In both cases, the “agreements or transactions” must be “with the debtor or any other entity.” Id. in one or more such agreements or transactions.” 11 U.S.C. The Bankruptcy Code in turn defines “financial participant” to mean an entity that has certain financial agreements or transactions of “total gross dollar value of not less than $1,000,000,000 in notional or actual principal amount outstanding” or “gross mark-to-market positions of not less than $100,000,000. Among the transfers protected by the section 546(e) safe harbor are transfers by or to a “financial participant” made “in connection with a securities contract.” Id. We have blogged previously about section 546(e), the Bankruptcy Code’s safe harbor for certain transfers otherwise subject to avoidance as preferences or fraudulent transfers. Go Delaware Bankruptcy Court Issues Decision on Whether a Debtor Can Be a “Financial Participant” In our prior posts, which you may wish to review and can find here and here, we explained that the Third Circuit, joining the minority of courts to have ruled on the issue, held in November 2019 that a creditor does not violate the stay if it retains estate property until the debtor seeks turnover of the seized property under Section 542. The Seventh Circuit had reached the opposite conclusion in June 2019, holding that the automatic stay “becomes effective immediately upon filing the petition” and requires the creditor to return property seized pre-petition: “ is not dependent on the debtor first bringing a turnover action.” In December, the Supreme Court granted certiorari and on Thursday adopted the minority view. In 2019, we began following a Circuit split regarding a secured creditor’s obligation to return collateral that it lawfully repossessed pre-petition after receiving notice of a debtor’s bankruptcy filing.
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