Secured Transactions—To Participate or Not to Participate: A Secured Party’s Question
11 October 2012
Mayer Brown Legal Update
Secured lenders are often obliged to become actively involved in the bankruptcy proceedings of their borrowers, as well as in related disputes concerning the propriety of the lenders’ secured claims and the treatment of those claims in the borrowers’ reorganization or liquidation. However, a recent federal court decision from Mississippi, which held that a secured creditor who did not file a proof of claim or otherwise appear in a debtor’s bankruptcy case did not lose its lien after confirmation of the debtor’s plan of reorganization, raises the question of what might happen to a secured claim if the creditor fails, or elects not, to participate in its debtor’s bankruptcy case.