Law Offices of Larry D. Simons

In their article, Courts Reign in Solvent Debtor Bankruptcies by Handing Landlords Significant Victories, 5 NORTON BANKR_ L. ADVISER 3 (2005), John D. Fredericks and Eric E. Sagerman argue that In re Liberate Technologies, 314 B.R. 206 (Bankr. N.D. Cal. 2004), and NMSBPCSLDHB, L.P. v. Integrated Telecom Express, Inc. (In re Integrated Telecom Express, Inc.), 384 F.3d 108 (3d Cie 2004), cert. denied, 2005 WL 544094 (June 6, 2004), reflect a trend away from prior cases that allowed solvent debtors to reorganize. As explained here, these recent decisions depart from a long line of cases holding that a debtor's good faith should be determined from a "totality of circumstances" including solvency of the debtor but not determined exclusively by the debtor's solvency. Further, this excessive focus on the debtor's solvency creates an additional eligibility requirement not found in If U.S.C. § 109(d) or (e). It is too soon to declare that the courts have shifted away from or abandoned the "totality of circumstances" approach and instead adopted the holdings in Liberate and Integrated.

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