bankruptcy, the debtor attempts to reorganize its affairs in a Chapter 11 Plan.  When the debtor files its proposed Plan, it must also file a Disclosure Statement providing creditors and claimants wit…

Will Bankruptcy Courts Treat Bitcoin as a Commodity?

Written By Lance P. Martin

What is virtual currency?  Is it money?  Is it a commodity?  Is it a hybrid of the two or something else entirely?  The answer to the question has profound implications for lenders seeking to secure lo…

I Want to Foreclose But I Can't Find My Note. Do I Have a Problem?

Written By Lance P. Martin

In my last article, I discussed whether inconsistent dates on a promissory note and deed of trust could cause problems in foreclosure. But what if you can't even find the original promissory note?  Perhaps it was ina…

Lenders: Take a Hint! Forbearance or Modification Agreements Should Contain Specific Waiver Language To Protect Against “Regulation B” Claims

Written By Michael J. Parrish

Lenders must comply with a constantly changing series of State and Federal laws and regulations. When loan relationships sour, and lenders seek to collect, borrowers and guarantors may allege the lender has violated some …

My Note and Deed of Trust Have Different Dates. Do I Have a Problem?

Written By Lance P. Martin

Consider this scenario:  You loan money to a borrower. You intend to secure the loan with a deed of trust encumbering real property.  Your borrower signs a promissory note dated November 7, 2006.  But your …

In Chapter 7, Oral Lies Are Safer Than Written Lies

Written By Lance P. Martin

In my last article, I discussed how the Fourth Circuit Court of Appeals affirmed the denial of a Chapter 7 debtor’s discharge because the debtor intentionally lowballed the value of his interest in a real estate inve…

In Chapter 7, Lowballing Your Assets Can Cost You Your Bankruptcy Discharge

Written By Lance P. Martin

The United States Court of Appeals for the Fourth Circuit—which covers North Carolina—recently decided a case that will have bankruptcy debtors thinking twice about how they complete their bankruptcy Petition a…

Winning While Losing with Attorneys' Fees Provisions

Written By Lance P. Martin

The United States District Court for the Middle District of North Carolina recently issued a decision that demonstrates the power of attorneys’ fees provisions in promissory notes and guaranty agreements. In TD Bank …

Individual Chapter 11 Plans Also Are Just About Written in Stone

Written By Lance P. Martin

In an article last year, we informed you about a ruling from the United States Bankruptcy Court for the Eastern District of North Carolina, in In re Royal, holding that debtors seeking modification of a confirmed Chapter 1…

New Bankruptcy Rules that Creditors Need to Know and Follow

Written By Lance P. Martin

On December 1, 2017, several changes to the Federal Rules of Bankruptcy Procedure took effect. The changes involve consumer cases under Chapter 13 and affect creditors with secured claims, unsecured claims, and judgment li…

In Bankruptcy, a Lease Isn't Always a Lease

Written By Lance P. Martin

In In re Price, the United States Bankruptcy Court for the Eastern District of North Carolina recently explored the difference between a “true” lease of personal property and “disguised” financing.&…

Supreme Court Absolutely Affirms the Absolute Priority Rule

Written By Lance P. Martin

The United States Supreme Court recently decided a case that impacts lenders and other creditors in Chapter 11 bankruptcy proceedings.  The Supreme Court held that a bankruptcy court may not approve a “structure…

Like Brangelina, a Promissory Note and Guaranty May Be Separated

Written By Lance P. Martin

Recently, in the case of Emerald Portfolio, LLC v. Outer Banks/Kinnakeet Associates, LLC, the North Carolina Court of Appeals issued an opinion that reaffirms the independent nature of personal guaranty agreements. &n…

North Carolina Court Clarifies Deadlines to Set Aside Fraudulent Conveyances

Written By Lance P. Martin

  Recently, the North Carolina Court of Appeals, in the case of KB Aircraft Acquisition, LLC v. Berry, et al., clarified the time limit for bringing claims under the North Carolina Uniform Voidable Transactions Act (…

Chapter 13 Plans are Just About Written in Stone

Written By Lance P. Martin

Recently, a bankruptcy judge in the United States Bankruptcy Court for the Eastern District of North Carolina issued a ruling that should help lenders dealing with borrowers in Chapter 13.  In a case entitled In re Ro…

A Win for Creditors: Supreme Court Expands the Meaning of Actual Fraud for Bankruptcy Discharge

Written By Lance P. Martin

The United States Supreme Court recently decided a case that will be a powerful tool for lenders dealing with borrowers who engage in schemes to avoid payment of their debts, such as an improper transfer of their assets be…