By Michael L. Moskowitz and Melissa A. Guseynov

On October 27, 2016, the Court of Appeals for the Ninth Circuit held that a credit union’s proofs of claim were properly rejected by the Bankruptcy Court as untimely, and that the debtor’s acknowledgment of debt owed to the credit union in her bankruptcy schedules was not an informal proof of claim. In re Barker, 2016 WL 6276078 (9th Cir. Oct. 27, 2016). Read the full opinion here.

By Michael L. Moskowitz and Melissa A. Guseynov

Generally, the concept of “reclamation” protects vendors in Chapter 11 cases because it provides a way to either retrieve goods delivered to a debtor pre-petition or to recover the value of those goods. On August 24, 2016, Bankruptcy Judge Mary F. Walrath, sitting in the Bankruptcy Court for the District of Delaware, bolstered creditors’ reclamation rights when she overruled an objection to a vendor’s claim for reclamation under section 546(c) of the Bankruptcy Code. In re Reichold Holdings US, Inc., et al., 556 B.R. 107 (Bankr. D. Del. 2016). This decision marks a noteworthy success for vendors asserting reclamation rights under the Bankruptcy Code.

Oftentimes, creditors wait too long before demanding reclamation or stopping delivery of their goods. This may result in a substantially smaller recovery on their claims. Trade creditors may significantly increase their recovery by reacting quickly when their buyer files for bankruptcy. This is crucial because once a chapter 11 case is filed, 11 U.S.C. § 546 controls the reclamation process.