By Michael Riela
Vedder Price
New York
In City of Concord v. Northern New England Telephone Operations LLC (In re Northern New EnglandTelephone Operations LLC), No. 14-3381, 2015 WL 4619576 (2d Cir. Aug. 4,
2015), the Second Circuit considered the circumstances under which a Chapter 11
plan extinguishes a lien. Notably, although
the general rule is that liens may pass through a bankruptcy unaffected, the
Second Circuit held that a Chapter 11 plan can extinguish a lien when the
lienholder had participated in the bankruptcy proceedings (by, for instance,
filing a proof of claim in the bankruptcy case). This case is an important reminder that if
you are a secured creditor, there is a risk to simply filing a proof of claim
in a Chapter 11 case and not diligently defending your lien rights thereafter.