The recent bankruptcy filing by Lehman Brothers Holdings, Inc. in the U.S. Bankruptcy Court for the Southern District of New York caught many people by surprise. It is the largest corporate bankruptcy to date in terms of assets and liabilities.
Holders of bonds, notes and other obligations issued or guaranteed by Lehman Brothers Holdings, Inc. wonder what their options are and whether they need to hire a New York bankruptcy lawyer to protect their rights. People doing business with non-debtor subsidiaries of Lehman Bros. wonder what steps they should take to protect their rights going forward.
There are certain steps that it is advisable for creditors in a bankruptcy case to take:
1. Obtain Legal Advice re Effect of Bankruptcy Filing on Your Rights.
Different creditors have different rights and remedies depending on the nature of their legal and contractual relationship with a debtor in bankruptcy. Provisions of the Bankruptcy Code give particular rights to certain parties (such as financial institutions, forward contract merchants, etc.) for certain type of financial contracts (such as forward contracts, securities contracts, etc.). Whether or not a creditor is subject to the benefit of particular rights specified in the Bankruptcy Code requires review of the legal obligation in question. In addition, the Bankruptcy Code provides for different rights for different categories of creditors, depending upon whether their claims are administrative claims arising after the filing of the bankruptcy, secured claims, etc. As the Lehman Bros. banruptcy case is pending in Manhattan it may be useful to hire a Manhattan based bankruptcy lawyer who is familiar with the Southern District of New York Bankruptcy Court to provide this advice.
2. File a Proof of Claim.
A creditor will often want to file a proof of claim in a bankruptcy case to ensure that it is eligible to participate in distributions to creditors, unless it has been scheduled in the debt schedules filed by the debtor and is satisfied as to how it has been scheduled. While a creditor is not required to hire a bankruptcy lawyer to prepare and file a proof of claim, it is often advisable to do so (particularly if the amount of money at stake is large). A Manhattan bankruptcy lawyer who is familiar with litigating claims objections in the U.S. Bankruptcy Court for the Southern District of New York can provide valuable assistance to a creditor in preparing a proof of claim for filing in that court.
3. Monitor Case & Plan Development.
Depending on the size of its claim a creditor may decide that it should monitor developments in the chapter 11 case, particularly regarding the proposed plan of reorganizations. If an ad hoc group of creditors are all similarly situated (for example, all are owed money by the debtor for similar reasons — such as same class of bonds or promissory notes), the creditors may pool resources by having one lawyer represent them as a group. At Starr & Starr, PLLC we can represent ad hoc groups of creditors on this basis and thereby reduce the cost to each creditor of hiring its own lawyers.