Law Commons^™

Non-Procrustean Bankruptcy, Richard M. Hynes

Faculty Publications

Many advocates of bankruptcy reform bristle at aspects of the bankruptcy system they find distributively "unfair." These scholars point to the instances in which wealthy debtors have been able to retain million-dollar homes and luxury items, examples which at first glance might offend any reasonable sense of decency or fairness. Yet if bankruptcy provides insurance otherwise unavailable because of market failures, then an ideal bankruptcy system would embrace much of this inequality in post-bankruptcy standards of living. The wealthy generally choose private contracts that ensure their high standards of living. Though others envy these benefits, they do not wish to …

Editor's Observations: The Sarbanes-Oxley Act And What Came After, Frank O. Bowman Iii

Faculty Publications

On December 2, 2001, the Enron Corporation filed the largest bankruptcy petition in U.S. history. Losses to investors, creditors, employees, and pensioners were in the billions. Criminal investigations are ongoing. On May 1, 2003, the U.S. Sentencing Commission passed a set of amendments to the U.S. Sentencing Guidelines that will, among other things, prevent a federal district judge from awarding a sentence of straight probation to a defendant convicted at trial of an $11,000 mail fraud. This Issue of FSR tells the story of how the first of these apparently unrelated events led to the second. Put another way, this …

The Effect Of Bankruptcy Upon A Firm Using Patents And Trademarks As Collateral, Lois R. Lupica

Faculty Publications

The Bankruptcy Code sets forth an orderly process for the distribution of a debtor-in-bankruptcy's assets. This process has the effect of altering many of the procedural and substantive rights and obligations of the debtor, as well as of the debtor's creditors. Parties asserting a property interest in assets of a debtor in bankruptcy, however, must rely on nonbankruptcy law to determine the nature and extent of their property interests. The most commonly asserted interest by creditors involved in a bankruptcy are security interests.

Revised Article 9, The Proposed Bankruptcy Code Amendments And Securitizing Debtors And Their Creditors, Lois R. Lupica

Faculty Publications

The new provisions in Revised Article 9 both reflects the drafters’ decision to enhance secured creditors’ rights, but also includes myriad provisions designed to facilitate securitization transactions. Because bankruptcy law looks to state law (specifically Article 9) to determine the rights of creditors and transferees with respect to personal property, changes to Article 9 are in effect, changes to bankruptcy law. The question raised by the changes to Article 9 is whether these changes are consistent with our historical understanding of bankruptcy policy.

Crumbs For Oliver Twist: Resolving The Conflict Between Tax And Support Claims In Bankruptcy, Michelle A. Cecil

Faculty Publications

This article is premised on the assumption that the congressional goal of preferring support claims over federal income tax claims is indeed a laudable one, based on three interrelated policy justifications. First, support claimants are unable to spread their risk of loss like the government is able to do by raising tax rates or increasing tax revenue from other sources. As three prominent bankruptcy scholars noted in their recent study of consumer bankruptcy entitled The Fragile Middle Class: Americans in Debt:

2001: A Code Odyssey (New Dawn For The Article 9 Secured Creditor), Michael G. Hillinger

Faculty Publications

This Article attempts to describe what bankruptcy lawyers and judges most need to know about the Revised Article 9. (Of course, if bankruptcy judges and lawyers need to know it, a fortiori, secured creditors’ attorneys need to know it.)

At the top of the most-need-to-know list are Revised Article 9’s choice-of-law and filing rules. Section 544(a) of the Bankruptcy Code, the “trustee’s strong-arm” clause, permits the trustee (and debtor-in-possession) to avoid unperfected security interests. For many transactions, Revised Article 9’s choice-of-law provisions will change where the creditor must file to perfect its interest. Those who do not know about Revised …

Privatizing Social Security, Jerry W. Markham

Faculty Publications

The 2000 presidential election focused attention on an idea that has been surfacing for some time--the privatization of Social Security. Although opposition remains fierce, proposals for privatization have been gradually gaining acceptance as the inadequacy of benefits from the present system become more apparent, and bankruptcy becomes certain in the absence of additional onerous funding. Resistance to privatization largely centers on concerns that existing participants will lose their contributions and that private accounts may result in investment losses, which would leave future pensioners penniless. The disability and survivor benefits of the present Social Security system also raise concerns for the …

Revised Article 9, Securitization Transactions And The Bankruptcy Dynamic, Lois R. Lupica

Faculty Publications

Article 9 of the Uniform Commercial Code ("U.C.C.")1 is the law governing the creation, perfection, and enforcement of security interests in personal property. Originally enacted in 1960,2 Article 9 was substantially revised in 1972 in response to changes in commercial financing markets and practices. Since this last revision, there have been further changes, including technological advances, affecting commercial practice and custom. These changes have led the Permanent Editorial Board for the U.C.C. ("PEB") to recommend to the American Law Institute ("ALI") and the National Conference of Commissioners on Uniform State Laws ("NCCUSL") that Article 9, once again, be significantly revised. …

Reinvigorating Chapter 11: The Case For Reinstating The Stock-For-Debt Exception In Bankruptcy, Michelle A. Cecil

Faculty Publications

This Article suggests that such a proposal will harmonize the bankruptcy policy of rehabilitating financially distressed corporations with the tax policy of ensuring that true economic income is subject to federal income taxation.27 Parts II and III of this Article will trace the common law evolution of the stock-for-debt exception and its statutory codification in 1980, with particular emphasis on the stated policy justifications for the exception. Part IV will then examine the history of the repeal of the stock-for-debt exception, demonstrating that the repeal was the result of hasty political maneuvering rather than reasoned legislative decision-making. In Part V, …

Can Shame, Guilt, Or Stigma Be Taught? Why Credit-Focused Debtor Education May Not Work, A. Mechele Dickerson

Faculty Publications

No abstract provided.

Section 365 In The Consumer Context: Something Old, Something New, Something Borrowed, Something Blue, Michael G. Hillinger, Ingrid Michelsen Hillinger

Faculty Publications

The § 365 consumer debtor case law has a further complication. Much of it arises in the context of the last great bankruptcy frontier, Chapter 13. Until recently, Chapter 11 has occupied the minds and hearts of courts and attorneys. Not any more. And, as attorneys and courts take a closer, harder look at Chapter 13, it is no longer possible to describe it as a “streamlined creditors-can’t-vote Chapter 11”. Chapter 13 is unique, presenting its very own quandaries, not the least of which is how its provisions and § 365 interact. We live in interesting times.

Comsumer Bankruptcy's New Clothes: An Empirical Study Of Discharge And Debt Collection In Chapter 13, Scott F. Norberg

Faculty Publications

Consumer bankruptcy filings hit another record high in 1998, with nearly 1.4 million consumers filing for bankruptcy relief. This trend sparked a debate in Congress about means-testing chapter 7 bankruptcy filings. Proponents of reform argued that it would curtail fraud and abuse. Opponents believed that consumer debt was swamping income growth, and that the deregulation of the consumer credit market had led to overgenerous lending and hence to more bankruptcies. This is an empirical study of whether filers for chapter 13 bankruptcy cases are abusing the system, or whether debtors are truly being swamped by debt in excess of their …

If You Don't Have Anything Good To Say..., Peter A. Alces

Faculty Publications

No abstract provided.

Fiduciary Duties Of Officers And Directors Of Distressed Corporations, Royce De R. Barondes

Faculty Publications

This Article argues that this widely-accepted premise for analyzing the incentives created by various alternative structures of federal bankruptcy law is suspect.

How Fresh A Start?: What Are "Household Goods" For Purposes Of Section 522 (F)(1)(B)(I) Lien Avoidance?, Michael G. Hillinger

Faculty Publications

What do camcorders, walkman players, personal computers, stereo components, firearms, chain saws, lawn and garden tools, bicycles, and video game machines have in common?

Well, they are all the things one might find in the typical American home. Although not necessarily cheap to buy new, such items generally do not retain value over time. They frequently serve as collateral for nonpurchase money loans. In a bankruptcy context, they share another characteristic; courts have had to decide if they are household goods such that a debtor is able to avoid a nonpossessory, nonpurchase money security interest in them. Indeed, over 270 …

Asset Securitization: The Unsecured Creditor's Perspective, Lois R. Lupica

Faculty Publications

The Article examines assumptions behind literature that uncritically assumes that securitization transactions are necessarily efficient, finding that these assumptions are unwarranted. The Article is the first to view securitization transactions from an unsecured creditor’s perspective, and concludes that from such a perspective, securitization is not the panacea its proponents claim it to be.

The article first defines structured finance and describes the nature of the current market for asset-backed securities. Then, it outlines the benefits that securitization provides to originators and other transaction participants. With that background, it turns to the debate on the efficiency of secured transactions, applies the …

Lifestyles Of The Not-So-Rich Or Famous: The Role Of Choice And Sacrifice In Bankruptcy, A. Mechele Dickerson

Faculty Publications

No abstract provided.

Of Hotel Revenues, Rents, And Formalism In The Bankruptcy Courts: Implications For Reforming Commercial Real Estate Finance, R. Wilson Freyermuth

Faculty Publications

This article is intended to continue the dialogue begun by the proposed Restatement and has two distinct goals in this effort. Parts I through III argue that the position of the Restatement drafters is both legally and functionally sound and that bankruptcy courts should embrace and apply the proposed Restatement in administering distressed real estate developments. Part I reviews the reasoning articulated in the hotel bankruptcy cases, demonstrating how courts have applied the provisions of the Bankruptcy Code and state law in a formalistic manner to extinguish the hotel mortgagee's lien upon postpetition room revenues. Part II rejects the analysis …

Why Have Chapter 11 Bankruptcies Failed So Miserably? A Reappraisal Of Congressional Attempts To Protect A Corporation's Net Operating Losses After Bankruptcy, Michelle A. Cecil

Faculty Publications

This Article will first outline the history of judicial and statutory limitations on the free transferability of net operating losses, highlighting congressional attempts to afford more favorable treatment to troubled corporations reorganizing in Title 11 proceedings. It will then examine the operation of section 382 of the 1986 Code, again focusing on those provisions designed to assist in the successful reorganization of these corporations, and will demonstrate the wholesale inability of these provisions to preserve the net operating losses of troubled corporations. Finally, the Article will propose an amendment to section 382 that would increase the likelihood that corporations will …

Including Retirement Benefits In A Debtor's Bankruptcy Estate: A Proposal For Harmonizing Erisa And The Bankruptcy Code, Michelle A. Cecil

Faculty Publications

This Article first examines the conflicting policies of ERISA and the Bankruptcy Code. It then explores how the various courts have attempted to reconcile these policies when faced with the issue of whether a debtor's interest in retirement plan assets should be available for distribution to creditors in bankruptcy. In analyzing the relevant case law, the Article examines cases addressing the exclusion issue (whether pension plans should be excluded from the bankruptcy estate entirely). It also evaluates cases addressing the exemption issue (whether plan assets, once included in the bankruptcy estate, can be exempted out of the estate by the …

Editor's Notes, Peter A. Alces

Faculty Publications

No abstract provided.

Preemption Of State Law Notice Provisions Governing The Recovery Of Attorneys' Fees By Section 506(B) Of The Bankruptcy Code, R. Wilson Freyermuth

Faculty Publications

This note provides a framework for courts and attorneys faced with the issue whether section 506(b) preempts state law notice provisions. The note studies the language and legislative history of section 506(b), pointing out the inconsistencies and ambiguities that make it difficult to determine congressional intent. The note then surveys the various rationales advanced by the lower courts in resolving this issue. Using the recent Fourth Circuit case of Unsecured Creditors' Committee v. Walter E. Heller & Co. to illustrate several of these rationales, the note suggests that a more consistent approach to this issue is needed. After examining the …

Collective Bargaining In Chapter 11 And Beyond, B. Glenn George

Faculty Publications

No abstract provided.

Unexpired Leases In Bankruptcy: Rights Of The Affected Mortgagee, Peter A. Alces

Faculty Publications

No abstract provided.

The Bankruptcy Discharge: Toward A Fresher Start, Doug R. Rendleman

Faculty Publications

No abstract provided.

Beyond Contempt: Obligors To Injunctions, Doug R. Rendleman

Faculty Publications

No abstract provided.