Open Access. Powered by Scholars. Published by Universities.®

Digital Commons Network

Open Access. Powered by Scholars. Published by Universities.®

PDF

Series

Faculty Scholarship

Bankruptcy

Discipline
Institution
Publication Year

Articles 1 - 30 of 69

Full-Text Articles in Entire DC Network

Reforming Institutions: The Judicial Function In Bankruptcy And Public Law Litigation, William H. Simon, Kathleen G. Noonan, Jonathan C. Lipson Jan 2019

Reforming Institutions: The Judicial Function In Bankruptcy And Public Law Litigation, William H. Simon, Kathleen G. Noonan, Jonathan C. Lipson

Faculty Scholarship

Public law litigation (PLL) is among the most important and controversial types of dispute that courts face. These civil class actions seek to reform public agencies such as police departments, prison systems, and child welfare agencies that have failed to meet basic statutory or constitutional obligations. They are controversial because critics assume that judicial intervention is categorically undemocratic or beyond judicial expertise.

This Article reveals flaws in these criticisms by comparing the judicial function in PLL to that in corporate bankruptcy, where the value and legitimacy of judicial intervention are better understood and more accepted. Our comparison shows that judicial ...


Bankruptcy Law—Rethinking The Discharge Of Late Filed Taxes In Consumer Bankruptcy, Justin H. Dion, Barbara Curatolo Jan 2018

Bankruptcy Law—Rethinking The Discharge Of Late Filed Taxes In Consumer Bankruptcy, Justin H. Dion, Barbara Curatolo

Faculty Scholarship

The 2005 amendments to the Bankruptcy Code, Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was enacted in order to improve bankruptcy law. However, BAPCPA has made the issue of whether late-filed taxes are dischargeable even murkier than before the amendments. After BAPCPA, some courts continued to analyze claims as they had before the amendment. Others used a “one-day-late rule” that prevented late-filed taxes from being dischargeable—even if the taxes were filed only one day late. This Article suggests a different approach. It argues that the legislature intended tax debt associated with late-filed income tax returns be dischargeable if ...


The Bankruptcy Of Refusing To Hire Persons Who Have Filed Bankruptcy, Terrence Cain Oct 2017

The Bankruptcy Of Refusing To Hire Persons Who Have Filed Bankruptcy, Terrence Cain

Faculty Scholarship

In 1978, Congress made it illegal for government employers to deny employment to, terminate the employment of, or discriminate with respect to employment against a person who has filed bankruptcy. In 1984, Congress extended this prohibition to private employers by making it illegal for such employers to terminate the employment of, or discriminate with respect to employment against a person who has filed bankruptcy. Under the law as it currently exists, private employers can refuse to hire a person who has filed bankruptcy solely because that person has filed for bankruptcy. Meanwhile, employers have substantially increased their use of credit ...


Puerto Rico And The Netherworld Of Sovereign Debt Restructuring, Mitu Gulati, Robert K. Rasmussen Jan 2017

Puerto Rico And The Netherworld Of Sovereign Debt Restructuring, Mitu Gulati, Robert K. Rasmussen

Faculty Scholarship

Puerto Rico has incurred debt well beyond its ability to repay. It attempted to address its fiscal woes through legislation allowing the restructuring of some its debt. The Supreme Court put a stop to this effort, holding that Congress in the Bankruptcy Code barred the Commonwealth from enacting its own restructuring regime. Yet all agreed that the Bankruptcy Code did not provide anything in its place. While Congress quickly enacted PROMESA in an attempt to address the Puerto Rico’s fiscal ills, we explore in this paper whether Congress has the power to bar Puerto Rico from enacting a restructuring ...


Cracking The Code: An Empirical Analysis Of Consumer Bankruptcy Outcomes, Sara Sternberg Greene, Parina Patel, Katherine M. Porter Jan 2017

Cracking The Code: An Empirical Analysis Of Consumer Bankruptcy Outcomes, Sara Sternberg Greene, Parina Patel, Katherine M. Porter

Faculty Scholarship

Chapter 13 is a cornerstone of the bankruptcy system. Its legal requirements strike a balance between the rehabilitation of debtors through keeping assets and reducing debt, and the repayment of creditors over a period of years. Despite the accolades from policymakers, the hard truth is that the majority of the half-million families each year that seek refuge in chapter 13 bankruptcy will not achieve the debt relief of a discharge. Prior research found that those who drop out of bankruptcy quickly endure the serious financial struggles that they had before bankruptcy—now even worse off for having spent thousands of ...


Beyond Options, Edward R. Morrison, Anthony J. Casey Jan 2016

Beyond Options, Edward R. Morrison, Anthony J. Casey

Faculty Scholarship

Scholars and policymakers now debate reforms that would prevent a bankruptcy filing from being a moment that forces valuation of the firm, crystallization of claims against it, and elimination of junior stakeholders’ interest in future appreciation in firm value. These reforms have many names, ranging from Relative Priority to Redemption Option Value. Much of the debate centers on the extent to which reform would protect the non-bankruptcy options of junior stakeholders, or harm the non-bankruptcy options of senior lenders. We argue that this focus on options misplaced. Protecting options is neither necessary nor sufficient for advancing the goal of a ...


Reforming The Law Of Reputation, Frank A. Pasquale Jan 2015

Reforming The Law Of Reputation, Frank A. Pasquale

Faculty Scholarship

Unfair and deceptive practices of controllers and processors of data have adversely affected many citizens. New threats to individuals’ reputations have seriously undermined the efficacy of extant regulation concerning health privacy, credit reporting, and expungement. The common thread is automated, algorithmic arrangements of information, which could render data properly removed or obscured in one records system, nevertheless highly visible or dominant in other, more important ones.

As policymakers reform the law of reputation, they should closely consult European approaches to what is now called the “right to be forgotten.” Health privacy law, credit reporting, and criminal conviction expungement need to ...


Derivatives And Collateral: Balancing Remedies And Systemic Risk, Steven L. Schwarcz Jan 2015

Derivatives And Collateral: Balancing Remedies And Systemic Risk, Steven L. Schwarcz

Faculty Scholarship

U.S. bankruptcy law grants special rights and immunities to creditors in derivatives transactions, including virtually unlimited enforcement rights. This Article examines whether exempting those transactions from bankruptcy’s automatic stay, including the stay of foreclosure actions against collateral, is necessary or appropriate in order to minimize systemic risk.


The Failed Reform: Congressional Crackdown On Repeat Chapter 13 Bankruptcy Filers, Sara Sternberg Greene Jan 2015

The Failed Reform: Congressional Crackdown On Repeat Chapter 13 Bankruptcy Filers, Sara Sternberg Greene

Faculty Scholarship

After decades of lobbying to “get tough” on bankruptcy repeat filers, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). The Bankruptcy Code now requires that the automatic stay, which prevents creditors from pursuing the property of bankruptcy debtors, expires after thirty days for petitioners who file for bankruptcy within one year of a previously failed petition. Debtors can file a motion to extend the stay, but there is a presumption of a bad faith filing, only overcome if a debtor can show there has been a “substantial change in his or her financial or personal ...


Is It Fair To Discriminate In Favor Of Pensioners In A Chapter 11 Plan?, Summer B. Chandler Dec 2014

Is It Fair To Discriminate In Favor Of Pensioners In A Chapter 11 Plan?, Summer B. Chandler

Faculty Scholarship

“A number of U.S. cities are plagued with debt obligations that cannot be met. As municipalities1 have turned to chapter 9 protection to ease their financial burdens, various creditor constituencies have found themselves pitted against each other as they realize that they might be forced to share a finite amount of assets and funds that are insufficient to cover all of the a municipality’s debts. The ultimate goal of a chapter 9 filing is the confirmation of an adjustment plan that implements a feasible and comprehensive restructuring of a municipality’s obligations. A municipality’s proposed plan ...


Debt-Buyer Lawsuits And Inaccurate Data, Peter A. Holland Apr 2014

Debt-Buyer Lawsuits And Inaccurate Data, Peter A. Holland

Faculty Scholarship

Pursuant to secret purchase and sale agreements (also known as forward flow agreements), the accounts that banks sell to debt buyers are often sold “as is,” with explicit and emphatic disclaimers that the debts may not be owed, the amounts claimed may not be accurate, and documentation may be missing. Despite their full knowledge that the accuracy and completeness of the data has been specifically disclaimed by the bank, when they sue consumers, debt buyers tell courts that the information obtained from the bank is inherently reliable and accurate. In order to avoid a fraud on the courts, the contents ...


Swords, Shields, And Shackles: Human And Corporate "Persons" Under The Bankruptcy Abuse Prevention And Consumer Protection Act Of 2005, Linda E. Coco Jan 2014

Swords, Shields, And Shackles: Human And Corporate "Persons" Under The Bankruptcy Abuse Prevention And Consumer Protection Act Of 2005, Linda E. Coco

Faculty Scholarship

No abstract provided.


Clearinghouses As Liquidity Partitioning, Richard C. Squire Jan 2014

Clearinghouses As Liquidity Partitioning, Richard C. Squire

Faculty Scholarship

To reduce the risk of another financial crisis, the Dodd-Frank Act requires that trading in certain derivatives be backed by clearinghouses. Critics mount two main objections: a clearinghouse shifts risk instead of reducing it; and a clearinghouse could fail, requiring a bailout. This Article’s observation that clearinghouses engage in liquidity partitioning answers both. Liquidity partitioning means that when one of its member firms becomes bankrupt, a clearinghouse keeps a portion of the firm’s most liquid assets, and a matching portion of its short-term debt, out of the bankruptcy estate. The clearinghouse then applies the first toward immediate repayment ...


Rolling Back The Repo Safe Harbors, Edward R. Morrison, Mark J. Roe, Christopher S. Sontchi Jan 2014

Rolling Back The Repo Safe Harbors, Edward R. Morrison, Mark J. Roe, Christopher S. Sontchi

Faculty Scholarship

Recent decades have seen substantial expansion in exemptions from the Bankruptcy Code's normal operation for repurchase agreements. These repos, which are equivalent to very short-term (often one-day) secured loans, are exempt from core bankruptcy rules such as the automatic stay that enjoins debt collection, rules against prebankruptcy fraudulent transfers, and rules against eve-of-bankruptcy preferential payment to favored creditors over other creditors. While these exemptions can be justified for United States Treasury securities and similarly liquid obligations backed by the full faith and credit of the United States government, they are not justified for mortgage-backed securities and other securities that ...


Derivatives And Collateral: Balancing Remedies And Systemic Risk, Steven L. Schwarcz Jan 2014

Derivatives And Collateral: Balancing Remedies And Systemic Risk, Steven L. Schwarcz

Faculty Scholarship

No abstract provided.


A People’S History Of Collective Action Clauses, Mark C. Weidemaier, Mitu Gulati Jan 2014

A People’S History Of Collective Action Clauses, Mark C. Weidemaier, Mitu Gulati

Faculty Scholarship

For two decades, collective action clauses (CACs) have been part of the official-sector response to sovereign debt crisis, justified by claims that these clauses can help prevent bailouts and shift the burden of restructuring onto the private sector. Reform efforts in the 1990s and 2000s focused on CACs. So do efforts in the Eurozone today. CACs have even been suggested as the cure for the US municipal bond market. But bonds without CACs are still issued in major markets, so reformers feel obliged to explain why they know better. Over time, a narrative has emerged to justify pro-CAC reforms. It ...


Rollover Risk: Ideating A U.S. Debt Default, Steven L. Schwarcz Jan 2014

Rollover Risk: Ideating A U.S. Debt Default, Steven L. Schwarcz

Faculty Scholarship

This article examines how a U.S. debt default might occur, how it could be avoided, its potential consequences if not avoided, and how those consequences could be mitigated. To that end, the article differentiates defaults caused by insolvency from defaults caused by illiquidity. The latter, which are potentiated by rollover risk (the risk that the government will be temporarily unable to borrow sufficient funds to repay its maturing debt), are not only plausible but have occurred in the past. Moreover, the ongoing controversy over the federal debt ceiling and the rise of the shadow-banking system make these types of ...


The Looming Chapter 9 Battle Over State Protection Of Vested Public Employee Pension Benefits, Mark S, Kaufman, Summer B. Chandler Nov 2013

The Looming Chapter 9 Battle Over State Protection Of Vested Public Employee Pension Benefits, Mark S, Kaufman, Summer B. Chandler

Faculty Scholarship

"For years, observers have warned of the looming threat of unfunded pension liabilities. Some dubbed the danger the “pension tsunami,” and it has hit an increasing number of U.S. cities, including Vallejo, Stockton and San Bernardino in California and the city of Detroit, which have sought chapter 9 relief in bankruptcy court.1 Despite the attention given to these cases, chapter 9 filings are relatively scarce, and many significant issues remain to be resolved by the courts. One unanswered question is whether a municipal debtor in bankruptcy can propose to pay its pension debt2 less than in full ...


Breaking Bankruptcy Priority: How Rent-Seeking Upends The Creditors' Bargain, Frederick Tung, Mark J. Roe Oct 2013

Breaking Bankruptcy Priority: How Rent-Seeking Upends The Creditors' Bargain, Frederick Tung, Mark J. Roe

Faculty Scholarship

Bankruptcy reallocates value in a faltering firm. The bankruptcy apparatus eliminates some claims and alters others, leaving a reduced set of claims to match the firm’s diminished capacity to pay. This restructuring is done according to statutory and agreed-to contractual priorities, so that lower-ranking claims are eliminated first and higher ranking ones are preserved to the extent possible. Bankruptcy scholarship has long conceptualized this reallocation as a hypothetical bargain among creditors: creditors agree in advance that if the firm falters, value will be reallocated according to a fixed set of predetermined rules and contracts. In any given reorganization case ...


Maybe Taxes Aren't So Certain: What Is "Fair And Equitable" In A Chapter 9 Plan?, B. Summer Chandler, Mark S. Kaufman Feb 2013

Maybe Taxes Aren't So Certain: What Is "Fair And Equitable" In A Chapter 9 Plan?, B. Summer Chandler, Mark S. Kaufman

Faculty Scholarship

"Many U.S. cities and other municipalities are struggling under crippling financial demands. Buckling under the financial strain, a number of municipalities are considering an option that, just a few short years ago, was almost unheard of—filing for bankruptcy protection. Assuming that eligibility requirements are met, a municipality1 may seek bankruptcy protection under chapter 9 of title 11 of the Bankruptcy Code. Historically, chapter 9 filings have been rare, with typically less than 10 such filings annually.2 In recent months, however, a number of chapter 9 cases have been filed.3 In addition to the rise in ...


Ring-Fencing, Steven L. Schwarcz Jan 2013

Ring-Fencing, Steven L. Schwarcz

Faculty Scholarship

“Ring-fencing” is often touted as a regulatory solution to problems in banking, finance, public utilities, and insurance. However, both the precise meaning of ring-fencing, as well as the nature of the problems that ring-fencing regulation purports to solve, are ill defined. This article examines the functions and conceptual foundations of ring-fencing. In a regulatory context, the term can best be understood as legally deconstructing a firm in order to more optimally reallocate and reduce risk. So utilized, ring-fencing can help to protect public-benefit activities performed by private-sector firms, as well as to mitigate systemic risk and the too-big-to-fail problem inherent ...


The Bankruptcy-Law Safe Harbor For Derivatives: A Path-Dependence Analysis, Steven L. Schwarcz, Ori Sharon Jan 2013

The Bankruptcy-Law Safe Harbor For Derivatives: A Path-Dependence Analysis, Steven L. Schwarcz, Ori Sharon

Faculty Scholarship

U.S. bankruptcy law grants special rights and immunities to creditors in derivatives transactions, including virtually unlimited enforcement rights. This article argues that these rights and immunities result from a form of path dependence, a sequence of industry-lobbied legislative steps, each incremental and in turn serving as apparent justification for the next step, without a rigorous and systematic vetting of the consequences. Because the resulting “safe harbor” has not been fully vetted, its significance and utility should not be taken for granted; and thus regulators, legislators, and other policymakers—whether in the United States or abroad—should not automatically assume ...


Defending Junk-Debt-Buyer Lawsuits, Peter A. Holland May 2012

Defending Junk-Debt-Buyer Lawsuits, Peter A. Holland

Faculty Scholarship

Junk debt buyer lawsuits have overwhelmed the courts all across the United States. These lawsuits wreak havoc on consumers and their families. Often overlooked is the fact that judgments against consumers which are based on junk debt are part of a zero sum game, where every bogus judgment deprives a legitimate creditor of the chance to get paid from scarce resources. Thus, the legitimate creditor to whom money is owed is materially harmed by the junk debt buyer who extracts money based on an illegitimate claim, or who causes someone to declare bankruptcy. Providing representation to this otherwise unrepresented population ...


Are Auditors' Going-Concern Evaluations More Useful After Sox?, Benjamin P. Foster, Terry J. Ward Mar 2012

Are Auditors' Going-Concern Evaluations More Useful After Sox?, Benjamin P. Foster, Terry J. Ward

Faculty Scholarship

Bankruptcy risk is a crucial factor in auditors’ decisions whether or not to modify their audit opinion based on the going-concern assumption. SOX required more extensive audit procedures than those required before its passage. More extensive audit procedures should result in more meaningful audit reports. This study examines whether the auditors’ going-concern opinion provides more useful incremental information after SOX than before SOX in distinguishing between distressed companies that become bankrupt in the next year and those that do not. We find that an audit opinion variable adds more useful information to bankruptcy prediction models after SOX than before SOX ...


Misbehavior And Mistake In Bankruptcy Mortgage Claims: Some Caveats Regarding The Porter Study, Gregory S. Crespi Jan 2012

Misbehavior And Mistake In Bankruptcy Mortgage Claims: Some Caveats Regarding The Porter Study, Gregory S. Crespi

Faculty Scholarship

This Article reviews the comprehensive empirical study of the bankruptcy mortgage foreclosure process conducted by Professor Katherine Porter and subsequently published in 2008 in the Texas Law Review. The results of her study, which analyzed 1,768 proof of claim submissions filed in a sample of 1,733 Chapter 7 bankruptcy proceedings, strongly suggest that there is a pervasive failure on the part of mortgage creditors to meet all of the formal documentation requirements for filing such bankruptcy claims. This documentation failure arguably impedes many mortgage debtors or bankruptcy trustees from reviewing these claims for their accuracy.

Porter's conclusion ...


Integrating "Alternative" Dispute Resolution Into Bankruptcy: As Simple (And Pure) As Motherhood And Apple Pie?, Nancy A. Welsh Jan 2011

Integrating "Alternative" Dispute Resolution Into Bankruptcy: As Simple (And Pure) As Motherhood And Apple Pie?, Nancy A. Welsh

Faculty Scholarship

Today, there can be little doubt that “alternative” dispute resolution is anything but alternative. Nonetheless, many judges, lawyers (and law students) do not truly understand the dispute resolution processes that are available and how they should be used. In the shadow of the current economic crisis, this lack of knowledge is likely to have negative consequences, particularly in those areas of practice such as bankruptcy and foreclosure in which clients, lawyers, regulators, and courts work under pressure, often with inadequate time and financial resources to permit careful analysis of procedural options. Potential negative effects can include: (1) impairment of a ...


The Consumer Indebtedness Crisis: Law School Clinics As Laboratories For Generating Effective Legal Responses, Peggy Maisel Jan 2011

The Consumer Indebtedness Crisis: Law School Clinics As Laboratories For Generating Effective Legal Responses, Peggy Maisel

Faculty Scholarship

For the legal system to operate effectively, it must address problems arising from the absence of needed laws, or, if enacted, of laws that have been drafted poorly or are not being implemented in a fair and just manner. Since law schools are generally part of a larger university community, they are uniquely placed to serve as laboratories to find solutions to such problems, perhaps nowhere more so than in their legal clinics. The latter have in fact often played the role of legal innovators, but their contributions to the law and therefore to society at large have been little ...


A Minimalist Approach To State ‘Bankruptcy’, Steven L. Schwarcz Jan 2011

A Minimalist Approach To State ‘Bankruptcy’, Steven L. Schwarcz

Faculty Scholarship

Increasingly finding themselves in financial straitjackets, states have been turning to austerity measures, tax increases, privatization of services, and renegotiation of collective bargaining agreements. Absent a federal government bailout, however, states will also need debt relief if their debt burden becomes so crushing that reasonable efforts at fiscal reform will fail to avoid default. Some advocate providing this relief by, effectively, extending municipal bankruptcy law to states. That approach brings in excess baggage, however, engendering political opposition and constitutional concerns. There is a simpler solution: Enable states to work out their debt problems with their creditors. Although the main obstacle ...


Bankruptcy Federalism: A Doctrine Askew, Margaret Howard Jan 2010

Bankruptcy Federalism: A Doctrine Askew, Margaret Howard

Faculty Scholarship

No abstract provided.


Saving Up For Bankruptcy, Ronald J. Mann, Katherine Porter Jan 2010

Saving Up For Bankruptcy, Ronald J. Mann, Katherine Porter

Faculty Scholarship

Bankruptcy is a numbers game. Policymaking, public perception, and the scholarly literature are captivated with the number of annual bankruptcy filings, which hit one million in 2008. The number of annual bankruptcy filings has become a barometer of economic health, reflecting an implicit assumption that bankruptcy is a useful proxy for financial distress.

But at the level of the individual family, the causative relation between financial distress and bankruptcy filings is unclear. On the one hand, only a fraction of those in serious financial distress will ever file for bankruptcy. For example, a study by Michelle White examined a group ...