The importance of the Bankruptcy Code's protections for aircraft financiers has been underscored by the recent Chapter 11 filing of Pan American Airways

Article Abstract:

Section 1110 of Title 11 of the Bankruptcy Code protects aircraft financiers who make it possible for air carriers to buy aircraft equipment, and the importance of these protections was highlighted by the 1998 Chapter 11 bankruptcy case of Western Pacific Airlines Inc. Under the Westpac decision, the federal district court did break new ground by allowing the collateralization and its assumption and assignment despite the existence of an anti-assignment clause, leaving the lessor at the mercy of the debtor in possession and the lender, who now have the unilateral ability to select a new lessee.

Finance, Airlines, Corporate reorganizations, Pan American Airways Corp.

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A 1995 Supreme Court decision has led to at least two cases in which banks or credit unions have been restricted in their right to freeze the funds of a debtor

Article Abstract:

The federal district court held in 1997 in Town of Hempstead Employees Federal Credit Union v. Wicks that an administrative freeze violated the automatic stay under the Bankruptcy Code, this despite the Supreme Court's broad upholding in Citizens Bank v. Strumpf of the bank right to place an administrative freeze or hold on a debtor's checking account. Lending institutions should, as a result of the Wicks holding, continue to hesitate before placing an administrative hold on debtor funds. The Wicks court erred when it held the credit union had violated the automatic stay.

Cases, Liquidity (Finance), Debtor and creditor, Stays of execution, proceedings, etc., Stays (Law)

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Courts restrict right to freeze a debtor's funds; financial institutions generally may not prohibit withdrawals once an automatic stay is issued

Article Abstract:

Courts have recently tended to favor borrowers when lending institutions place an administrative freeze or hold on any funds on deposit upon the borrower's default on the loan. In the past courts split fairly evenly on the issue, which results from conflicting sections of the Bankruptcy Code, primarily Sec 362(a)(7) and Sec 553. Lenders can avoid this problem by filing an ex parte motion accompanied by funds from the debtor's account, among other measures.

Banking Institutions, Depository Credit Intermediation, DEPOSITORY INSTITUTIONS, Interpretation and construction, Banks (Finance), Secured transactions, Bankruptcy law, Financial institutions, Set-off and counterclaim, Counterclaims

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