Law Commons^™

Pension Benefit Guaranty Corporation’S Termination Premiums Constitute Dischargeable Pre-Petition Contingent Claims, Thomas Rooney

Bankruptcy Research Library

(Excerpt)

In Oneida Ltd. v. Pension Benefit Guaranty Corp., the U.S. Bankruptcy Court for the Southern District of New York addressed the issue of whether a debtor’s liability for pension termination premiums (“DRA Premiums”) constituted a pre-petition contingent “claim” and was, therefore, dischargeable pursuant to the debtor’s reorganization plan confirmation. 383 B.R. 29, 32 (Bankr. S.D.N.Y. 2008). The Bankruptcy Court held that the debtor’s liability for DRA premiums was a dischargeable pre-petition “claim” even though the pension termination occurs during the debtor’s chapter 11 case. Id. at 32, 43.

The Bankruptcy Court based its holding on three determinations: (1) …

Non-Claim Status Of Environmental Clean-Up Injunctions Limited To States, Klevis Peshtani

Bankruptcy Research Library

(Excerpt)

Does the equitable right of an individual, whose property has been damaged by the debtor’s pollution, to injunctive clean-up relief constitute a “claim” that may be discharged in the debtor’s Chapter 11 bankruptcy? This was the issue of first impression which the Pennsylvania Bankruptcy Court dealt with in Krafczek v. Exide Corp., No. 00-1965, 2007 WL 1199530, at *1 (E.D. Pa. Apr. 19, 2007). The Krafczek court answered the question in the affirmative, 2007 WL 1199530 at *3, setting new precedent in an already narrow area of Bankruptcy Law upon which other courts had trodden carefully.

This article …

The Exclusive View V. The Non-Exclusive View: Can A Creditor’S Claim Be Dismissed For Failing To Provide Supporting Documentation?, Robert J. Ryan

Bankruptcy Research Library

(Excerpt)

May a creditor’s claim be dismissed simply because he failed to provide supporting documentation in violation of Federal Rule of Bankruptcy Procedure 3001? The answer depends on which jurisdiction the creditor is pursuing its claim in. Courts are currently sharply divided on the issue. If the creditor is fortunate enough to be in a jurisdiction which follows the “exclusive” view, which is the majority rule, the answer to this problem will be yes. However, if the creditor happens to be in a jurisdiction which follows the “non-exclusive” view, which is the minority rule, the answer to this problem will …

Bapcpa Does Not Require The Chapter 13 Means Test In Individual Chapter 11 Cases, Steven Saal

Bankruptcy Research Library

(Excerpt)

The Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) was implemented in order to prevent debtors from unjustly shielding value in their estate from deserving creditors and thus abusing the functionality of the federal bankruptcy system. Specifically, one problem perceived to be very prevalent was a practice by individual debtors who would seek to avoid the stringent guidelines of the “means test” in Chapter 13 cases by running for the protection of the more relaxed standards in Chapter 11 cases. The BAPCPA Amendments to section 1129 of the Bankruptcy Code were adopted to institute stricter standards in Chapter 11 …

Clear Channel Outdoor, Inc. V. Knupfer, Thomas Scappaticci

Bankruptcy Research Library

(Excerpt)

An important and traditional power afforded by the Bankruptcy Code to debtors and trustees is the power to sell encumbered property free and clear of any liens or encumbrances. See G COLLIER ON BANKRUPTCY, App. Pt. 44, at 44-529 (Alan N. Resnick et al. eds., 15th ed. rev. 2006). One way in which this power is given to debtors and trustees is through Section 363(f)(3) of the Bankruptcy Code, which provides a mechanism for property to be sold free and clear of any liens. See 11 U.S.C. § 363(f)(3) (2006). Yet, the application of Section 363(f)(3) is not entirely …

Early Retirement Benefits Not Entitled To Severance Priority, Joe Scolavino

Bankruptcy Research Library

(Excerpt)

In Supplee v. Bethlehem Steel Corp (In re Bethlehem Steel Corp.), 479 F.3d 167 (2d Cir. 2007), the Second Circuit Court of Appeals addressed the issue of whether early retirement benefits triggered by severance are entitled to administrative expense treatment. The court held that that early retirement benefits are not entitled to severance priority. While the Second Circuit generally treats severance payments as priority administrative expenses when employment is terminated during the employer’s bankruptcy, Bethlehem determined that lump-sum retirement benefits for which the employee became eligible at termination did not constitute a new benefit earned at termination, …

American Home Mortgage, Holdings, Inc. V. Lehman Brothers Inc., Valerie Sokha

Bankruptcy Research Library

(Excerpt)

The derivatives provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) amendments greatly enlarged the scope of the financial contracts that are shielded from traditional bankruptcy limitations such as the automatic stay and the prohibition on ipso facto clauses. Those exceptions were reaffirmed in a strong anti-debtor opinion in Am. Home Mortg. Inv. Corp. v. Lehman Bros. (In re Am. Home Mortg. Holdings, Inc.), 388 B.R. 69 (Bankr. D. Del 2008). Although Lehman may now regret its victory since it is a debtor in its own bankruptcy case, it succeeded in defeating a number …

Discharge Under The Code For Erisa "Fiduciaries", Devin Sullivan

Bankruptcy Research Library

(Excerpt)

The Bankruptcy Code (“Code”) provides debtors with relief from many of their outstanding debts. However, even under the broad protection of the Code, some debts cannot be erased. Pursuant to section 523(a)(4) of the Code, an individual debtor may not discharge any debt for fraud or defalcation (unauthorized appropriation of money) while acting in a fiduciary capacity. 11 U.S.C. § 523(a)(4). The federal courts are currently split on the issue of whether a debtor who qualifies as a “fiduciary” under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132 et seq, (“ERISA”) will also qualify as …

Can Software Be A Bankruptcy Petition Preparer?, Thomas Szaniawski

Bankruptcy Research Library

(Excerpt)

Recently, in Reynoso v. United States (In re Reynoso) — a case of first impression for the Ninth Circuit that addressed the intersection of cyberspace and bankruptcy — the court held that a provider of web-based bankruptcy software was a bankruptcy petition preparer (“BPP”) under 11 U.S.C. section 110 and that under California law, the features and functionality of the software went beyond mere typesetting and constituted the unauthorized practice of law. Reynoso v. United States (In re Reynoso), 477 F.3d 1117 (9th Cir. 2007). In re Reynoso is significant because prior to this …

Overlooking Tort Claimants' Best Interests: Non-Debtor Releases In Asbestos Bankruptcies , Joshua M. Silverstein

Faculty Scholarship

The asbestos crisis has spawned the development of extraordinary new remedies. One of the most dramatic and controversial is known as a "non-debtor release," a bankruptcy order extinguishing claims against a party who has not itself filed for bankruptcy. Also known as a "third-party release," this form of relief first found acceptance in early asbestos insolvencies. Since that time, Congress has passed a statute—§ 524(g) of the Bankruptcy Code—that expressly authorizes non-debtor releases in asbestos reorganizations. Powerful remedies are subject to abuse, and third-party releases are no exception. In this article, I argue that bankruptcy courts and litigants have overlooked …

We Can Work It Out: Entertaining A Dispute Resolution System Design For Bankruptcy Court, Elayne E. Greenberg

Faculty Publications

On October 2, 2009, dispute resolution scholars and bankruptcy court jurists courageously began the difficult conversation about the feasibility of an expanded dispute resolution system design for bankruptcy court. This commentary distills that conversation through a dispute resolution system design lens. Dispute resolution system design offers a framework for organizations to more effectively manage and resolve recurring conflicts. The design of a dispute resolution system requires clarifying ideas, elucidating values, prioritizing goals, considering options and incorporating that information into a more workable process to respond to conflict. All the while, the stakeholders and dispute resolution designers work together to clarify, …

The Chapter 13 Estate And Its Discontents, David G. Carlson

Articles

Thirty years after the enactment of the Bankruptcy Code, the courts have yet to agree on a theory of the bankruptcy estate in Chapter 13 cases. This is not the fault of the courts. The Bankruptcy Code is contradictory as to the composition of the chapter 13 estate. This article selects one of four possible theories and defends it as the one that does the least violence to the plain meaning of the Bankruptcy Code.

This theory is referred to in this article as the "Divestment Theory," because it holds that, upon confirmation of a chapter 13 plan, the debtor …

Interpreting Data: A Reply To Professor Pardo, Robert M. Lawless, Angela K. Littwin, Katherine M. Porter, John A. E. Pottow, Deborah K. Thorne, Elizabeth Warren

Articles

Professor Pardo has published a pointed critique to our Report, raising three major complaints. First, he claims that we make two predicating assumptions in our study that are flawed. Second, he contends that we misunderstand the means test and fail to appreciate with sufficient "nuance" its "operative effect." Third, he maintains that our Report suffers from methodological problems. We can address the two impugned assumptions quickly. The first one - that BAPCPA's means test is the sole causal agent driving 800,000 putative filers from the bankruptcy courts - is not one we make. The second - regarding the income profiles …

Debt, Bankruptcy, And The Life Course, Allison Mann, Ronald J. Mann, Sophie Staples

Faculty Scholarship

This Essay considers the significance of credit markets and bankruptcy for life course mobility. Comparing parallel data from the 2007 Survey of Consumer Finances (SCF) and the 2007 Consumer Bankruptcy Project (CBP), it analyzes use of the bankruptcy process as a function of the distribution of unplanned events, the ability of households to use credit markets to limit the adverse effects of such events, and barriers in access to the bankruptcy system. Our findings suggest two things. One, although the financial characteristics of filers vary markedly by age and race, bankrupt households generally come from the bottom quartiles of the …

Chrysler, Gm And The Future Of Chapter 11, Edward R. Morrison

Faculty Scholarship

Although they caused great controversy, the Chrysler and GM bankruptcies broke no new ground. They invoked procedures that are commonly observed in modern Chapter 11 reorganization cases. Government involvement did not distort the bankruptcy process; it instead exposed the reality that Chapter 11 offers secured creditors – especially those that supply financing during the bankruptcy case – control over the fate of distressed firms. Because the federal government supplied financing in the Chrysler and GM cases, it possessed the creditor control normally exercised by private lenders. The Treasury Department found itself with virtually the same, unchecked power that the FDIC …

Is The Bankruptcy Code An Adequate Mechanism For Resolving The Distress Of Systemically Important Institutions?, Edward R. Morrison

Faculty Scholarship

The President and members of Congress are considering proposals that would give the government broad authority to rescue financial institutions whose failure might threaten market stability. These systemically important institutions include bank and insurance holding companies, investment banks, and other "large, highly leveraged, and interconnected" entities that are not currently subject to federal resolution authority. Interest in these proposals stems from the credit crisis, particularly the bankruptcy of Lehman Brothers. That bankruptcy, according to some observers, caused massive destabilization in credit markets for two reasons. First, market participants were surprised that the government would permit a massive market player to …

Financial Crisis Containment, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

This Article maps financial crisis containment - extraordinary measures to stop the spread of financial distress - as a category of legal and policy choice. I make three claims.

First, containment is distinct from financial regulation, crisis prevention and resolution. Containment is brief; it targets the immediate term. It involves claims of emergency, rule-breaking, time inconsistency and moral hazard. In contrast, regulation, prevention and resolution seek to establish sound incentives for the long term. Second, containment decisions deviate from non-crisis norms in predictable ways, and are consistent across diverse countries and crises. Containment invariably entails three kinds of choices: choices …

Creditor Control And Conflict In Chapter 11, Kenneth M. Ayotte, Edward R. Morrison

Faculty Scholarship

We analyze a sample of large privately and publicly held businesses that filed Chapter 11 bankruptcy petitions during 2001. We find pervasive creditor control. In contrast to traditional views of Chapter 11, equity holders and managers exercise little or no leverage during the reorganization process. 70 percent of CEOs are replaced in the two years before a bankruptcy filing, and few reorganization plans (at most 12 percent) deviate from the absolute priority rule to distribute value to equity holders. Senior lenders exercise significant control through stringent covenants, such as line-item budgets, in loans extended to firms in bankruptcy. Unsecured creditors …

Helping Families Save Their Homes: The Role Of Bankruptcy Law: Hearing Before The S. Comm. On The Judiciary, 110th Cong., Nov. 19, 2008 (Statement Of Professor Adam Levitin, Geo. U. L. Center), Adam J. Levitin

Testimony Before Congress

No abstract provided.

Sense And Sensibility In Securitization: A Prudent Legal Structure And A Fanciful Critique, Thomas E. Plank

Scholarly Works

This article responds to a recent critique that the securitization of receivables is a legally shaky financial product that survives only because it is too big to fail. This critique argues that securitization's success in avoiding the costs that the Bankruptcy Code imposes on secured credit, including a bankruptcy trustee's ability to use the cash collateral from the receivables, is a type of fraud that hinders or delays the creditors of the originators of receivables. The critique, however, fails. The cases cited for the author's fraud analysis do not support its thesis. Further, the critique fails to demonstrate that securitization's …

Identifying And Keeping The Genie In The Bottle: The Practical And Legal Realities Of Trade Secrets In Bankruptcy Proceedings, Sharon Sandeen

Faculty Scholarship

Anyone who has been paid attention to developments in the world of business over the past quarter century can attest to the fact that intellectual property (IP) is a hot commodity. Indeed, in contrast to the companies that emerged out of the Industrial Revolution, the companies that have spawned as part of the so-called “Information Age” attribute much of their value and future prospects to intangible, rather than tangible, assets. Unfortunately, while bankruptcy courts have generally recognized the need to distinguish between tangible and intangible assets, particularly when determining whether a claim is secured or unsecured, they often fail to …

Section 524(G) Without Compromise: Voting Rights And The Asbestos Bankruptcy Paradox, S. Todd Brown

Journal Articles

Section 524(g) of the Bankruptcy Code was adopted to protect unknown future asbestos personal injury victims' rights and prospects for financial recovery. To serve these goals and satisfy the demands of due process, Section 524(g) provides two basic forms of virtual representation for future victims - requiring the appointment of an independent legal representative and aligning the interests of future victims with current claimants (75% of whom must approve any plan that invokes Section 524(g)). In recent years, however, the 75% super-majority vote requirement has been transformed into a veto power wielded by a small group of law firms, who …

Trends In Distressed Debt Investing: An Empirical Study Of Investors' Objectives, Michelle M. Harner

Faculty Scholarship

Increased creditor control in chapter 11 cases has generated considerable debate over the past several years. Proponents of creditor control argue that, among other things, it promotes efficiency in corporate reorganizations. Critics assert that it destroys corporate value and frequently forces otherwise viable entities to liquidate. The increasing involvement of professional distressed debt investors in chapter 11 cases has intensified this debate. In this article, I present and analyze empirical data regarding the investment practices and strategies of distressed debt investors. Based on this data and actual case reports, I reach two primary conclusions. First, although relatively few in number, …

Selling It First, Stealing It Later: The Trouble With Trademarks In Corporate Transactions In Bankruptcy, Xuan-Thao Nguyen

Articles

Why does AI get two bites of the “Apple” trademark? Should AI be allowed to grant the right to use the trademark “perpetual and exclusive” with the sale of the music division and steal it back for free, ten years later? This article is part of an ongoing and broader inquiry into the intersection of trademark, contract and bankruptcy laws. This article argues that recent bankruptcy decisional law, notably the In re Exide Technologies decision, misunderstands the “perpetual and exclusive” trademark transaction, deeming it as an ordinary “license” when it is truly an outright sale. This article explains that the …

Illness And Inability To Repay: The Role Of Debtor Health In The Discharge Of Educational Debt, Rafael I. Pardo

Scholarship@WashULaw

For a debtor to obtain a discharge of student loans in bankruptcy, the debtor must establish that their repayment would impose an undue hardship. This Article presents the results of an empirical study of bankruptcy court doctrine over a ten-year period that involved undue hardship discharge proceedings where the court reported information on the debtor's health status, monthly household income, and monthly household expenses. The data show that a medical condition increased a debtor's odds of being granted a discharge by 140% but that household income and expense levels did not have a statistically significant association with legal outcome. These …

Get Sick, Get Out: The Medical Causes Of Home Mortgage Foreclosures, Christopher Robertson, Richard Egelhof, Michael Hoke

Faculty Scholarship

In recent years, there has been national alarm about the rising rate of home foreclosures, which now strike one in every 92 households in America and which contribute to even broader macroeconomic effects. The "standard account" of home foreclosure attributes this spike to loose lending practices, irresponsible borrowers, a flat real estate market, and rising interest rates. Based on our study of homeowners going through foreclosures in four states, we find that the standard account fails to represent the facts and thus makes a poor guide for policy. In contrast, we find that half of all foreclosures have medical causes, …

A Study Of Consumers' Post Discharge Finances: Struggle, Stasis, Or Fresh Start?, Lois R. Lupica, Jay L. Zagorsky Ph.D.

Faculty Publications

The postwar U.S. has experienced an extremely sharp rise in consumer bankruptcies. What happens to these consumers financially after filing for bankruptcy? Do filers catch up with their non-filing peers, stay a constant distance behind or fall further behind over time? This question is investigated empirically using a new set of financial and bankruptcy data obtained from a large national random survey of bankruptcy filers and non-filers. Along some simple financial dimensions, such as car ownership, bankruptcy filers are not disadvantaged compared to non-filers. Along more complex indicators, such as total income and net worth, filers catch up over time …

The Corporate Governance And Public Policy Implications Of Activist Distressed Debt Investing, Michelle M. Harner

Faculty Scholarship

Activist institutional investors traditionally have invested in a company's equity to try to influence change at the company. Some of these investors, however, are now purchasing a company's debt for this same purpose. They may seek to change a company's management and board personnel, operational strategies, asset holdings or capital structure. The chapter 11 bankruptcy cases of Allied Holdings, Inc. and its affiliates exemplify the strategies of activist distressed debt investors. In the Allied cases, Yucaipa Companies, a distressed debt investor, purchased approximately 66% of Allied's outstanding general unsecured bond debt. Yucaipa used this debt position to exert significant influence …

Court-System Transparency, Lynn M. Lopucki

UF Law Faculty Publications

This article applies systems analysis to two ends. First, it identifies simple changes that would make the court system transparent. Second, it projects transparency's consequences. Transparency means that both the patterns across, and details of, case files are revealed to policymakers, litigants, and the public in easily understood forms. Government must make two changes to achieve court system transparency. The first is to remove the existing restrictions on the electronic release of court documents, including the requirements for registration, separate requests for each document, and monetary payment. The second - already being implemented in the federal courts - is to …

(Almost) Everything We Learned About Pleasing Bankruptcy Judges, We Learned In Kindergarten, Nancy B. Rapoport, Roland Bernier Iii

Scholarly Works

In this essay, we demonstrate that most ethics violations (at least the ones that irritate bankruptcy judges) are also violations of simple rules of behavior that people should have learned in kindergarten.