USA Law & Practice

1. Structurally Embedded Laws of General Application

1.1 Insolvency Laws

If a debtor becomes subject to bankruptcy proceedings, creditors will, with some exceptions, be automatically stayed from collecting and enforcing against the debtor and any posted collateral. Lifting the stay may be time-consuming and costly and until the creditor has received payment it will be subject to the broad statutory and equitable powers of the bankruptcy court, which could permit the court to take actions such as (i) releasing the creditors rights to excess collateral; (ii) adding additional super-priority debt, pari passu debt or junior debt secured by the collateral; (iii) substituting different collateral for the original collateral; and (iv) rejecting executory contracts. Creditors will also be limited in their ability to exercise rights that trigger off a debtor's bankruptcy or financial condition (so-called ipso facto clauses). Unlike many other jurisdictions where bankruptcy