The Restructuring Report

The Fourth Circuit recently addressed whether bankruptcy courts have subject matter jurisdiction over a case filed by an arguably “solvent debtor,” resulting in three separate written opinions and a split decision on the issue.

After the Eighth Circuit ruled that Chapter 5 avoidance actions could be sold by a trustee or debtor in possession, many commentators raised the question of whether the debtor could grant a pre-petition security interest in those causes of action to a lender. A recent decision by the United States District Court for the Northern District of Iowa, on appeal from the bankruptcy court, provides one answer to that question.