Economic downturns often oblige secured lenders to become involved actively in the bankruptcy of their borrowers and in related disputes concerning the propriety of the lenders’ secured claims and the treatment of those claims in the borrowers’ reorganization or liquidation. Thus, many insolvency and workout topics have appeared in this space since the Great Recession began more than four years ago.
Today, however, we consider what might happen to a secured claim if the creditor fails, or elects not, to participate in its debtor’s bankruptcy case. We are prompted to do so by a recent Mississippi federal district court decision, Acceptance Loan v. S. White Transportation (In re S. White Transportation),1 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.
