Judge Lets Banks Immediately Appeal Distressed Debt Ruling

by Mike Bevel, CollectionIndustry.com

Bankruptcy Judge Arthur Gonzalez made himself pretty unpopular with banks and financial institutions like Merrill Lynch & Co., Citibank and Barclays Bank. As part of the aftermath of the Enron rulings, Gonzalez ruled that holders of claims against a bankrupt company could see those claims wiped out even if they did nothing wrong in their relationship with the company ? what amounts to an ?It?s not you, it?s me? decision.

Gonzalez?s ruling created a flood of unhappiness and had an immediate effect on the trading of bankruptcy claims, a market of at least $300 billion, according to the Dow Jones News Service. Such creditors typically sell their claims against bankrupt companies either because they want an immediate payoff or because they don’t have the time to recover the money themselves. Of course, that?s until Gonzalez rolled in with his controversial ruling.

Fortunately for the affected banks, U.S. District Judge Shira Scheindlin took the unusual step of permitting the banks to immediately appeal the ruling by Gonzalez, no doubt to the accompaniment of thousands of ?I >heart
Scheindlin gave the banks, until Tuesday to come up with an expedited briefing schedule for the appeal. Enron ? unsurprisingly — has backed Gonzalez’s ruling and argued in court papers that an appeal shouldn’t be allowed.