Bankruptcy Law Commons^™

Thwarting The Inevitability Of Over-Indebtedness, Lois R. Lupica, Zach Neumann

Emory Bankruptcy Developments Journal

No abstract provided.

Disillusionment Of Discharge: The Fresh Start Through Bankruptcy Act, John Ellison

Emory Bankruptcy Developments Journal

Although its roots precede the twenty-first century, the student loan debt “issue” in America has evolved in recent years into a full-blown “crisis.” Recently surpassing credit cards and auto loans, student loan debt is the second-largest type of consumer debt in the United States, behind only mortgage debt. Prior to the Higher Education Amendments of 1976, bankruptcy provided an avenue through which student loan debt could be discharged. A series of legislative amendments, however, led to the imposition of 11 U.S.C. § 523(a)(8), which bars the discharge of student loan debt absent a showing of “undue hardship.” Courts have constructed …

Penalizing Compliance: The Case For Paying Chapter 13 Trustees In The Event Of Pre-Confirmation Dismissal, Hannah L. Fink

Emory Bankruptcy Developments Journal

Standing trustees provide a critical function of fairness in chapter 13 bankruptcy, but a jurisdictional split regarding their fees means that trustees in multiple circuits are not paid for a large percentage of their work. Under Ninth and Tenth Circuit precedents, standing trustees may not collect the percentage fee when the debtor’s case is dismissed before confirmation. This creates a different result for standing trustees as opposed to single-case trustees, hurts debtors and creditors, creates adverse incentives, and even constitutional conundrums.

Permitting some debtors to enjoy the benefits of chapter 13 without paying their fair share creates a system where …

Chapter 13: Let’S Call The Whole Thing Off, Lawrence Ponoroff

Emory Bankruptcy Developments Journal

Courts cannot agree on much of anything about chapter 13, and legislators cannot agree and are confused over what to do about it. This state of affairs benefits no one and shows no signs of abating. So, in this Article, I propose to throw in the towel by imagining a world without chapter 13. Spoiler alert: although I am not superstitious, with just a few tweaks and tucks to chapter 7, I think the Bankruptcy Code might just be better off operating like a high-rise elevator that goes directly from floor twelve to floor fourteen. I will lay it out …

Rural Health Care In The Age Of Hospital Bankruptcies, Sonal Rastogi

Emory Bankruptcy Developments Journal

In recent years, the United States has witnessed a surge in bankruptcy filings within the healthcare sector. Inflation, rising expenses, shifts in payment models, labor shortages, legislative uncertainty, and mounting pharmaceutical costs have impacted all healthcare organizations, casting a shadow over communities. This is particularly evident in rural America where hospital closures have shrunk access to healthcare services. This Comment delves into the challenges and interests at play when healthcare entities and nonprofit organizations navigate bankruptcy proceedings, paying particular attention to the challenges faced by health care business bankruptcy proceedings.

This Comment argues that the current bankruptcy framework requires adjustments …

Bankrupting The Matrix: Daos And The Code, Ryan Levin

Emory Bankruptcy Developments Journal

The utilization of the novel Decentralized Autonomous Organization (“DAO”) structure to conduct business activity creates substantial challenges for the Bankruptcy Code (the “Code”). The characteristics of this unregulated, extralegal entity, built entirely on a blockchain and controlled by anonymous members through digital tokens, provides endless opportunities to avoid legal enforcement and exploit the Code. While the Code has provisions to apply to both individuals and organized actors, such as partnerships and corporations, neither DAOs nor their individual token holders fit neatly into these molds. When a DAO, or a DAO token holder, eventually faces bankruptcy, the current state of the …

The Rise Of Uptier Transactions In The Leveraged Loan Market, Joshua Bichovsky

Emory Bankruptcy Developments Journal

The use of uptier transactions has exploded in the leveraged loan market, precipitated by economic pressure, flexible debt documentation, and permissive treatment by courts. In an uptier transaction, a borrower typically issues senior debt to a new or pre-existing group of lenders by exchanging outstanding debt for superpriority debt, thereby subordinating an existing class of lenders. The principal result of these transactions is that the borrower may obtain follow-on secured financing without offering the investment to all its lenders, thereby materially decreasing the value of each excluded lender’s investment. Due to the material effects of these transactions to unsuspecting lenders, …

Liquidating Fiduciary Warning: Do Not Follow The Yellow (Corp.) Brick Road, Jeremiah A. Carew Iii

Emory Bankruptcy Developments Journal

Yellow Corporation, the 99-year-old trucking giant, filed for bankruptcy on August 6, 2023. A week before filing, the company abruptly shut down its operations and laid off its entire workforce of thirty thousand employees. Under the Warn Act, employers like Yellow are required to notify their employees 60 days before conducting any mass layoffs or plant closings. Yellow, however, claimed that it did not need to give any advanced notice to its employees because it qualified for an obscure exception to the Warn Act known as the liquidating fiduciary exception.

Under the sliding scale test established in In re United …

Creditor Considerations In Crypto Cases, Alan Rosenberg, Ross Hartog

Emory Bankruptcy Developments Journal

No abstract provided.

Opening Remarks, Keith J. Shapiro

Emory Bankruptcy Developments Journal

No abstract provided.

Non-Uniformity Is The New Uniformity: Inconsistent Quarterly Fees And Why The Bankruptcy Administrator System Must Go, Cody Turner

Emory Bankruptcy Developments Journal

The Bankruptcy Clause’s call for uniformity is one of the more mysterious and unstudied constitutional constraints on bankruptcy, yet it is an ever-present policy consideration. It is a flexible guidepost that functions as a minor constraint on bankruptcy law. However, courts have recently allowed this guidepost to bend too much. When the courts upheld a split bankruptcy administration system as constitutionally uniform, it set the stage for needless, avoidable litigation. The most recent examples of such needless litigation are the Supreme Court cases of Siegel v. Fitzgerald and Office of the United States Trustee v. John Q. Hammons Fall …

Third-Party Bankruptcy Releases And The Separation Of Powers: A Stern Look, Henry Reynolds

Emory Bankruptcy Developments Journal

In the last few years, bankruptcy scholars and professionals have criticized mass tort debtors’ use of chapter 11 bankruptcy as a litigation forum. One such criticism concerns mass tort debtors’ use of third-party releases: provisions in chapter 11 reorganization plans that enjoin creditors’ claims against non-debtor third parties. If a bankruptcy court approves such releases, creditors lose claims against the released third parties, which often include the debtor’s directors, insurers, or employees.

Third-party releases have troubled many. Critics and courts have said that third-party releases violate (1) the Bankruptcy Code, (2) bankruptcy policy, (3) the constitutional right to due process, …

Safe Harboring Sloppiness: The Scope Of, And Available Remedies Under, Sections 363(M) And 364(E), Vishal Patel

Emory Bankruptcy Developments Journal

No abstract provided.

Law In Books Versus Law In Action In The Landmark Shenzhen, China, Personal Bankruptcy Regime, Jason J. Kilborn

Emory Bankruptcy Developments Journal

The first personal bankruptcy regime in Mainland China celebrated its second anniversary on March 1, 2023. An empirical assessment of the law in action during these first two years reveals some troubling deviations from the early promises of the new law on the books. In the first year, a handful of judges were charged with an arduous in-person review process for over 1,000 applicants, and they accepted only twenty-five for case initiation. In the second year, initial case review was delegated to an administrative body—an important efficiency enhancement that tripled the number of opened cases. Nonetheless, most debtors continue to …

Introduction: A Tribute To The Honorable Thomas L. Ambro, Z Arima

Emory Bankruptcy Developments Journal

No abstract provided.

Acceptance Remarks For The 2024 Distinguished Service Award For Lifetime Achievement, Thomas L. Ambro

Emory Bankruptcy Developments Journal

No abstract provided.

Access To Justice: A Roadmap To Creating And Launching Consumer Bankruptcy Experiential Programs In Law Schools, Ishaq Kundawala

Emory Bankruptcy Developments Journal

No abstract provided.

Just Consumer Financial Protection: Prevention Or Cure, Andrea J. Boyack

Emory Bankruptcy Developments Journal

No abstract provided.

Teaching Bankruptcy Valuations To Law Students And Other Unnatural Acts, Jack F. Williams

Emory Bankruptcy Developments Journal

We often measure that which we can as opposed to that in which we are most interested, and fail to appreciate the difference between the two. Experts may aid a trier of fact in measuring fair market value, fair value, investment value, or some other measure of value; however, courts make determinations with regard to a legal standard, not a financial standard. For example, “fair valuation” may be used for determinations of insolvency or the “fair and equitable” rule may be used for determinations of chapter 11 cramdown plan confirmation disputes. Other measures of value may be used in determining …

Consumer Bankruptcy In The Neoliberal State, Michael D. Sousa

Emory Bankruptcy Developments Journal

The rise of financialized capitalism as a component of the neoliberal state has resulted in our debt-based economy, under which utilizing credit—and incurring significant debt—is a necessary strategy for individuals and families to avoid economic marginality and to maintain some semblance of financial security in an evaporated welfare state. The current capitalist logic of differential accumulation and financial expropriation has created perpetually indebted citizens for whom debt needs to be understood as a social power and as a class relation of domination and exploitation between creditors and debtors. Many consumers who experience unmanageable debt often turn to the bankruptcy process …

The Texas Two-Step: How Corporate Debtors Manipulate Chapter 11 Reorganizations To Dance Around Mass Tort Liability, Laura S. Rossi

Emory Bankruptcy Developments Journal

The purpose of the bankruptcy system is to grant a “fresh start” to the honest but unfortunate debtor, while the purpose of the tort system is to make injured parties “whole” again. As a result, these systems inevitably clash when a business debtor files for bankruptcy while there are pending tort claims against it. The tension between these systems has reached a whole new level following the emergence of a new strategy deemed the “Texas Two-Step.”

A Texas statute leaves open a loophole for otherwise solvent companies to dodge mass tort liabilities and protect their assets, leaving injured plaintiffs with …

Presentation Remarks, Marvin Isgur

Emory Bankruptcy Developments Journal

No abstract provided.

The Fresh Start Paradox: Economic Disaster Relief Available To Title 11 Debtors, Kellsie Davis Ruane

Emory Bankruptcy Developments Journal

The Small Business Administration (“SBA”) has been providing disaster relief in the form of Economic Injury Disaster Loans (“EIDLs”) since its inception in 1953. In the context of the COVID-19 pandemic, the CARES Act charged the SBA with issuing forgivable loans through the Paycheck Protection Program (“PPP”) to small businesses which would otherwise face permanent closure. Though the CARES Act did not specifically grant the SBA authority to do so, the SBA interpreted its powers to include the ability to set requirements for loan approval which were not laid out in the Act itself. Specifically, the SBA promulgated a rule …

“Engaged In”: The Rocky Marriage Between Commercial And Business Activity And Subchapter V Eligibility, Blake Clevenger

Emory Bankruptcy Developments Journal

The Small Business Reorganization Act of 2019, which created subchapter V bankruptcy relief for eligible small business debtors, is a step towards a small-business-friendly bankruptcy environment. The legislative history of subchapter V stated the goal of this new statute was to provide a cost-effective and streamlined path to reorganization to allow financially distressed small businesses to remain in business. To be eligible for subchapter V relief, a debtor must, among other requirements, be “engaged in commercial or business activities.” However, courts have continuously disagreed on the meaning of “engaged in commercial or business activities.” Courts have …

Fake And Real People In Bankruptcy, Melissa B. Jacoby

Emory Bankruptcy Developments Journal

This essay explores the bankruptcy system’s structural bias in favor of artificial persons—for-profit companies, non-profit enterprises, and municipalities given independent life by law—relative to humans. The favorable treatment extends to foundational issues such as the scope and timing of debt relief, the conditions to receiving any bankruptcy protections, and the flexibility to depart from the Bankruptcy Code by asserting that doing so will maximize economic value. The system’s bias also contributes to the “bad-apple-ing” of serious policy problems, running counter to other areas of law that have deemed harms like discrimination to be larger institutional phenomena rather than merely the …

Introduction: A Tribute To Hon. David R. Jones, Adriano Omar Iqbal

Emory Bankruptcy Developments Journal

No abstract provided.

Reconceptualizing Bankruptcy Education Requirements For Incarcerated Debtors, Sydney Calas

Emory Bankruptcy Developments Journal

In the eighteen years since Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), bankruptcy scholars and professionals have launched countless critiques against two of the Act’s more drastic amendments: (1) mandatory pre-filing credit counseling and (2) a mandatory post-filing financial management course. Without completing the pre-filing requirement, one cannot qualify as a debtor under the Code and is thus barred from filing for bankruptcy. Without completing the post-filing requirement, one cannot receive a discharge. Notwithstanding the volume and breadth of valid criticisms, the specific harm of BAPCPA’s education requirements has been largely ignored for one population: incarcerated …

America’S Public Shell Trafficking Problem: Ripe For Reprocessing, Harrison Lipsky

Emory Bankruptcy Developments Journal

The scourge of public shell trafficking has led to fraudsters taking advantage of and pilfering the hard-earned dollars of the American investing public for decades. These fraudsters seek to abuse the chapter 11 bankruptcy process by discharging the debt of such public shells, so that they can increase the profitability of schemes that target innocent investors, such as reverse mergers and pump-and-dump schemes. Regulators and lawmakers alike have fought back against this phenomenon through statutory reform and targeted regulatory programs; recently, their principal method of fighting back has been to consistently object to chapter 11 plans of reorganization that could …

Standardizing And Unbundling The Sub Rosa Dip Loan, Kenneth Ayotte, Alex Zhicheng Huang

Emory Bankruptcy Developments Journal

In many recent chapter 11 cases, debtor-in-possession (“DIP”) loans determine reorganization plan payoffs at the outset of the case. Recent DIP loans are tied to plan terms including rights offerings, which give the DIP lender exclusive rights to purchase discounted equity in the reorganized company, and backstop fees, which pay the rights holder for committing to purchase them. Terms like these raise fears that DIP loan approval is being used to short circuit the chapter 11 reorganization plan process—in bankruptcy parlance, that the DIP loan is a sub rosa plan. How should bankruptcy law manage this sub rosa DIP loan …

Sovereign Immunity Tests Bankruptcy’S Least Contested Axioms, Deborah L. Thorne, Luke L. Sperduto

Emory Bankruptcy Developments Journal

Section 106 of the Bankruptcy Code expressly abrogates the sovereign immunity of governmental units with respect to fifty-nine other provisions of the Code. There are currently two distinct issues splitting circuit courts over the meaning of this provision. First, does section 106 waive the sovereign immunity of the Internal Revenue Service in avoidance actions brought against it by a bankruptcy trustee under section 544(b)? Second, are Native American Indian Tribes “governmental units” within the meaning of section 101(27), such that their sovereign immunity is abrogated to the extent set forth in section 106? Invoking conventional canons of statutory construction, this …