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ISRI CONVENTION: Polishing Up a New Act

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The 2005 Bankruptcy Act offers new options to recyclers who ship scrap to insolvent mills.

April 17, 2006

The 2005 Bankruptcy Act changes contain language that can benefit recyclers who have shipped material to a consumer that enters bankruptcy, attendees of the Institute of Scrap Recycling Industries Inc. (ISRI) Annual Convention learned.


Three attorneys from the firm of Thompson Hine, which has offices in seven U.S. cities plus Brussels, presented their overview of how the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 may change the way scrap recyclers react when a customer of theirs enters bankruptcy protection.


According to attorneys Robert Folland, Alan Lepene and Mark Weintraub, the 2005 Act “greatly expands” the rights of a company such as a scrap recycler that ships material into a mill shortly before it files for bankruptcy.


In particular, if the scrap is identifiable and not commingled with other goods, recyclers have more time to take action to reclaim the material if they so choose.


Recent case law is also shaping the circumstances under which a recycler can be identified as a “critical vendor” to a consuming mill. This status means the recycler can continue to receive payments in an uninterrupted fashion during the time the consuming mill operates under bankruptcy protection. The critical vendor status may also result in the bankruptcy trustee being ordered to pay old invoices to suppliers who have been designated with this status.


Not all the recent changes are positive, however, as the 2005 law also allows a bankruptcy trustee to issue “demand letters” if the trustee determines that a supplier improperly received preferential payments that were not critical.


The attorneys advised that sometimes such letters are “fishing expeditions” by trustees seeking cash flow, but that a recipient of such a letter also takes a risk by not responding to it at all.


Among the attorneys making the presentation at the ISRI event was Mark Weintraub, formerly an active ISRI member and an employee with scrap consumer and red metals ingot maker Federal Metal Co., Bedford, Ohio. Weintraub left Federal Metal


Weintraub left the metals industry earlier this decade to practice law, and now works for Thompson Hine out of its Cleveland office.


The ISRI Annual Convention was held in the first week of April at the Mandalay Bay Resort in Las Vegas.


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