Bankruptcy Law Commons^™

Rethinking Antebellum Bankruptcy, Rafael I. Pardo

Scholarship@WashULaw

Bankruptcy law has been repeatedly reinvented over time in response to changing circumstances. The Bankruptcy Act of 1841—passed by Congress to address the financial ruin caused by the Panic of 1837—constituted a revolutionary break from its immediate predecessor, the Bankruptcy Act of 1800, which was the nation’s first bankruptcy statute. Although Congress repealed the 1841 Act in 1843, the legislation lasted significantly longer than recognized by scholars. The repeal legislation permitted pending bankruptcy cases to be finally resolved pursuant to the Act’s terms. Because debtors flooded the judicially understaffed 1841 Act system with over 46,000 cases, the Act’s administration continued …

The Purloined Debtor: Edgar Allan Poe’S Bankruptcy In Law And Letters, Erin L. Sheley, Zvi Rosen

Faculty Scholarship

This Article represents the first interdisciplinary case study of Edgar Allan Poe’s bankruptcy as an inflection point in the legal and cultural history of debt. Although Poe hardly leaps to mind for portrayals of legal procedure, much of his oeuvre reveals a terror of legal process as an interstitial principle. The anxiety around identity in Poe’s work reveals an ongoing struggle between an individual subject and two opposing yet equally degenerate legal statuses: possession and indebtedness. This opposition renders a distinct form of legal process legible in these texts: the then emerging law of bankruptcy. Poe declared bankruptcy at a …

Racialized Bankruptcy Federalism, Rafael I. Pardo

Scholarship@WashULaw

Notwithstanding the robust national power conferred by the U.S. Constitution’s Bankruptcy Clause, the design and administration of federal bankruptcy law entails choices about the extent to which non-bankruptcy-law entitlements will remain un-displaced. When such entitlements sound in domestic nonfederal law (i.e., state or local law), displacing them triggers federalism concerns. Considerations regarding the relationship between the federal government and the nation’s smaller political subdivisions might warrant preserving nonfederal-law entitlements even though their displacement would be authorized pursuant to the bankruptcy power. But such considerations might also suggest replacing those entitlements with bankruptcy-specific ones. Some scholarship has theorized about the principles …

On Bankruptcy’S Promethean Gap: Building Enslaving Capacity Into The Antebellum Administrative State, Rafael I. Pardo

Scholarship@WashULaw

As the United States contends with the economic crisis triggered by the COVID-19 pandemic, federal bankruptcy law is one tool that can be used to resolve the financial distress suffered by individuals and businesses. When implementing this remedy, the question arises whether the law’s application should be viewed as limited to addressing private debt matters, without regard for the public interest. This Article answers the question by looking to modern U.S. bankruptcy law’s first forebear, the 1841 Bankruptcy Act, which Congress enacted in response to the depressed economic conditions following the Panic of 1837. That legislation created a judicially administered …

Financial Freedom Suits: Bankruptcy, Race, And Citizenship In Antebellum America, Rafael I. Pardo

Scholarship@WashULaw

This Article presents a new frame of reference for thinking about how the federal government facilitated citizenship claims by free people of color in the antebellum United States. While scholars have accounted for various ways in which free black litigants may have made such claims, they have not considered how the Bankruptcy Act of 1841 enabled overindebted free people of color to reconstruct their economic lives, thereby restoring the financial freedom that was and continues to be an essential component of American citizenship. Relying on a variety of primary sources, including manuscript court records, this Article shows how six free …

Federally Funded Slaving, Rafael I. Pardo

Scholarship@WashULaw

This Article presents a new frame of reference for thinking about the federal government’s complicity in supporting the domestic slave trade in the antebellum United States. While scholars have accounted for several methods of such support, they have failed to consider how federal bankruptcy legislation during the 1840s functionally created a system of direct financial grants to slave traders in the form of debt discharges. Relying on a variety of primary sources, including manuscript court records that have not been systematically analyzed by any published scholarship, this Article shows how the Bankruptcy Act of 1841 enabled severely indebted slave traders …

Documenting Bankrupted Slaves, Rafael I. Pardo

Scholarship@WashULaw

Bankrupted Slaves tells a story about institutional complicity in antebellum slavery — that is, the story of how the federal government in the 1840s and 1850s became the owner and seller of thousands of slaves belonging to financially distressed slaveowners who sought forgiveness of debt through the federal bankruptcy process. Relying on archival court records that have not been systematically analyzed by other scholars, Bankrupted Slaves analyzes how the Bankruptcy Act of 1841 and the domestic slave trade inevitably collided to create the bankruptcy slave trade, focusing the analysis through a case study of the Eastern District of Louisiana, which …

Bankrupted Slaves, Rafael I. Pardo

Scholarship@WashULaw

Responsible societies reckon with the pernicious and ugly chapters in their histories. Wherever we look, there exist ever-present reminders of how we failed as a society in permitting the enslavement of millions of black men, women, and children during the first century of this nation’s history. No corner of society remains unstained. As such, it is incumbent on institutions to confront their involvement in this horrific past to fully comprehend the kaleidoscopic nature of institutional complicity in legitimating and entrenching slavery. Only by doing so can we properly continue the march of progress, finding ways to improve society, not letting …

Foreword: Bankruptcy’S New And Old Frontiers, William W. Bratton, David A. Skeel Jr.

All Faculty Scholarship

This Symposium marks the fortieth anniversary of the enactment of the 1978 Bankruptcy Code (the “1978 Code” or the “Code”) with an extended look at seismic changes that currently are reshaping Chapter 11 reorganization. Today’s typical Chapter 11 case looks radically different than did the typical case in the Code’s early years. In those days, Chapter 11 afforded debtors a cozy haven. Most everything that mattered occurred within the context of the formal proceeding, where the debtor enjoyed agenda control, a leisurely timetable, and judicial solicitude. The safe haven steadily disappeared over time, displaced by a range of countervailing forces …

The Empty Idea Of “Equality Of Creditors”, David A. Skeel Jr.

All Faculty Scholarship

For two hundred years, the equality of creditors norm—the idea that similarly situated creditors should be treated similarly—has been widely viewed as the most important principle in American bankruptcy law, rivaled only by our commitment to a fresh start for honest but unfortunate debtors. I argue in this Article that the accolades are misplaced. Although the equality norm once was a rough proxy for legitimate concerns, such as curbing self-dealing, it no longer plays this role. Nor does it serve any other beneficial purpose.

Part I of this Article traces the historical emergence and evolution of the equality norm, first …

Rediscovering The Bankruptcy And Insolvency Power: Political And Constitutional Challenges To The Bankruptcy Act, 1919-1929, Thomas G. W. Telfer

Law Publications

No abstract provided.

Review Of Sovereign Defaults Before International Courts And Tribunals, John A. E. Pottow, Emily Iversen

Reviews

This book review probes Michael Waibel’s new book, Sovereign Defaults Before International Courts and Tribunals. Waibel's project is ambitious, exploring international attempts to address sovereign defaults over the past century and a half. Through painstaking and comprehensive historical analysis, Waibel shows how we've been here before -- a sober reminder for those thinking Argentina is simply part of a new fad in financial default. With the UN now turning its attention to sovereign debt issues, this study is especially timely. Although somewhat disappointing in the lightness of its normative content, the book should nevertheless prove helpful to those considering the …

From Chrysler And General Motors To Detroit, David A. Skeel Jr.

All Faculty Scholarship

In the past five years, three of the most remarkable bankruptcy cases in American history have come out of Detroit: the bankruptcies of Chrysler and General Motors in 2009, and of Detroit itself in 2012. The principal objective of this Article is simply to show that the Grand Bargain at the heart of the Detroit bankruptcy is the direct offspring of the bankruptcy sale transactions that were used to restructure Chrysler and GM. The proponents of Detroit’s “Grand Bargain” never would have dreamed up the transaction were it not for the federal government-engineered carmaker bankruptcies. The Article’s second objective, based …

Ideas, Interests And Institutions And The History Of Canadian Bankruptcy Law 1867-1880, Thomas G. W. Telfer

Law Publications

Michael Trebilcock's scholarship has long recognized the importance of ideas, interests, and institutions in shaping policy. Taking the same analytical approach that Michael Trebilcock and Ninette Kelley use in their ground-breaking book on the history of Canadian immigration, which focuses on economic interests, contested ideas, and institutions, this article examines the Canadian historical experience to gain an understanding of the ideas, interests, and institutions that have been influential in shaping the evolution of Canadian bankruptcy law. Specifically, the article addresses the rise of Canadian bankruptcy legislation in the early post-Confederation period and its ultimate repeal in 1880. Bankruptcy law represented …

Bankruptcy Phobia, David A. Skeel Jr.

All Faculty Scholarship

As the recent economic crisis has unfolded, bankruptcy has offered possible solutions at several key junctures. The first of these solutions, often referred to as mortgage modification, was geared toward homeowners who faced the loss of their homes in the months—now several years—since the start of the subprime crisis On the corporate side, Chapter 11 was an obvious alternative when large nonbank financial institutions like Bear Stearns and AIG stumbled in 2008. But regulators repeatedly balked, and the one exception to the avoidance of bankruptcy at all costs—Lehman Brothers—was anomalous. This aversion to bankruptcy, which seems to pervade all sides …

Competing Narratives In Corporate Bankruptcy: Debtor In Control Vs. No Time To Spare, David A. Skeel Jr.

All Faculty Scholarship

When a company like Chrysler or United Airlines files for bankruptcy, it offers narrative explaining the way out of its predicament. In support of its claim that the business is worth saving, the company may argue that it simply needs time to renegotiate its obligations with its creditors. Alternatively, it may say that asset values are deteriorating rapidly and it is imperative that the bankruptcy court immediately approve a sale of the company, or some other rapid disposition. These two possibilities correspond to the principal resolution narratives in current Chapter 11 bankruptcy practice, which I refer to as Debtor in …

Self-Organizing Legal Systems: Precedent And Variation In Bankruptcy, Bernard Trujillo

Law Faculty Publications

Models of legal ordering are frequently hierarchical. These models do not explain two prominent realities: (1) variation in the content of a legal system, and (2) patterns of non-hierarchical ordering that we observe. As a supplement to hierarchical explanations of legal order, this Article, drawing from physical and social science research on complex systems, offers a self-organizing model. The self-organizing model focuses on variation in the content of legal systems and attempts to explain the relationship between that variation and patterns of ordering. The self-organizing model demonstrates that variation and ordering are not opposite categories, but rather constitute one continuous …

Corporate Anatomy Lessons, David A. Skeel Jr.

All Faculty Scholarship

The book that will lay the groundwork for the corporate law debates of the coming decade is The Anatomy of Corporate Law. Written by seven of the world's leading corporate law scholars - Henry Hansmann, Reinier Kraakman and Ed Rock of the U.S.; Paul Davies of England; Gerard Hertig of Switzerland; Klaus Hopt of Germany; and Hideki Kanda of Japan - The Anatomy of Corporate Law attempts to identify the underlying structure of corporate law, and to provide a framework for understanding the wide range of approaches that different countries take to corporate law regulation. It is hard to overstate …

Corporate Ownership Structure And The Evolution Of Bankruptcy Law: Lessons From The United Kingdom, John Armour, Brian R. Cheffins, David A. Skeel Jr.

All Faculty Scholarship

No abstract provided.

Vern Countryman And The Path Of Progressive (And Populist) Bankruptcy Scholarship, David A. Skeel Jr.

All Faculty Scholarship

Throughout the 1960s and 1970s, Vern Countryman was the leading progressive bankruptcy scholar - and in fact the leading bankruptcy scholar of any perspective. This article explores the links between Countryman's work and that of his New Deal predecessors, on the one hand, and his successors, on the other. In addition to Countryman himself, the article focuses on William Douglas, who was Countryman's predecessor and mentor, as well as being the leading bankruptcy scholar of the New Deal. Among Countryman's successors, the article focuses on the work of Elizabeth Warren, Countryman's successor at Harvard Law School and the nation's leading …

The Genius Of The 1898 Bankruptcy Act, David A. Skeel Jr.

All Faculty Scholarship

No abstract provided.

The Boiling Pot Of Lawyer Conflicts In Bankruptcy, Charles W. Wolfram

Cornell Law Faculty Publications

I take up here only two modest pieces of the current puzzle of lawyer conflicts of interest in bankruptcy practice. One involves the decision of the American Law Institute (hereinafter "ALI") to sidestep the entire field in the course of drafting its Restatement of the Law Governing Lawyers (hereinafter "Restatement"). The other involves the decision of the National Bankruptcy Review Commission (hereinafter "NBRC") to refuse to recommend that Congress do anything at all major to disturb existing law in the same realm. Either the law of lawyer conflicts in bankruptcy has been blessed in its present state by two prestigious …

An Evolutionary Theory Of Corporate Law And Corporate Bankruptcy, David A. Skeel Jr.

All Faculty Scholarship

In this Article, Professor Skeel argues that the important recent literature exploring historical and political influences on American corporate law has neglected a crucial component of corporate governance: corporate bankruptcy. Only by appreciating the complementary relationship between corporate law and corporate bankruptcy can we understand how corporate governance operates in any given nation. To show this, the Article contrasts American corporate governance with that of Japan and Germany. America's market-driven corporate governance can only function effectively if the bankruptcy framework includes a manager-driven reorganization option. The relational shareholding that characterizes Japanese and German corporate governance, by contrast, requires a much …

Ladies In Red: Learning From America's First Female Bankrupts, Marie Stefanini Newman

Elisabeth Haub School of Law Faculty Publications

Several years ago, the Honorable Joyce Bihary, a bankruptcy judge in Atlanta, Georgia, asked me3 why our country's first bankruptcy law specifically referred to debtors using “he” or “she” rather than a gender-neutral noun (such as “bankrupts”) or the male possessive pronoun “he.” Implicitly, she was also asking whether there were any women debtors under our early bankruptcy laws. Although I had read the Bankruptcy Act of 1800 more than once, I did not recollect its use of these gender-inclusive pronouns. Nor did I know why the Act employed them. Despite having given considerable thought to contemporary women in debt, …

Rethinking The Line Between Corporate Law And Corporate Bankruptcy, David A. Skeel Jr.

All Faculty Scholarship

No abstract provided.

Baseline Problems In Assessing Chapter 11, Theodore Eisenberg

Cornell Law Faculty Publications

Dealing with failing businesses is like dealing with failing marriages. It is messy. The bigger the business the messier the process is likely to be. Many big business failures in the United States go through their death throes or cure their ills in reorganizations under Chapter 11 of the Bankruptcy Act. As the vehicle in which big business messes travel, Chapter 11 is viewed as unnecessarily complex, time-consuming, and costly. The justification for Chapter 11's very existence has been challenged.

This article suggests that we are blaming the vehicle for the mess that it carries. Much of what is problematic …

Markets, Courts, And The Brave New World Of Bankruptcy Theory, David A. Skeel Jr.

All Faculty Scholarship

No abstract provided.

Absolute Priority And New Value, James J. White

Articles

This paper is based on a lecture given on December 6, 1990 ast the Second Annual Robert E. Krinock Lecture. The absolute priority rule is a specific application of the broader doctrine that reorganization plans must be "fair and equitable." Both have their origins in the railroad reorganization cases of the early 20th century. The general doctrine is now codified in section 1129(b)(2) of the Bankruptcy Code and the rule is codified in subsection 1129(b)(2)(B)(ii) which provides that the debtor must pay a nonconsenting class of unsecured creditors in full or "the holder of any claim or interest that is …

Commentary On “On The Nature Of Bankruptcy”: Bankruptcy And Bargaining, Theodore Eisenberg

Cornell Law Faculty Publications

At a conference on bargaining, it should not be surprising that there is more than one perspective on the relationship between bankruptcy and bargaining. Dean Jackson and Professor Scott's article emphasizes a hypothetical bargain to be struck by idealized participants in a firm. It explores the relationship between bankruptcy and that bargain. By imagining what that bargain would look like, Jackson and Scott construct new justifications for bankruptcy law's distributional rules. Such a theory, however, is subject to reservations about the depth of insight that can be gained from examination of purely theoretical bargains. Stripped of real-world characteristics, hypothetical bargains …