Law Commons^™

Allocation Of Property Appreciation: A Statutory Approach To The Judicial Dialectic, Lawrence Ponoroff

William & Mary Business Law Review

Many, perhaps the majority, of Chapter 13 cases end up being converted to Chapter 7. The converted Chapter 7 case is not a new case, it is a continuation of the case that was commenced with the filing of the original Chapter 13 petition. However, there are important structural differences between the two chapters, including over what constitutes property of the estate. This creates some thorny issues surrounding whether property of the estate as generally defined in section 541(a) of the Bankruptcy Code or property of the estate as specifically defined in Chapter 13 controls in determining the scope of …

Lending A Hand Instead Of Breaking The Bank: The Imperative Need To Resolve The Circuit Split For Determining Undue Hardship For Section 523(A)(8) Student Loan Discharges, Rucha Pandit

William & Mary Business Law Review

The Bankruptcy Code permits petitioners to discharge their student debts if they are able to demonstrate that their loans impose an undue hardship. Somewhat frustratingly, the Code does not define what exactly constitutes undue hardship in the context of student loan discharges. Moreover, neither Congress nor the Supreme Court has broken its silence to offer guidance on the issue. As a result, the rest of the federal judiciary has been once again, left to its own devices.

Over the past few decades, the Brunner and totality-of-the-circumstances tests have emerged as the standards that federal circuits choose between to assess whether …

Absolute Priority Redux: First-Day Orders And Pre-Plan Settlements In Chapter 11 Post-Jevic, Bruce Grohsgal

William & Mary Business Law Review

This Article considers the problem of priority-skipping distributions made by a chapter 11 debtor outside of a plan, following the Supreme Court’s Jevic decision. The Jevic Court extended the absolute priority rule—which under U.S. bankruptcy enactments dictates the order of distributions to creditors under a chapter 11 cramdown plan and in a chapter 7 liquidation—to a chapter 11 case-ending settlement known as a “structured dismissal.”

The Jevic Court limited its holding to a case-ending settlement. It did not extend the absolute priority rule to an interim or pre-plan settlement or other transaction that is not case-ending or to a “first-day” …

Rethinking Preemption And Constitutional Parameters In Bankruptcy, Michelle M. Harner

William & Mary Law Review

Chapter 11 of the U.S. Bankruptcy Code allows financially distressed businesses to reorganize and emerge from bankruptcy free of their pre-bankruptcy debts and obligations. In general, a business can achieve this kind of “fresh start” by confirming a plan of reorganization or pursuing a going-concern sale that typically facilitates a change in ownership, a reduction in leverage, and the elimination of most claims against the company’s assets. Through these kinds of transactions, a business can emerge from bankruptcy with a stronger balance sheet and often a new ownership structure. It also can streamline operations by, for example, assuming valuable contracts …

How Absolute Is The Absolute Priority Rule In Bankruptcy? The Case For Structured Dismissals, Bruce Grohsgal

William & Mary Business Law Review

This Article challenges the view that the absolute priority rule applies to a “structured dismissal” in a chapter 11 bankruptcy case, namely a court-approved settlement of certain claims by or against the debtor followed by the dismissal of the case. Under that view, the bankruptcy court cannot approve a settlement that makes a distribution to holders of junior claims unless it also provides for payment of all senior claims in full. The Supreme Court considered the question in the fall of 2016 in Czyzewski v. Jevic Holding Corp. (In re Jevic Holding Corp.). The question before the Court is: “Whether …

With Malice Toward One? – Defining Nondischargeability Of Debts For Willful And Malicious Injury Under Section 523(A)(6) Of The Bankrupcy Code, Theresa J. Pulley Radwan

William & Mary Business Law Review

The federal bankruptcy system strikes a balance between the rights of debtors seeking a fresh start and the rights of creditors seeking repayment for debt. While many areas of the Bankruptcy Code provide examples of this balancing act, perhaps no area of the Code embodies this balance better than discharge of debt. Discharge of debt provides the fresh start for debtors on which the bankruptcy system rests, but the Code also protects the interests of creditors who would otherwise have their claims against the debtor discharged.

Section 523(a)(6) excepts from discharge any debt “for willful and malicious injury by the …

From Wreckage Comes Reason: How Detroit’S Chapter 9 Filing Helps Develop A Practicable And Principled “Good Faith” Standard, Scott A. Krystiniak

William & Mary Business Law Review

The city of Detroit is beginning to rise from the ashes following decades of fiscal ineptitude, social failure, and corruption. Bolstered by protections under Chapter 9 of the Bankruptcy Code, Detroit has eliminated billions of dollars in debt and established a feasible plan for municipal reorganization. Now, Detroit is even considered an American “comeback story.” However, Detroit’s revitalization began on a tenuous foundation. The city’s creditors objected vigorously to the bankruptcy petition by claiming that Detroit had not filed its bankruptcy petition in good faith under § 921(c). Despite the relatively scarce and imprecise case law and jurisprudence surrounding § …

A New Fulcrum Point For City Survival, Samir D. Parikh

William & Mary Law Review

Municipalities have historically enjoyed immense stability. This era of tranquility is over, and fiscal deterioration is accelerating. Policymakers and scholars have struggled to formulate debt restructuring options; almost all have embraced federal bankruptcy law. But this resource-draining process is not the fulcrum point for any meaningful solution to municipal demise. Indeed, for the vast majority of distressed municipalities, the lever of municipal recovery will not turn on the solutions that have been offered to date. This Article radically shifts the municipal recovery debate by arguing that state law is the centralized point at which officials can exert the necessary amount …

When Should Bankruptcy Be An Option (For People, Places, Or Things)?, David A. Skeel Jr.

William & Mary Law Review

When many people think about bankruptcy, they have a simple left-to-right spectrum of possibilities in mind. The spectrum starts with personal bankruptcy, moves next to corporations and other businesses, and then to municipalities, states, and finally countries. We assume that bankruptcy makes the most sense for individuals; that it makes a great deal of sense for corporations; that it is plausible but a little more suspect for cities; that it would be quite odd for states; and that bankruptcy is unimaginable for a country.

In this Article, I argue that the left-to-right spectrum is sensible but mistaken. After defining “bankruptcy,” …

When Opting Out Is The Only Option: Protecting Small Business Debtors In Bankruptcy, Ryan Malone

William & Mary Business Law Review

This Note implores states that have not already done so to opt out of the provisions of the Federal Bankruptcy Code that place explicit limits on the amount a debtor is allowed to exempt from liquidation. By doing so, states will be able to provide debtors who operate their own small business a greater degree of protection from creditors, as those states are entitled to establish their own limit on the value of the tools of a debtor’s trade the debtor may shield in bankruptcy. This Note contends that Congress has evinced an intent within the last decade to restrict …

Dodd-Frank's Title Ii Authority: A Disorderly Liquidation Of Experience, Logic, And Due Process, Chadwick Welch

William & Mary Bill of Rights Journal

No abstract provided.

Defending The Current State Of Section 363 Sales, Jared A. Wilkerson

W&M Law Student Publications

Notwithstanding the priority-based controversy following the Chrysler and GM § 363(b) sales, value is the central dispute dominating the asset sale debate. Given the mounting data purporting to show that sales harm junior creditors by producing low value, I confront two issues in this article. First, I address the depth and breadth of the low value phenomenon for junior creditors, concluding that(a) although sales appear to cut deeply into creditor recoveries, causation has yet to be shown; and (b) sales have not, contrary to the predictions of some scholars, overtaken reorganization. Second, using qualitative and quantitative analysis, I challenge four …

Does Ideology Matter In Bankruptcy? Voting Behavior On The Courts Of Appeals, Jonathan Remy Nash, Rafael I. Pardo

William & Mary Law Review

This Article empirically examines whether courts of appeals judges cast ideological votes in the bankruptcy context. The empirical study is unique insofar as it is the first to examine the voting behavior of circuit court judges in bankruptcy cases. More importantly, it focuses on a particular type of dispute that arises in bankruptcy: debt-dischargeability determinations. The study implements this focused approach in order to reduce heterogeneity in result. We find, contrary to our hypotheses, no evidence that circuit court judges engage in ideological voting in bankruptcy cases. We also find, however, non-ideological factors—including the race of the judge and the …

The Affordability Paradox: How Consumer Bankruptcy's Greatest Weakness May Account For Its Surprising Success, Angela Littwin

William & Mary Law Review

When the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) made consumer bankruptcy more expensive for all debtors, it inadvertently reignited a debate about how to make the system more affordable for its neediest beneficiaries. Even before BAPCPA, consumer bankruptcy suffered from the irony that those who needed it the most were often too poor to take advantage of its relief.

The seemingly obvious solution to this problem is to eliminate the major cost that consumer bankruptcy filers bear, that of paying their own lawyers. But in our rush to undo the harm caused by BAPCPA’s worsening of the …

"Some Portion Of Misconduct": The Argument For A Negligence Standard For Expecting Discharge Of Debts Incurred Through Defalcation, Alyssa Miller

William & Mary Business Law Review

The United States Circuit Courts are currently split on the correct standard for defalcation: that is, they are split on what level of mental culpability a fiduciary must possess before bankruptcy courts exclude debts incurred through misconduct from discharge. The First, Fifth, Sixth, and Seventh Circuits apply a recklessness standard. The Fourth, Eighth, and Ninth Circuits apply a negligence standard. The time has come to resolve the circuit split because the inter-jurisdictional nature of business in the twenty-first century creates a danger that fiduciaries will not have notice of potential liability if standards for liability vary from jurisdiction to jurisdiction. …

Looking Forward While Looking Back: Using Debtors' Post-Petition Financial Changes To Find Bankruptcy Abuse After Bapcpa, Justin H. Rucki

William & Mary Law Review

No abstract provided.

Credit Markets, Exemptions, And Households With Nothing To Exempt, Richard M. Hynes

Faculty Publications

American bankruptcy law has offered a "fresh start" in every state for over one hundred years. As a result, econometric studies of consumer bankruptcy often focus on one of the few aspects of the law that has varied significantly across time and across states: exemptions. Professors Gropp, Scholz and White published the first article to test the effect of exemptions on credit markets. Consistent with theory, they found that residents of states with larger exemptions pay higher interest rates than those in states with lower exemptions andface an increased probability that they will be denied credit. These effects were most …

Bankruptcy And State Collections: The Case Of The Missing Garnishments, Richard M. Hynes

Faculty Publications

Recent bankruptcy reforms were spurred in part by a bankruptcy filing rate that has more than doubled in the last ten years and that has risen by approximately six hundred percent over the last generation. Some attribute this surge in filings to Americans' greater willingness to avoid debts by declaring bankruptcy. Most academics, however, argue that more Americans are forced into bankruptcy by crushing debt burdens and aggressive collections techniques. Surprisingly, the literature has largely ignored data on the use of these collections techniques. This Article examines the use of one of the most important collections tools, garnishment, in two …

An Appeal To Equity: Why Bankruptcy Courts Should Resort To Equitable Powers For Latitude In Their Interpretation Of "Interests" Under Section 363(F) Of The Bankruptcy Code, Matthew T. Gunlock

William & Mary Law Review

No abstract provided.

Caught In The Trap: Pricing Racial Housing Preferences, A. Mechele Dickerson

Faculty Publications

No abstract provided.

Bankruptcy And Mortgage Lending: The Homeowner Dilemma, A. Mechele Dickerson

Faculty Publications

No abstract provided.

Race Matters In Bankruptcy, A. Mechele Dickerson

Faculty Publications

No abstract provided.

Why (Consumer) Bankruptcy?, Richard M. Hynes

Faculty Publications

No abstract provided.

A Politically Viable Approach To Sovereign Debt Restructuring, A. Mechele Dickerson

Faculty Publications

The failure to enact a statutory system to restructure sovereign debt suggests that the international community is still unwilling to adopt a unified global response to insolvency issues. Since nations refused to enact uniform legislation to facilitate more orderly business insolvencies within a sovereign, it is not surprising that recent attempts to create uniform legislation that addresses the insolvency of sovereigns themselves have been unsuccessful. While a comprehensive statutory approach can predictably and efficiently restructure all of a sovereign's debts, the failed experience with uniform cross-border insolvency legislation suggests that sovereigns will not accept an inflexible statutory scheme that contains …

The Many Faces Of Chapter 11: A Reply To Professor Baird, A. Mechele Dickerson

Faculty Publications

No abstract provided.

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 …

The Political Economy Of Property Exemption Laws, Richard M. Hynes, Anup Malani, Eric A. Posner

Faculty Publications

Exemption laws enable people who default on loans to protect certain assets from liquidation. Every state has its own set of exemption laws, and they vary widely. The 1978 federal bankruptcy law contains a set of national exemptions, which debtors in bankruptcy are permitted to use instead of their state's exemptions unless the state has formally "opted out" of the federal system. We contend that states' decisions to opt out shed light on their exemption levels. We find that states are more likely to opt out if their state exemption is lower than the federal exemption and that states are …

Overoptimism And Overborrowing, Richard M. Hynes

Faculty Publications

No abstract provided.

Approving Employee Retention And Severance Programs Judicial Discretion Run Amuck, A. Mechele Dickerson

Faculty Publications

No abstract provided.

Behavioral Approach To Analyzing Corporate Failures, A. Mechele Dickerson

Faculty Publications

Recent corporate failures indicate that existing laws fail to give boards of directors adequate incentives to acknowledge that some financially troubled firms simply cannot be salvaged. Relying primarily on insights from law and behavioral science literature, this Article notes that directors have a natural tendency to underestimate risks and overestimate their ability to save an insolvent or near insolvent firm. This Article urges the imposition of a duty to file a timely bankruptcy petition because such a duty will encourage directors to consider the interests of all the firms' constituents, including workers, creditors, and the local community, when making decisions …