Loan Can Be Re-Characterized as Equity for Fraudulent Conveyance Purposes

The Court of Appeals for the Ninth Circuit has joined other circuits in holding that the bankruptcy court has the authority to re-characterize a debt obligation as equity in the context of a fraudulent transfer avoidance action under the Bankruptcy Code. For third-party, non-insider creditors, the Fitness Holdings decision is a helpful tool to restore assets to the debtor’s estate that were transferred to the holder of an equity interest in the guise of a debt repayment.

Guess What? Ninth Circuit Splits with Fourth Circuit in Ruling on Involuntary Petition Against Guess Founder Marciano

The Marciano decision is an important ruling for creditors that may be considering an involuntary petition. As Lesley Hawes explains, there is limited reported case law addressing involuntary petitions, and this decision creates an easy-to-follow, bright-line test for determining whether a petitioning creditor with a judgment that is on appeal but not stayed has a claim that satisfies the requirements of §303(b)(1) of the Bankruptcy Code.