Bankruptcy Law Commons^™

A Showing Of Gross Recklessness Satisfies Section 523(A)(2)(A): Denying Deceivers The Ability To Discharge Debts Related To Fraudulently Obtained Funds, Megan Kuzniewski

Bankruptcy Research Library

(Excerpt)

11 U.S.C. Section 523(a) lists certain debts that may not be discharged through a debtor’s bankruptcy. In particular, section 523(a)(2)(A) provides that a debtor who files bankruptcy will not be discharged of debts that were obtained by “false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.” False representations, such as those described in section 523(a)(2)(A), carry a scienter requirement which requires that it be shown that an individual knowingly made false statements or representations. This requirement carries a heavy burden, as trying to prove that a person had …

The Continued Growth Of The Presumption Against Extraterritoriality And Its Impact On The Bankruptcy Code’S Avoidance Provisions, Michael Vandermark

Bankruptcy Research Library

(Exceprt)

Over the past several years, ever since the United States Supreme Court’s seminal decision in Morrison v. National Australia Bank Limited, the presumption against extraterritoriality has steadily expanded across much of the legal field. In doing so, the presumption has again become the dominant standard in deciding whether Congressional legislation may be used on an extraterritorial basis. This expansion has recently encompassed portions of the Bankruptcy Code, specifically, its avoidance provisions.

The presumption, as noted in detail below, relies on the premise that although the legislature has the authority to regulate beyond the borders of the United States, …

House Swaps: A Strategic Bankruptcy Solution To The Foreclosure Crisis, Lynn M. Lopucki

Michigan Law Review

Since the price peak in 2006, home values have fallen more than 30 percent, leaving millions of Americans with negative equity in their homes. Until the Supreme Court’s 1993 decision in Nobelman v. American Savings Bank, the bankruptcy system would have provided many such homeowners with a remedy. They could have filed bankruptcy, discharged the negative equity, committed to pay the mortgage holders the full values of their homes, and retained those homes. In Nobelman, however, the Court misinterpreted reasonably clear statutory language and invented legislative history to resolve a three-to-one split of circuits in favor of the minority view …

Considerations For Private Equity Firms When Utilizing Chapter 11 New Value Deals, Alexandra Wilde

Michigan Business & Entrepreneurial Law Review

The new value exception to the Chapter 11 absolute priority rule provides a narrow avenue for equity holders to retain an equity interest in a reorganized company over the objections of senior creditors and interest holders. With the increasing number of Chapter 11 reorganization filings by private equity owned companies, private equity firms may be interested in exploring ways to retain their equity ownership in the debtor company. This Note explores the unique implications a private equity firm may encounter when attempting to utilize the new value exception as a last resort to maintain ownership in a debtor company. Part …

The Implied Waiver Solution To The Problem Of Privilege In The Individual Bankruptcy Case, Laura B. Bartell

Law Faculty Research Publications

No abstract provided.

Judicial Abuse Of "Process": Examining The Applicability Of Section 2f1.1(B)(4)(B) Of The Federal Sentencing Guidelines To Bankruptcy Fraud, Hideaki Sano

Michigan Law Review

The proliferation of bankruptcy filings over the past decade has coincided with a comparable increase in the incidence of bankruptcy fraud. In response to this growing problem, the United States Department of Justice has placed greater emphasis on federal prosecution of bankruptcy fraud. As a result, federal judges are increasingly applying the Federal Sentencing Guidelines ("Guidelines") to bankruptcy fraud and have begun to implement uniform standards for sentencing defendants convicted of this crime. Congress enacted the Guidelines pursuant to the Sentencing Reform Act of 1984. In instituting the Guidelines, Congress sought honesty, reasonable uniformity, and proportionality in sentencing. Congress attempted …

The New Textualism And The Rule Of Law Subtext In The Supreme Court's Bankruptcy Jurisprudence, Alan Schwartz

NYLS Law Review

The Supreme Court is thought to use a method of statutory interpretation called "the new textualism" when construing Federal Statutes, including the Bankruptcy Code. The new textualism, in brief, ties interpreters more closely to the text than more traditional interpretative methods. This Essay inquires into the justifications for the new textualism, but its primary goal is to argue that the Court prefers an important justification of this interpretative method to the method itself. The justification holds that interpretation should advance the rule of law virtues of certainty and predictability. A court that is committed to the new textualism would construe …

The Immovable Object Versus The Irresistable Force: Rethinking The Relationship Between Secured Credit And Bankruptcy Policy, Lawrence Ponoroff, F. Stephen Knippenberg

Michigan Law Review

The last leaf in O. Henry's classic short story was hanging by a delicate thread, but it never fell. It never fell, of course, because it wasn't real; Old Behrman had painted it (and caught pneumonia for his trouble) in order to give Johnsy the will to live. The Supreme Court's decision in Dewsnup v. Timm is also hanging by a thread, following a barrage of scholarly criticism and more than four years of limiting case law and legislative incursions on the case's core conceptual rationale. But the holding in Dewsnup, unlike the last leaf, is very real. It has …

In Defense Of Language, The Supreme Court And Congress: A Reply To Professor Chemerinsky, Laura B. Bartell

Law Faculty Research Publications

No abstract provided.

Strategies For Preserving The Bankruptcy Trustee's Avoidance Power Against States After Seminole Tribe, Edward J. Janger

Faculty Scholarship

No abstract provided.

A Rule Unvanquished: The New Value Exception To The Absolute Priority Rule, Clifford S. Harris

Michigan Law Review

This Note examines whether the new value exception remains part of the revised Bankruptcy Code. Part I discusses the background of the new value exception. Part II traces the development of the conflict concerning the survival of the new value exception subsequent to the adoption of the Code. It then discusses the Supreme Court's opinions in Mid/antic National Bank v. New Jersey Department of Environmental Protection and its progeny, which established the methodology for determining the impact of the revised Bankruptcy Code on preexisting bankruptcy law. Based on an analysis of the Midlantic doctrine, Part II concludes that Congress did …

Rotten To The "Core": An Essay On Juries, Jurisdiction And Granfinanciera, G. Ray Warner

Faculty Publications

(Excerpt)

Like a worm in an apple, the recent Granfinanciera, S.A. v. Nordberg decision has eaten away the article III heart of the current bankruptcy jurisdictional scheme while leaving nothing more than a seventh amendment blemish on the surface.

Granfinanciera ostensibly involves only the question whether Congress may, consistent with the seventh amendment jury trial guarantee, bar trial by jury in a fraudulent conveyance action brought in the bankruptcy court. The Court, however, converts the issue into an article III delegation question by equating Congress' power to override the seventh amendment with its power to delegate matters to non-article III …

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 …

Rethinking Absolute Priority After Ahlers, John D. Ayer

Michigan Law Review

There was no evident reason why the Supreme Court granted certiorari in Norwest Bank Worthington v. Ahlers. It can be conceded that the issue was important: in the midst of an agricultural depression, a farmer was trying to hang onto his farm without paying the full amount of his bank debt. The farmer argued that he ought to be able to do so because he was offering to contribute "new value" beyond what he was obliged to contribute - specifically, his efforts as a farmer.

For Ahlers is a case with a past, as well as a future. Thus, in …

The Bankruptcy Dynamics Of Collective Bargaining Agreements, 19 J. Marshall L. Rev. 301 (1986), Richard L. Merrick

UIC Law Review

No abstract provided.

The Bildisco Case And The Congressional Response, James J. White

Articles

Section 365 of the Bankruptcy Reform Act authorizes one in bankruptcy to "assume or reject any executory contract ...of the debtor." The most frequent use of the section arises when a lessee goes into Chapter 11 and decides either to reject its real estate lease with its lessor or, if the lease is at a favorable rental rate, to assume it and assign it to another. A less frequent but more controversial use of section 365 is to reject one's collective bargaining agreement with his employees.

The Relative Priority Of Small Business Administration Liens: An Unreasonable Extension Of Federal Preference?, Ronald L. Olson

Michigan Law Review

During the past three decades, the priority of the federal government as against state and private creditors competing for the assets of debtors has been greatly strengthened. In terms of relative growth, the expansion of federal priority has been comparable to the increased commercial involvement of the United States. In more recent years, Congress and the judiciary have recognized that this increased governmental commercial activity necessitates a restriction in sovereign prerogatives. However, contrary to this general trend toward the contraction of sovereign prerogatives and for reasons appearing unsatisfactory to most commentators, the "sovereign prerogative" of priority to the assets of …

Taxation - Liens -Priority Of A Subsequent Federal Tax Lien Over An Antecedent Inchoate Lien, John B. Huck S.Ed.

Michigan Law Review

The purpose of this comment is to analyze the rationale, in terms of both statutory construction and policy, of the theory that only a choate garnishment lien is superior to a subsequent tax lien.

Insurance Policies As Assets In Bankruptcy, Evans Holbrook

Articles

The Supreme Court of the United States, in the recent case of Cohen v. Samuels, 38 Sup. Ct. 36, has put an end to a method, approved by some of the lower Federal Courts, whereby a person could create a fund which would be completely under his control but which would nevertheless be protected against any claim on the part of his trustee in bankruptcy. The circumstances in the principal case were as follows: Samuels had taken out ordinary life insurance policies, with the usual provisions as to loan and surrender values, payable to certain of his relatives as beneficiaries, …

When Is A Preferential Transfer Required To Be Recorded?, Evans Holbrook

Articles

In the recent case of Carey v. Donohue, 36 Sup. Ct. 386, the Supreme Court of the United States has passed on a question that has for years been vexing the Circuit Courts of Appeals, namely: When is the recording of a preferential transfer "required" under § 60 of the'Bankruptcy Act of 1898 as amended in 1903 and 1910. § 60a (as amended in 1903) defines a preference as a transaction by which property of an insolvent debtor is transferred, within four months before his bankruptcy, in such a way that the debt owing to one of his creditors will …

Discharge In Bankruptcy Of Principal's Inchoate Obligation To Indemnify His Surety, Evans Holbrook

Articles

In the recent case of R. P. Williams, et al. v. United States Fidelity and Guaranty Company, 35 Sup. Ct. 289, the United States Supreme Court has at last passed upon a question that has vexed the courts ever since the enactment of the Bankruptcy Act of 1898. As stated by the Supreme Court, the question is this: "Does a discharge in bankruptcy acquit an express obligation of the principal to indemnify his surety against loss by reason of their joint bond conditioned to secure his faithful performance of a building contract broken prior to the bankruptcy when the surety …

Depositors' Checks In Payment Of Matured Obligations Held By Drawee Bank As Preferences, Ralph W. Aigler

Articles

Since the case of New York County Bank I. Massey, 192 U. S. 138, there has been no doubt as to the right of a debtor of a bankrupt's estate to exercise the right of set-off as preserved by § 68a of the Bankruptcy Act. In that case it was laid down dearly that such right of set-off may be exercised despite the provisions of § 60a, which covers the matter of preferences. The question very frequently arises when bankers apply deposit balances upon matured obligations of customers. If such application is made within four months of the time when …

Note And Comment, Michigan Law Review

Michigan Law Review

Lawyers and Jurists at the Exposition; Convention of the Commercial Law League of America; The Philippine Island Cases in the Supreme Court of the United States; The Writ of Habeas Corpus in Chinese Exclusion Cases; What is a "Crime" Within the Meaning of the Constitution?; Due Process of Law; Winding up Proceedings; Literary Criticism and the Law of Libel; The New Japanese Civil Code;