Assignments of Bankruptcy Claims

Handling transfers of distressed debt effectively requires more than a passing knowledge of bankruptcy law, and this is especially true in the case of bankruptcy claim assignments. Bankruptcy claims not arising from syndicated loans present different due diligence, documentation and post-closing challenges for the distressed debt investor. Evidence of the claims may consist of invoices, purchase orders and proof of delivery in the case of a vendor claim, an ISDA Schedule, confirmation and notice of termination in the case of a derivatives claim, or a lease in the case of a lease rejection claim.  Although there is general agreement as to what types of provisions should be included in bankruptcy claim assignments, the forms have not yet been standardized and disagreements still persist over issues such as the appropriate remedy in the event of a seller breach of the governing claim assignment.  Post-closing issues may range from having to recover a portion of the purchase price from seller after the claim has been partially disallowed to preventing seller’s defense of a preference action from delaying purchaser’s receipt of plan distributions.

Our firm has had extensive experience in handling transfers of bankruptcy and other insolvency-related claim transactions, domestically and abroad, involving a broad variety of claims and counterparties. Monitoring bankruptcy and restructuring developments through publications such as Debtwire and BankruptcyLaw360, whether or not relating specifically to credits in which we are currently involved, and analyzing how these developments may affect our clients investments now and in the future, is an integral part of our practice. This approach helps us better evaluate the most effective way to document our clients’ bankruptcy claim assignments, freeing them to focus on selecting investments and generating returns.