Law Commons^™

Pandemic Hope For Chapter 11 Financing, David A. Skeel Jr.

All Faculty Scholarship

One of the biggest surprises of the recent pandemic from a bankruptcy perspective has been the ready availability of financing. A variety of factors—such as an estimated $2.5 trillion in available funding at the outset of the crisis and the buoyant stock market—may have contributed. In this Essay, I focus on a less widely appreciated factor, a striking shift in the capital structure of many corporate debtors. Rather than borrowing from one group of lenders, debtors now often borrow from multiple groups of diverse lenders. Although the new capital structure complexity has downsides, it also could counteract a longstanding problem …

Building A Restructuring Hub: Lessons From Singapore, Aurelio Gurrea-Martinez

Research Collection Yong Pung How School Of Law

This article analyses the legal, market and institutional features needed to become an international hub for debt restructuring. For that purpose, it explores the strategy followed by Singapore, as well as the market and institutional factors generally found in other leading centres for legal and financial services such as the United States, the United Kingdom and Hong Kong. In jurisdictions traditionally having creditor-oriented insolvency systems, such as the United Kingdom, Hong Kong and Singapore, one of the primary challenges for the improvement of the restructuring framework for debtors consists of making sure that the insolvency system remains protective of the …

The Future Of Insolvency Law In A Post-Pandemic World, Aurelio Gurrea-Martinez

Research Collection Yong Pung How School Of Law

The COVID-19 crisis has encouraged many countries to amend their insolvency laws. In most cases, these amendments took place temporarily – especially during the hibernation phase of the pandemic. In other countries, however, the pandemic has led to permanent changes in the insolvency legislation. More importantly, the COVID-19 crisis has accelerated the insolvency reforms already existing in the political agenda of many countries, and it has encouraged other jurisdictions to reassess the desirability of their insolvency and restructuring frameworks. This article analyzes the current trends, reforms and policy discussions that are expected to reshape the future of insolvency law in …

Changemakers: Finding The Perfect Niche, Michael Bowden

Life of the Law School (1993- )

No abstract provided.

Equitable Subordination Redux? Section 183 Of The Bankruptcy And Insolvency Act And Respecting The 'Legislative Will' Of Parliament, Thomas G. W. Telfer

Law Publications

The Supreme Court of Canada has yet to rule on whether the American doctrine of equitable subordination is part of Canadian law. In Re US Steel, the Ontario Court of Appeal suggested in obiter that section 183 of the Bankruptcy and Insolvency Act (BIA) conferred upon courts the power to equitably subordinate a claim. This article focuses on the specific point of whether section 183 of the BIA provides the court jurisdiction in equity to subordinate a claim and alter the statutory priority scheme. Equitable jurisdiction found in section 183 of the BIA does not represent a broad power to …

Two Approaches For Evaluating A Debtor’S “Additional Circumstance” Under The Brunner Test To Qualify For A Hardship Discharge Of Student Loan Debt, Julie Aberasturi

Bankruptcy Research Library

(Excerpt)

Under title 11 of the United States Code (the “Bankruptcy Code”), student loan debt is typically non-dischargeable in bankruptcy, except for circumstances in which the failure to discharge “would impose an undue hardship on the debtor and the debtor’s dependents.” However, the Bankruptcy Code does not define “undue hardship.” Instead, Congress “left it up to the various Bankruptcy Courts to utilize their discretion in defining what that term means after an analysis of the statute and a review of applicable legislative history.”

In determining what constitutes an “undue hardship,” a majority of courts rely on the three-prong Brunner test …

Unqualified Student Loans Are Likely Dischargeable In Bankruptcy, Cristian Catanese

Bankruptcy Research Library

(Excepr)

As a general matter, most student loans are excepted from discharge under section 523 of title 11 of the United States Code (the “Bankruptcy Code”). The Bankruptcy Code prohibits discharge of certain student loans unless doing so “would impose undue hardship on the debtor and [their] dependents . . . .” Student debtors seeking to discharge student loan debt must file an adversary proceeding and demonstrate “undue hardship” — a difficult burden to meet. However, not all student loans may be subject to this requirement.

Jurisdictions are divided on whether unqualified student loans, i.e., loans outside the cost of …

Enforcing Make Whole Premiums In Bankruptcy, Brian P. Campbell Jr.

Bankruptcy Research Library

(Excerpt)

A debt instrument typically has two components: principal and interest. The lender usually has some expectation in receiving a certain amount of interest over the life of a loan. The borrower may in many instances reduce the amount of the interest paid by pre-paying the loan in full prior to maturity. In certain instances, a lender will protect its interest recovery by including a “make whole premium” (“MWP”) in the loan. When borrowings are either paid back early or are accelerated forward by a default, MWPs provide for the payment of an additional amount by the borrower to “compensate …

The Debtor’S Absolute Right To Dismiss A Chapter 13 Case, Jared Brady

Bankruptcy Research Library

(Excerpt)

Under section 1307(b) of title 11 of the United States Code (the “Bankruptcy Code”), a debtor has an absolute right to dismiss a Chapter 13 bankruptcy case. A bankruptcy case may be voluntarily filed under any chapter so long as the individual is eligible to be a debtor under the chapter selected. Section 1307(b) requires the court, on request of the debtor, to dismiss a Chapter 13 case if the case has not already been converted from Chapter 7 or Chapter 11.

This memorandum addresses a debtor’s right to dismiss a Chapter 13 case in three sections. Section one …

The Differing Standards To Obtain A Student Loan Debt Discharge, Nicholas Bonelli

Bankruptcy Research Library

(Excerpt)

Discharging student loans in a bankruptcy case is often an uphill battle. Under section 523 of title 11 of the United States Code (the “Bankruptcy Code”), student loans are presumed nondischargeable. Thus, a discharge is generally unavailable for student loans “[u]nless excepting such debt from discharge . . . would impose an undue hardship on the debtor and the debtor's dependents.” To obtain a discharge, a debtor bears the burden of showing “undue hardship” by a preponderance of the evidence. In determining “undue hardship,” a majority of courts use the Brunner Test. A minority of courts use the more …

Standing To Challenge Bankruptcy Court’S Approval Of Retiree Benefits Settlement, Inkook Choi

Bankruptcy Research Library

(Excerpt)

Section 1114 of title 11 of the United States Code (the “Bankruptcy Code”) provides in relevant part that: “the debtor in possession shall timely pay and shall not modify any retiree benefits” unless “the court, on the motion of the [debtor] or authorized representative [of the retirees,]” orders or the debtor and the authorized representative agree to the modification of such benefits. A bankruptcy court may, after notice and hearing, approve a settlement, including a settlement of retiree benefit claims, under Federal Rule of Bankruptcy Procedure 9019. Consequently, creditors and other parties in interest may voice their views on …

Financial Advisory Firms Whose Affiliate’S Employees Served As Independent Officers Or Directors Of The Debtor Prepetition Should Be Retained Under Section 327(A) Of The Bankruptcy Code, Lauren Jusas

Bankruptcy Research Library

(Excerpt)

The retention of financial advisors by chapter 11 debtors must be approved by a bankruptcy court. Currently, debtors may file employment applications for financial advisors, whose affiliate’s employees, prepetition, served as a chief restructuring officer (“CRO”), under two different sections of title 11 of the United States Code (the “Bankruptcy Code”). Under section 327(a), financial advisors must satisfy a stringent two-part test to be approved. Alternatively, financial advisors may seek approval under section 363(b) pursuant to the J. Alix Protocol, a national settlement protocol developed by the United States Trustee Program (the “USTP”). Since its inception, the J. Alix …

A Bankruptcy Court May Temporarily Suspend Rent Obligation, Matthew Kipnis

Bankruptcy Research Library

(Excerpt)

Section 365(d)(3) of title 11 of the United States Code (the “Bankruptcy Code”) authorizes a court to “extend, for cause, the time for performance of any [rent] obligation[‘s] [on unexpired leases of nonresidential real property] that arise[] within 60 days after the date of the order for relief[.]” Historically, courts have recognized that under § 365(d)(3), there is a statutory obligation on debtors to pay rent on unexpired leases. Courts have also recognized that if a debtor’s rent obligation is deferred, lessors are entitled to adequate protection. However, courts are divided on the exact timing of when a debtor’s …

Did The Consolidated Appropriations Act Make Bankruptcy Debtors Eligible For Ppp Loans?, Mary Theresa Michalos

Bankruptcy Research Library

(Excerpt)

In response to the economic fallout of the global COVID-19 pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which makes government-guaranteed loans available to qualified small businesses through the Paycheck Protection Program (“PPP”). The PPP was not created as a standalone program but was added to the existing section 7(a) program, which subjects the PPP to existing conditions and regulations, as well as existing Small Business Administration (the “SBA”) authority. The CARES Act expressly gives the SBA “[e]mergency rulemaking authority” to “issue regulations” carrying out the PPP. And it provides that the SBA …

A Receiver Lacks Standing To Recover Fraudulent Transfers Under Ufta When Corporation Has Not Been Adequately Cleansed From Fraudulent Actions Of Ponzi Schemers, Chelsea Mcgee

Bankruptcy Research Library

(Excerpt)

A court-appointed receiver is charged with collecting the assets of an entity for the benefit of creditors. A receiver, however, only has standing to bring claims that the party in the receivership possessed. In determining whether a receiver has standing to bring a claim, it is necessary to differentiate between the types of claims that can be asserted on behalf of a corporation. First, there are actions that a receiver may bring directly against the principals of a corporation or the recipients of fraudulent transfers. Second, are common law tort claims that can be brought against a third party, …

Bankruptcy Debtor Eligibility For Federal Coronavirus Aid Under The Cares Act, Meghan Paola

Bankruptcy Research Library

(Excerpt)

In March of 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to provide assistance to individuals and businesses affected by the Covid-19 pandemic. The Paycheck Protection Program (the “PPP”) was established under section 7(a)(36) of the Small Business Act to provide economic relief in the form of loans to small businesses negatively impacted by Covid-19. The CARES Act tasks the Small Business Administration (the “SBA”) with administering the PPP loans.

The PPP application form provides that a loan will not be approved if an applicant is “presently involved in any bankruptcy.” However, debtors …

The Debtor’S Conduct At The Time Of Filing Controls In Determining Whether A Debtor Is Eligible To Convert Their Existing Case To A Case Under Subchapter V Of The Bankruptcy Code, Eric Silverstein

Bankruptcy Research Library

(Excerpt)

Congress passed the Small Business Reorganization Act of 2019 (the “SBRA”) to give small businesses a better chance to successfully reorganize under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). One of the SBRA’s most important amendments was the addition of Subchapter V to Chapter 11 of the Bankruptcy Code, which was designed to reduce the cost and complexity of a small business reorganization. Because the statute’s express terms do not address its application to existing debtors, courts have been forced to address issues of conversion and eligibility. Generally, conversion of a case is …

Do Parents Receive Reasonably Equivalent Value For Paying College Tuition For Their Children Making Such Payments Avoidable, Alexandria Stiteler

Bankruptcy Research Library

(Excerpt)

Under section 548 of title 11 of the United States Code (the “Bankruptcy Code”), a trustee may avoid a transfer by a debtor that was an actual or constructive fraud. An actual fraudulent transfer is a transfer made with actual intent to hinder, delay, or defraud creditors. In general, a constructive fraudulent transfer is a transfer or the incurrence of an obligation by a debtor that was made within two years before the date of filing the bankruptcy petition, for less than reasonably equivalent value, at a time when the debtor was insolvent and could not pay its debts …

Section 1112(B) Of The Bankruptcy Code Allows A Bankruptcy Court To Dismiss A Case Filed In Bad Faith, Antonio Sciarrotta

Bankruptcy Research Library

(Excerpt)

The United States Bankruptcy Code (the “Bankruptcy Code”) offers a wide range of instances where a bankruptcy court can dismiss a case. Section 1112(b) of the Bankruptcy Code provides that “the court shall convert a case under this chapter to a case under chapter 7 or dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, for cause . . . .” Section 1112(b)(4) lists different scenarios that constitute “for cause.” Although not explicitly within the statutory scheme, a requirement that the debtor files his bankruptcy petition in good faith is one …

City’S Retention Of Impounded Vehicle Not Violation Of Automatic Stay, Alexis Zobeideh

Bankruptcy Research Library

(Excerpt)

Upon the filing of a petition under title 11 of the United States Code (the “Bankruptcy Code”), creditors and other parties in interest are generally automatically stayed from taking any action against a debtor or property of the estate. The estate includes “all legal or equitable interests of the debtor in property as the commencement of the case,” with some exceptions. The automatic stay is “one of the most important protections and powerful tools available to a debtor in a bankruptcy.”

It is well established that a creditor cannot take affirmative steps against a debtor or estate property. Prior …

Mandatory Abstention Is Required When Foreign Law Claims Are Brought In Conjunction With State Law Claims, Matthew Seymour

Bankruptcy Research Library

(Excerpt)

When a case is wrongfully removed from state court, mandatory abstention provides moving parties with a way to remand their non-core claims. 28 U.S.C. § 1334(c)(2) provides the framework for a motion that would require a federal district court to abstain. Congress enacted the statute to allow a party to litigate state claims in state court when the case was only removed to federal court because of its relation to a bankruptcy case. The case law interpreting the statute has created a five-step test to determine when mandatory abstention is required. The Third Circuit in Stoe articulated that:

upon …

Timing And Location Of Comi Determined At The Timing Of Filing Chapter 15 Petition, Priya Suresh

Bankruptcy Research Library

(Excerpt)

A debtor’s center of main interest (“COMI”) is not defined under title of 11 of the United States Code (the “Bankruptcy Code”). As a result, bankruptcy courts have taken a number of different approaches to determining a debtor’s COMI. The starting place for determining COMI is the statutory rebuttable presumption that a debtor’s registered office, or habitual residence is the debtor’s COMI. If the presumption is rebutted, the party seeking recognition as a foreign main proceeding must prove by a preponderance of the evidence that the debtor's COMI is in the jurisdiction where the proceeding is pending. Under chapter …

How Courts In The Second Circuit Decide On A Stay Pending Appeal In Bankruptcy Actions, Valerie Timmerman

Bankruptcy Research Library

(Excerpt)

Absent a stay, an appeal may be mooted by actions taken while the appeal is pending. The Federal Rules of Bankruptcy Procedure permit a court to grant “a stay of a judgment, order, or decree” pending an appeal. The purpose of a stay “is to preserve the status quo pending appeal and to protect the rights of all parties in interest.” The standard for a grant or denial of a stay under Bankruptcy Rule 8007 has historically differed among courts, with some favoring the “judicial discretion” test and others opting for the “preliminary injunction” test, depending on the nature …

Are Settlement Agreements Executory Contracts? Courts That Say “No” Give More Power To Creditors In Bankruptcy Actions, Kevin Murray

Bankruptcy Research Library

(Excerpt)

In order to provide for quick and efficient resolutions in bankruptcy cases, courts will often encourage settlement agreements. Settlement agreements are so common that it is unusual for there not to be a settlement between adversaries. Additionally, settlement agreements are favored by law to allow the parties to avoid the expense and burdens that are associated with litigating claims.

Courts have taken two approaches when analyzing disputes that involve settlement agreements. Some courts have held that a settlement agreement is a court approved contract between two adversarial parties and its interpretation is governed by the general provisions of contract …

Bankruptcy For Banks: A Tribute (And Little Plea) To Jay Westbrook, David A. Skeel Jr.

All Faculty Scholarship

In this brief essay, to be included in a book celebrating the work of Jay Westbrook, I begin by surveying Jay’s wide-ranging contributions to bankruptcy scholarship. Jay’s functional analysis has had a profound effect on scholars’ understanding of key issues in domestic bankruptcy law, and Jay has been the leading scholarly figure on cross-border insolvency. After surveying Jay’s influence, I turn to the topic at hand: a proposed reform that would facilitate the use of bankruptcy to resolve the financial distress of large financial institutions. Jay has been a strong critic of this legislation, arguing that financial institutions need to …

The Settlement Trap, Lindsey Simon

Scholarly Works

Mass tort victims often wait years for resolution of their personal injury claims, but many who successfully navigate this arduous process will not receive a single dollar of their settlement award. According to applicable bankruptcy and state law, settlement payments may be an asset of the estate that the trustee, exercising its significant authority, administers and distributes to creditors instead of a claimant who had filed for bankruptcy. This distribution power maximizes repayment, a critical counterbalance to the robust protections and benefits that debtors receive in bankruptcy.

Setting aside the perceived unfairness of taking desperately needed money from tort victims, …

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 …

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 …