Bankruptcy Law Commons^™

Maintaining Condominiums And Homeowner Associations: How Much Of A Priority?, Stewart E. Sterk

Articles

During the recent real estate crisis, competition for scarce dollars pitted the holders of defaulted mortgages against condominiums and homeowner associations seeking to collect maintenance assessments. Statutes providing mortgagees with lien priority threatened association ability to provide services, and imposed a disproportionate burden on non-defaulting unit owners. Statutes enacted in other states gave associations a “super priority” lien for six months of assessments, but left uncertainty about the meaning of that super priority in an environment in which foreclosure delays became the norm.

The last five years have brought a spate of litigation over the relative rights of associations and …

Bankruptcy, Honorable Harlin D. Hale, Chance Hiner

SMU Annual Texas Survey

No abstract provided.

Decision-Making And The Shaky Property Foundations Of Municipal Bankruptcy Law, Juliet M. Moringiello

Brooklyn Journal of Corporate, Financial & Commercial Law

Municipal bankruptcies are unpredictable. There are several reasons for this statement— municipal bankruptcies are rare, involvement of the state itself in the process varies according to the governing state law, and chapter 9, the Bankruptcy Code chapter governing the municipal bankruptcy process, has many gaps. Congress constructed the modern chapter 9 on a foundation of corporate bankruptcy law, a foundation whose roots—corporate finance—are significantly different from the rules governing municipal finance. In this Article, Professor Moringiello aims a spotlight on the property roots of private bankruptcy law and compares them to the promissory and statutory roots of municipal finance law …

Towards A Jurisprudence Of Public Law Bankruptcy Judging, Edward J. Janger

Brooklyn Journal of Corporate, Financial & Commercial Law

In this essay Professor Janger considers the role of bankruptcy judges in Chapter 9 cases in light of the scholarly literature on public law judging. He explores the extent to which bankruptcy judges engaged in the fiscal restructuring of a municipality use tools, and face constraints, similar to those utilized by federal district court judges in structural reform cases, where constitutional norms are at issue.

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 …

Law And Legislation In Municipal Bankruptcy, Vincent S.J. Buccola

Cardozo Law Review

Corporate and consumer bankruptcy are defined by two principal features: a compulsory process and an identifiable set of priorities to debtor property. These "rule of law"features reduce borrowing costs ex ante by, among other things, discouraging rent-seeking ex post. Municipal bankruptcy, by contrast, despite apparent similarities, embodies a radically different vision of debt adjustment. Substantive priorities in Chapter 9 are riddled with uncertainty, and the very invocation of bankruptcy is subject to veto by multiple actors. Consequently, this Article contends that familiar models of bankruptcy are inadequate to explain the existing regime of municipal debt adjustment. What Chapter 9 creates …

Bankruptcy, Honorable Harlin D. Hale, Amber M. Carson

SMU Annual Texas Survey

No abstract provided.

Beyond The Great Divide: Federalism Concerns In Municipal Insolvency, Andrew B. Dawson

Articles

No abstract provided.

Predictors Of Municipal Bankruptcies And State Intervention Programs: An Exploratory Study, Laura N. Coordes, Thom Reilly

Kentucky Law Journal

Why do some struggling cities file for bankruptcy while others, facing simiar circumstances, do not? This Article builds on the literature examining the causes and consequences ofmunicipal fiscal distress by exploring specific factors that lead municipalities to seek help from the state and federal government. Viewing municipal opportunities and constraints through political, economic, and legal lenses, this Article helps to explain the nuances ofmunicival decision making.

After identifiing eight factors that may serve as predctors of municipal insolvency, the authors studied cities in Fiscal distress with an eye toward uncovering the circumstances that led each of these cities into and—if …

Taxes And Ability To Pay In Municipal Bankruptcy, John Patrick Hunt

Washington Law Review

Scholars and commentators have argued that municipalities can and should use bankruptcy to shed unwanted liabilities, particularly employee healthcare and pension commitments. Courts increasingly have agreed: Detroit’s approved bankruptcy plan cut pensions, and the bankruptcy court overseeing the bankruptcy of Stockton, California brought down barriers to pension-cutting. Both courts found their way around state provisions arguably protecting municipal pensions. Now that pension-cutting in bankruptcy has momentum, we can expect to hear arguments for using bankruptcy not just in cases like Detroit and Stockton where the municipality cannot meet all its obligations, but also in cases where residents or politicians come …

Taxes And Ability To Pay In Municipal Bankruptcy, John Patrick Hunt

Washington Law Review

Scholars and commentators have argued that municipalities can and should use bankruptcy to shed unwanted liabilities, particularly employee healthcare and pension commitments. Courts increasingly have agreed: Detroit’s approved bankruptcy plan cut pensions, and the bankruptcy court overseeing the bankruptcy of Stockton, California brought down barriers to pension-cutting. Both courts found their way around state provisions arguably protecting municipal pensions. Now that pension-cutting in bankruptcy has momentum, we can expect to hear arguments for using bankruptcy not just in cases like Detroit and Stockton where the municipality cannot meet all its obligations, but also in cases where residents or politicians come …

The Theory Of Municipal Custom And Practice, Karen Blum

Touro Law Review

No abstract provided.

Eleventh Amendment Federalism And State Sovereign Immunity Cases: Direct Effect On Section 1983?, Stephen H. Steinglass

Touro Law Review

No abstract provided.

An Analysis Of The Treatment Of Employees Pension And Wage Claims In Insolvency And Under Guarantee Schemes In Oecd Countries: Comparative Law Lessons For Detroit And The United States, Paul M. Secunda

Fordham Urban Law Journal

No abstract provided.

The Detroit Bankruptcy, Pre-Eligibility, Melissa B. Jacoby

Fordham Urban Law Journal

No abstract provided.

Zombieland/The Detroit Bankruptcy: Why Debts Associated With Pensions, Benefits, And Municipal Securities Never Die. . . And How They Are Killing Cities Like Detroit, Christine Sgarlata Chung

Fordham Urban Law Journal

No abstract provided.

Resolving The Public Pension "Crisis", Jack M. Beermann

Fordham Urban Law Journal

No abstract provided.

Better Than Bankruptcy?, Andrew B. Dawson

Articles

According to many in the bankruptcy field, small business debtors are increasingly turning to state debtor-creditors laws as an alternative to federal bankruptcy relief. One particularly popular state law is the assignment for the benefit of creditors. The conventional wisdom is that these procedures provide a state law alternative to liquidate a business.

This article reports the results of an original empirical study that challenges this conventional wisdom. Gathering data from every assignment for the benefit of creditors in a major metropolitan area over a three-year period, this study shows that debtors and their secured creditors are using these procedures …

The Motor City Needs Oil (On Canvas): An Argument In Support Of Detroit's "Grand Bargain", Jonathan A. Weeks

Georgia Law Review

Now the largest municipality in the history of the United States to go bankrupt, Detroit very nearly lost its famous art collection to its creditors. To protect its collection, Detroit proposed what is now often referred to as the "grand bargain," which involved creating a corporation that paid $816 million for the entire art collection provided that the amount paid was earmarked for pension holders in Detroit. The deal resulted in realizing two goals: keeping the art collection in Detroit and protecting pensioners who faced a huge loss in the wake of the bankruptcy. Critics of the grand bargain claim …

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 …

Time For An Update: A New Framework For Evaluating Chapter 9 Bankruptcies, Michael J. Deitch

Fordham Law Review

    Municipal bankruptcies have been making national news since the “Great Recession.” Municipalities like Stockton, Vallejo, and Jefferson County gained notoriety for the record scale of their bankruptcy filings, only to be surpassed by Detroit shortly thereafter as the largest and most populous municipal bankruptcy filing. Historically, municipal bankruptcy occurred infrequently, leaving the nuances of many critical issues, including insolvency, asset utilization, and good faith, unexplored in case law. For example, how should a bankruptcy court analyze Detroit’s cityowned art museum that houses billions of dollars of art when bondholders, pensioners, and other unsecured creditors have unpaid claims? And how should …

Feeling Insecure—A State View Of Whether Investors In Municipal General Obligation Bonds Have A Mere Promise To Pay Or A Binding Obligation, Randle B. Pollard

Scholarly Articles

The City of Detroit's filing for municipal bankruptcy in July, 2013, has added to a continuing controversy of whether general obligation bondholders have a secured lien. The City of Detroit claimed its general obligation bondholders did not have a fully secured lien because the law of the state of Michigan did not create a statutory lien. Without the creation of a lien by state law, during the insolvency or bankruptcy of municipalities, general obligation bondholders will potentially have a mere promise to pay versus a binding obligation to pay, and therefore, will not have a secured lien. Treating otherwise secured …

Reconciling The Municipal Pension Problem With Chapter 9'S Automatic Stay: A Case Note On In Re City Of San Bernardino, Michael Simon

The Journal of Business, Entrepreneurship & the Law

Using In re City of San Bernardino as a springboard, this Note explores both the descriptive and analytic dimensions of a municipality seeking relief from its pension woes within the context of Chapter 9 of the Bankruptcy Code. As a descriptive matter, this Note illustrates that municipalities need alternative solutions to address the growing public pension problem besides issuing municipal bonds. Given the structure of certain public defined benefit pension systems, the strategy of issuing municipal bonds to raise cash has substantial disadvantages. In certain contexts, Chapter 9 of the Bankruptcy Code provides a significantly better alternative. Unlike a business …

A Public Pensions Bailout: Economics And Law, Terrance O'Reilly

University of Michigan Journal of Law Reform

In several states, public pension plans are at risk of insolvency within a decade. These risks are significant, and the solutions currently contemplated are likely to fall short of what is necessary to contain the problem. If public pension plans do become insolvent, it seems likely the federal government will bail them out. This Article proposes that the federal government prepare for the prospect of federal financial support of public pension plans by instituting an optional regulatory regime for public pensions. If a state elects not to participate, its public pension plans would be ineligible for federal financial support. In …

Chapter 9 Bankruptcy In California: The Efficacy Of Mandating Alternative Dispute Resolution In Municipal Bankruptcy Filings, Michael Galen

Cardozo Journal of Conflict Resolution

The subject of this Note is of importance to ADR practitioners: the incorporation of ADR into a new state law can mitigate a heated legal struggle involving state and federal law, while balancing the competing interests of powerful parties like local governments and large unions. This subject demonstrates the efficacy of ADR as applicable to bankruptcy law, a realm with which many ADR practitioners may be unfamiliar. This Note's case study focuses solely on California law and cases because California stands alone in its approach of mandating ADR as a precondition to a municipal bankruptcy filing. Since all states have …

Detroit's Real Challenge, John A. E. Pottow

Articles

When Detroit became the largest city in U.S. history to file for bankruptcy, it was a bad thing—unless you have the unique world-view of a bankruptcy lawyer, in which case it was marvelous news, worthy of celebration.

Municipal Securities: The Crisis Of State And Local Government Indebtedness, Systemic Costs Of Low Default Rates, And Opportunities For Reform, Christine Sgarlata Chung

Cardozo Law Review

No abstract provided.

The Case For Public Pension Reform: Early Evidence From Kentucky, Maria O'Brien

Faculty Scholarship

Kentucky has managed to effect major changes to some of its pension plans in the face of poor funding ratios that threatened to swamp other budget priorities. At this point it is unclear whether the reforms are deep enough to bring the plans funding levels in line with those of “healthy” states like Wisconsin. It is also unclear whether there is the political will in other jurisdictions to curb costs by moving to defined contribution or hybrid cash balance vehicles. Transparency combined with a fear that pension obligations would soon swamp all other state budget priorities appears to have been …

California Dreaming: The California Secure Choice Retirement Savings Trust Act, Edward A. Zelinsky

Articles

Half of American workers are not covered by employer-sponsored retirement arrangements. The recently passed California Secure Choice Retirement Savings Trust Act seeks to solve this problem by mandating retirement savings arrangements for California employers, coupled with a public investment vehicle for investing these private retirement savings. The Act is important because of California’s size and status as a trendsetter for other states.

This Article is the first to examine the important legal questions the Act raises under the Internal Revenue Code and ERISA. Contrary to the drafters’ intent, the savings accounts authorized under the Act do not qualify as individual …

A Minimalist Approach To State ‘Bankruptcy’, Steven L. Schwarcz

Faculty Scholarship

Increasingly finding themselves in financial straitjackets, states have been turning to austerity measures, tax increases, privatization of services, and renegotiation of collective bargaining agreements. Absent a federal government bailout, however, states will also need debt relief if their debt burden becomes so crushing that reasonable efforts at fiscal reform will fail to avoid default. Some advocate providing this relief by, effectively, extending municipal bankruptcy law to states. That approach brings in excess baggage, however, engendering political opposition and constitutional concerns. There is a simpler solution: Enable states to work out their debt problems with their creditors. Although the main obstacle …