Bankruptcy Law Commons^™

Bankruptcy, Just For The Rich? An Analysis Of Popular Fee Arrangements For Pre-Petition Legal Fees And A Call To Amend, Kerry H. Ducey

Vanderbilt Law Review

The scenario is typical. An individual sits amid a pile of overdue bills. He calculates and recalculates only to verify what he has already suspected-his debt far exceeds his monthly income. Meanwhile, creditors and collection agencies demand payment while threatening repossession and other legal action. With no ready source of additional income, the debtor ultimately decides to file for bankruptcy. He consults an attorney, and the two agree to file a consumer no-asset Chapter 7 bankruptcy petition.' The lawyer then promises to use her best efforts to secure relief for the debtor. All she needs is a retainer. A retainer? …

The Failure Of Public Company Bankruptcies In Delaware And New York: Empirical Evidence Of A "Race To The Bottom", Lynn M. Lopucki, Sara D. Kalin

Vanderbilt Law Review

Commentators sometimes recognize Delaware's preeminence in corporate law, but they almost invariably treat Delaware's recent popularity as a bankruptcy venue choice as raising entirely different issues. In fact, the two are integrally related. Specifically, just as the efforts of Delaware and other states to attract corporations--a process often referred to as "charter competition'-has induced Delaware to regulate corporate law in a generally efficient manner, the same forces will have a beneficial effect on Delaware's bankruptcy judges

. -Professor David Skeet'

Can The Market Evaluate Legal Regimes? A Response To Professors Rasmussen, Thomas, And Skeel, Lynn M. Lopucki

Vanderbilt Law Review

Scholarly projects benefit from thoughtful criticism-particularly by those committed to a contrary view. For that reason, I feel fortunate that the three leading proponents of the efficiency of Delaware bankruptcy reorganization have taken the time to respond to our study.'

These three critics recognize that the stakes are enormous. As Professor Rasmussen and Professor Thomas put it, the bankruptcy reorganization of large, public companies was "Delawarized" during the decade of the 1990s. If it can be shown that, during the period of Delawarization, the Delaware court provided a wasteful and inefficient reorganization process, it follows that even a very sophisticated …

Whither The Race? A Comment On The Effects Of The Delawarization Of Corporate Reorganizations, Robert K. Rasmussen, Randall S. Thomas

Vanderbilt Law Review

The war is over and Delaware has won. The "Delawarization" of bankruptcy law appears complete. The reorganization of a large, publicly held corporation under Chapter 11 of the Bankruptcy Code today will more likely take place in the Delaware Bankruptcy Court than in any other jurisdiction.' The bankruptcy judges and lawyers in Delaware are no doubt pleased with this state of affairs, while many of their counterparts in other jurisdictions look to Delaware with envy. While few question that Delaware is the preferred forum for public corporations seeking to reorganize, it remains hotly contested whether that is a good thing. …

What's So Bad About Delaware?, David A. Skeel, Jr.

Vanderbilt Law Review

There is something a little desperate about the relentless criticism of Delaware's bankruptcy judges. Prior to 1990, nobody thought much about Delaware as a filing location for large corporate debtors. Thereafter, following in the wake (or jet-stream, perhaps) of the Continental Airlines bankruptcy, more and more large debtors began filing their bankruptcy cases in Delaware. Because bankruptcy's venue provision permits debtors to file for bankruptcy in their state of incorporation, and so many large firms are incorporated in Delaware, most large corporate debtors are entitled to choose Delaware for their bankruptcy case if they wish. Since 1990, the critics have …

Whither The Race? A Comment On The Effects Of The Delawarization Of Corporate Reorganizations, Randall Thomas, Robert K. Rasmussen

Vanderbilt Law School Faculty Publications

Recent empirical work has demonstrated that large, publicly held firms tend to file for bankruptcy in Delaware. In our previous work, we have documented this trend, and argued that it may be efficient for prepackaged bankruptcies, while it unclear if it is efficient for traditional Chapter 11 cases. In this piece, we respond to LoPucki and Kalin's assertion that Delaware bankruptcy court performs worse than others. They base this claim on the observation that firms that file for bankruptcy in Delaware are more likely to file for bankruptcy a second time than are firms that file in another jurisdiction. We …

A Brave New Lochner Era? The Constitutionality Of Nafta Chapter 11, Steve Louthan

Vanderbilt Journal of Transnational Law

In the eight years since its adoption, NAFTA Chapter 11 has escaped significant scrutiny from academics and journalists alike. However, with the recent filing of several Chapter 11 expropriation claims involving U.S. states, Chapter 11 has begun to gain some notoriety in the press and sparked at least two legal symposia this past year.

This Note begins by highlighting the recent Methanex Chapter 11 claim involving the State of California. Methanex, a Canadian chemical manufacturer and importer, claimed $1.6 billion in damages over California's ban of the chemical MTBE. Despite the EPA'S classification of MTBE as a possible carcinogen and …

Textualism's Failures: A Study Of Overruled Bankruptcy Decisions, Daniel J. Bussel

Vanderbilt Law Review

Judges and legal scholars are engaged in a contentious, wide- ranging, and long-running debate over methods of statutory interpretation. Stripping the debate of some of its nuance without misrepresenting its essence, there are two camps: the "textualists" and the "pragmatists." Cass Sunstein recently argued that the question of interpretive method should be considered in light of evidence whether textualist methods work better or worse than pragmatic ones. To date, however, only limited empirical evidence has been systematically brought to bear on this question.

This Article presents new empirical evidence gleaned from twenty years of interpretation of the United States Bankruptcy …

State Defiance Of Bankruptcy Law, Eric Winston

Vanderbilt Law Review

Bankruptcy is the principal device by which failing businesses and financially-troubled families get one last chance to reorganize their affairs back to financial health. It is also the graveyard for business failures, the place where we bury dead corporations and divide their remaining assets among their surviving creditors. In the last decade, the bankruptcy system has given seven million middle-class families a way to start over-an opportunity to save their homes from foreclosure, rid themselves of overwhelming debts, and reintegrate themselves into the workforce as productive citizens. It has also been the way that 10,000 corporations have restructured their way …

State Defiance Of Bankruptcy Law, Kenneth N. Klee, James O. Johnston, Eric Winston

Vanderbilt Law Review

Bankruptcy is the principal device by which failing businesses and financially-troubled families get one last chance to reorganize their affairs back to financial health. It is also the graveyard for business failures, the place where we bury dead corporations and divide their remaining assets among their surviving creditors.

In the last decade, the bankruptcy system has given seven million middle-class families a way to start over-an opportunity to save their homes from foreclosure, rid themselves of overwhelming debts, and reintegrate themselves into the workforce as productive citizens. It has also been the way that 10,000 corporations have restructured their way …

Self-Settled Spendthrift Trusts: Should A Few Bad Apples Spoil The Bunch?, Gideon Rothschild, Daniel S. Rubin, Jonathan G. Blattmachr

Vanderbilt Journal of Transnational Law

It is unfortunate, but perhaps not terribly surprising, that the first two reported cases to consider the application of conflict of laws principles to self-settled spendthrift trusts both involved "bad facts" from an asset protection planning standpoint. In this regard, the adage "bad facts produce bad law" is not a slight on the courts, but rather an acknowledgment of a court's primary duty to do substantial justice to the parties immediately before it. However, in an effort to do substantial justice to the parties immediately before them, the Portnoy and Brooks courts have forged what may well become the first …

Roundtable Discussion, David Aronofsky, Barry S. Engel, Eric Henzy, Gideon Rothschild, Jeffrey A. Schoenblum

Vanderbilt Journal of Transnational Law

Welcome to the Roundtable panel discussion. Each of the speakers is going to open with a few minutes statement. And then we're going to pose some questions to open discussion, so it will take people through the whole asset protection route from beginning to end, hopefully. And then, any questions you may have we believe we'll have sufficient time to ask those questions and have them answered. You may get very different views. And then we've just decided that the jury will decide whether asset protection trusts are a good thing or a bad thing. Okay. So pay attention.

The Evolution Of The Fresh-Start Policy In Israeli Bankruptcy Law, Rafael Efrat

Vanderbilt Journal of Transnational Law

A fresh-start policy in bankruptcy provides the honest but financially troubled individual some form of financial relief in an attempt to provide him with an opportunity to productively reintegrate into the economy and society. While some countries today provide broad financial relief to individuals who resort to bankruptcy protection, many countries have retained a largely limited as well as punitive fresh-start policy.

This Article explores the evolution of the fresh-start policy in Israel. While it briefly examines the attitudes and practices adopted towards financially troubled individuals historically in the Jewish tradition, it focuses on tracing those attitudes and practices to …

Behavioral Economics, The Economic Analysis Of Bankruptcy Law And The Pricing Of Credit, Robert K. Rasmussen

Vanderbilt Law Review

Bankruptcy has been a fertile ground for the economic analysis of law. A significant portion of bankruptcy scholarship during the past fifteen years applies the basic assumptions of standard economic theory to the problems caused by financial distress. This scholarship begins with the premise that people make choices in a rational manner in order to maximize their individual utility. It applies this axiom to questions ranging from when do individuals file for bankruptcy to how bankruptcy laws affect firms' investment decisions. As it has in most other areas of law (especially private law), law and economics has both reshaped our …

Re-Reading Reading: "Fairness To All Persons" In The Context Of Administrative Expense Priority For Postpetition Punitive Fines In Bankruptcy, Stephen D. Hurd

Vanderbilt Law Review

Who gets the money when there isn't enough to go around? This is the practical question that the bankruptcy system seeks to answer every day.' In answering this question, the Bankruptcy Code draws a particularly bright line at the filing of a bankruptcy petition. The filing of a petition creates the bankruptcy estate, which is a distinct legal entity from the debtor. Creditors with claims against the debtor arising before filing ("prepetition) receive payment of their claim, if at all, through bankruptcy's collective distribution scheme. In contrast, persons whose claims arose after filing ("postpetition"), but before completion of the bankruptcy …

Residential Mortgages Under Chapter 13 Of The Bankruptcy Code: The Increasing Case Against Cramdown After "Dewsnup V. Timm", David A. Wisniewski

Vanderbilt Law Review

Congress designed Chapter 13 to allow individuals an extended period of time to pay their debts so that they may support themselves and their dependents while repaying their creditors." Chapter 13 bankruptcy is more favorable to debtors than a straight liquidation under Chapter 7 because Chapter 13 debtors may keep all of their assets while Chapter 7 debtors must surrender most of their assets to generate funds with which to pay their creditors. A Chapter 13 debtor also benefits by avoiding the stigma and less favorable credit rating that accompanies a liquidating bankruptcy.s Chapter 13's benefit to creditors is also …

A Theory Of The Regulation Of Debtor-In-Possession Financing, George G. Triantis

Vanderbilt Law Review

The profile of Chapter 11 of the Bankruptcy Code in public consciousness has surged recently. Other than the automatic stay on the enforcement of claims, the most publicized feature of bankruptcy reorganizations is debtor-in-possession (DIP) financing. Indeed, along with the bankruptcy stay, DIP financing is the motivation for many Chapter 11 filings. Under Section 364 of the Code, a firm in bankruptcy (the debtor in possession) can finance its ongoing operations and investments by issuing new debt that enjoys any one of various levels of priority, all of which rank higher than the firm's prepetition unsecured debt.' The debtor's financing …

The Voidability Of Actions Taken In Violation Of The Automatic Stay: Application Of The Information-Forcing Paradigm, Robert R. Niccolini

Vanderbilt Law Review

The automatic stay' is undeniably one of the most important elements of the bankruptcy process. In fact, the expansion of the stay was one of the major changes that the 1978 Bankruptcy Reform Act initiated. Despite the integral nature of the automatic stay, however, courts have yet to reach a consensus regarding the conceptualization and subsequent effect of actions taken in violation of the stay. Presently, a substantial majority of the circuits hold that such actions are void "ab initio" and of no legal effect. A small but significant number of courts, however, decline to follow the majority rule. These …

Offensive Uses Of The Bankruptcy Stay, Daniel Keating

Vanderbilt Law Review

One of the most significant features of the 1978 Bankruptcy Reform Act was markedly broadened versions of the automatic and postdischarge stays. If bankruptcy is the refuge for the honest but unfortunate debtor,' then the stay is the specific tool that makes the refuge meaningful. Indeed, more than one court has characterized the stay as a shield that gives the corporate debtor an opportunity to reorganize and affords the individual debtor a chance for the proverbial fresh start. Even courts mindful of the debtor-protection function of the stay, however, are careful to note that the debtor should use the stay …

The Priority Battle Over Returned And Repossessed Goods, Michael A. Birrer

Vanderbilt Law Review

Article 9 of the Uniform Commercial Code (the Code) governs secured transactions in personal property and fixtures.' When more than one creditor has a security right in the same piece of collateral, the Article 9 rules of priority determine the order in which each creditor may satisfy his claim. The creditor with the highest priority rank gets paid first, and, if his claim exceeds the amount of the proceeds, junior creditors take nothing. Consequently, creditors want to determine their priority rights in collateral before extending credit. If one creditor determines that another creditor will have priority over its security interest, …

Public Policy Concerns Prevent Application Of Comity To Foreign Bankruptcy Proceedings That Discriminate Against Tax Obligations Owed To The United States Government, Michael P. Bigelow

Vanderbilt Journal of Transnational Law

This Case Comment explores the application of comity to foreign bankruptcy proceedings, particularly when comity would render the Internal Revenue Service a general unsecured creditor in bankruptcy. The United States Court of Appeals for the Fifth Circuit held on public policy grounds that comity should not be accorded to a Luxembourg bankruptcy proceeding that discriminated against tax obligations owed to the United States government. This Case Comment discusses the factual setting for the instant decision and presents a brief history of transnational insolvency law. The author finds that the law of transnational insolvency is inconsistent and underdeveloped and that the …

International Environmental Bankruptcy: An Overview Of Environmental Bankruptcy Law, Including A State's Claims Against The Multinational Polluter, Rick M. Reznicsek

Vanderbilt Journal of Transnational Law

This Note focuses on current environmental bankruptcy law in the United States. It analyzes the claims of a state against a corporate polluter when the corporation discharges a toxic substance in violation of the state's environmental laws, refuses to clean up the waste, and then files bankruptcy in lieu of paying for the cleanup.

This Note analyzes the court decisions subsequent to the United States Supreme Court opinions in Ohio v. Kovacs and Midlantic National Bank v. New Jersey Department of Environmental Protection to evaluate the current status of United States bankruptcy law on the issues of the automatic stay; …

Bankruptcy Valuation Under Selected Liquidation Provisions, Steven L. Pottle

Vanderbilt Law Review

Chapter 7 of the Bankruptcy Code' (the Code) serves a distributive function; it is designed to distribute equitably a debtor's assets from the bankruptcy estate to creditors. All nonexempt as-sets owned by a debtor at the time of filing a petition for bankruptcy become part of the bankruptcy estate and subsequently are distributed to creditors. Generally, debtor transactions prior to the filing escape the purview of Chapter 7. If, however, a debtor distributes assets during the applicable statutory period, giving preference to some creditors' or defrauding other creditors,' the Code empowers the bankruptcy trustee to avoid those transfers.After filing, a …

Creditor Equality In Transnational Bankruptcies: The United States Position, Ulrich Huber

Vanderbilt Journal of Transnational Law

In addition to giving a fresh start to the debtor, a primary goal of bankruptcy law (at least of liquidation bankruptcy) is to distribute equally the debtor's assets to his creditors. Although the Bankruptcy Reform Act of 1978 and its 1984 Amendments (collectively "the Code") provide many ways of achieving this goal in domestic bankruptcies, these methods often prove to be of little help when a debtor's assets are located in more than one country.

Equality of creditors regardless of their origin, however, is considered essential for the development of international trade. International trade has grown substantially, if not explosively, …

The Enterprise Bankruptcy Law Of The People's Republic Of China (For Trial Use): A Translation, Henry R. Zheng

Vanderbilt Journal of Transnational Law

Art. 1. This law is enacted to meet the need for development of the planned socialist commodity economy and for economic reform, to promote the independence of business management of the enterprises under the ownership by the whole people, to strengthen the system of economic responsibility and democratic management, to improve business management and economic performance, and to protect the lawful rights and interests of debtors and creditors. Art. 2. This law applies to enterprises under the ownership of the whole people.

Art. 3. Enterprises that sustain serious loss due to inappropriate management and that are unable to pay off …

Case Comment, Laura F. Howard

Vanderbilt Journal of Transnational Law

SCOPE OF REVIEW IN EXTRADITION PROCEEDINGS: The Government Cannot Appeal A Denial of Extradition Request Based on the Declaratory Judgment Act --United States v. Doherty, 786 F.2d 491 (2d Cir. 1986).

BANKRUPTCY--Section 304 Of The Bankruptcy Code Is Not An Exclusive Remedy In A Nonbankruptcy Court, Cunard Steamship Co.Ltd. v. Salen Reefer Serv. A.B., 773 F.2d 452 (2d Cir. 1985).

Bankruptcy Law Of The People's Republic Of China: Principle, Procedure & Practice, Henry R. Zheng

Vanderbilt Journal of Transnational Law

The Enterprise Bankruptcy Law of the People's Republic of China (For Trial Use) (the National Act), promulgated on December 2, 1986, is the first bankruptcy legislation applicable nationwide in the People's Republic of China (PRC or China). At the same time, some regional governments have also enacted regional bankruptcy laws with very limited geographic application. The National Act applies only to state-owned Chinese enterprises, while one regional bankruptcy regulation applies exclusively to foreign investment enterprises." The PRC thus has developed two parallel bankruptcy regimes. The introduction of a bankruptcy system in China represents a significant development in the economic relationship …

Toxic Torts And Chapter 11 Reorganization:The Problem Of Future Claims, Anne Hardiman

Vanderbilt Law Review

Recently, the toxic tort phenomenon has emerged as a vital concern to manufacturers, employers, and consumers as Agent Orange,' DES, Dalkon Shield, and asbestos victims have litigated toxic tort claims. Toxic torts are unique because any number of victims may be exposed to a toxic substance from which they may contract a disease as far as twenty years in the future. Toxic tort claims typically involve large sums of money and an inestimable number of plaintiffs. The potential for tremendous, financially crippling, liability for these injuries has prompted some asbestos companies to file for reorganization under Chapter 11 of the …

The Discharge Of Partnerships And Partners Under The Bankruptcy Code, Frank R. Kennedy

Vanderbilt Law Review

The provisions of the Bankruptcy Act applicable to partnerships, partners, and their creditors were cryptic. Significant changes in these provisions made by the Bankruptcy Reform Act of 1978 have not appreciably diminished the difficulties of administering the estates of partnerships and partners in cases under Title 11 of the United States Code. The rules governing discharge of partnerships and partners and the dischargeability of their debts have given rise to a number of special problems under both the Bankruptcy Act and the Bankruptcy Reform Act. This Article undertakes to identify and analyze these problems and to suggest solutions.

Symposium On Bankruptcy, Stefan A. Riesenfeld

Vanderbilt Law Review

The Bankruptcy Reform Act of 1978, a.k.a. The Code, has now been in operation for more than a quinquennium. Thus, it is old enough to be the subject of a symposium, even if that expression is used in its original meaning of drinking party or festivity. The editors of the Vanderbilt Law Review deserve high praise for having observed that opportunity and gathered an illustrious panel of guest-participants. Special commendations are due for the hosts'success in enlisting in their offerings the cooperation of the celebrated Triple-K-Trio to regale the readership with their now almost classical performing style. Equally gratifying is …