In a recent decision from the Bankruptcy
Court for the Western District
of Kentucky, it was (again) held that provisions in an operating agreement intended to bar seeking protection under the Bankruptcy Code will not be enforced. In re Insight Terminal
Solutions, LLC, Case No. 19-32231(1)(11), 2019 Bankr. LEXIS 2949, 2019 WL 4640773
(Bankr. W.D. Ky. Sept. 23, 2019).
The debtors in this action, Insight Terminal Solutions, LLC and Insight Terminal Holdings, LLC, were each organized as a Delaware limited
liability company. After a loan from Autumn Wind Lending, LLC was going sideways, a “Bankruptcy Rights
Waiver” was entered into requiring, in effect, that Autumn Wind have
a veto right with respect to the debtors’ bankruptcy filing. Ultimately the debtors, without that approval, did file for bankruptcy protection, whereupon Autumn Wind challenged the
validity of
those filings.
Responding to Autumn Wind’s argument that the bankruptcy filings
was ineffective, the Court wrote that the waiver
of the right to seek bankruptcy is “against public policy and invalid.” In the support of this determination, the court cited a number of affiliates including In re Lexington
Hospitality Group, LLC, 577 B.R. 676, 683 (Bankr. E.D.
Ky. 2017), In Re Intervention
Energy Holdings, LLC, 553 B.R. 258 (Bankr. D.
Del. 2016) and In re Lake
Michigan Beach
Pottawattamie Resort LLC, 547 B.R. 899, 912 (Bankr. N.D. Ill. 2016).
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