Bankruptcy Law Commons^™

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, …

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 …

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 …

Jurisdiction And Procedure Under The Bankruptcy Amendments Of 1984, Lawrence P. King

Vanderbilt Law Review

The complexity and possible invalidity of the 1984 amendments arise from Congress' refusal to constitute the bankruptcy courts as article III courts. The only group, if any, that this refusal has aided is the district court bench, by keeping their numbers small (except to the extent that additional bankruptcy duties re-quire additions to their numbers) and their status elite. The congressional action works against the needs of all parties involved in the functioning of the Bankruptcy Code and the judicial system itself. Debtors in Bankruptcy Code cases are left uncertain as to the authority of the bankruptcy courts adjudicating proceedings …

Chapters 11 And 13 Of The Bankruptcy Code -- Observations On Using Case Authority From One Of The Chapters In Proceedings Under The Other, David G. Epstein, Christopher Fuller

Vanderbilt Law Review

This Article will focus on the relationship between Chapter 11 and Chapter 13 of the Bankruptcy Code.' A number of issues are similar or identical in Chapter 11 and Chapter 13. Furthermore,much of the language of Chapter 13 mirrors that of Chapter 11. This Article explores whether courts should apply case law and concepts of one chapter when similar issues arise in proceedings under the other chapter. Parts II and III of this Article address basic similarities and differences between Chapters 11 and 13. Parts IV, V, and VI examine three issues governed by statutory language common to both chapters. …

The Concept Of A Voidable Preference In Bankruptcy, Vern Countryman

Vanderbilt Law Review

A bankruptcy trustee is armed by statute with a number of powers to avoid prebankruptcy transfers made by the now bankrupt debtor. Probably none of these powers is of more concern to prebankruptcy transferees than the trustee's power to avoid preferential transfers. This Article examines the content of and the reasons for the concept of a preferential transfer as it has evolved over the centuries.We inherited the notion of the preferential transfer from Eng-land; but, as elsewhere, we frequently have concluded that we could improve on the English model. Substantial differences exist,therefore, between the English law of voidable preferences and …

A Theory Of Contractual Debt Subordination And Lien Priority, David G. Carlson

Vanderbilt Law Review

Creditors distrust debtors and other creditors. Some of this in-security is dispelled by the two basic priority rules--"first in time"for secured credit and pro rata sharing for general credit. These priorities, however, are merely suppletive rules that replicate what most creditors want.' Individual creditors can have different objectives that call for different priorities. For that reason, creditors vary their rights by contract.'

Two motives exist for subordination agreements. First, a creditor may wish to subordinate its priority to induce another creditor to advance new funds. Second, a junior creditor may wish to advance credit, but the resulting increased leverage of …

The Undersecured Creditor In Reorganizations And The Nature Of Security, Theodore Eisenberg

Vanderbilt Law Review

For better or for worse, bankruptcy law generally recognizes secured creditors' state law rights in collateral. The decision to honor secured creditors' state law interests and the need to modify those interests in bankruptcy generate an essential tension of bankruptcy law. Much of the Bankruptcy Act's complexity and several of its most controversial provisions arise from congressional efforts to resolve this tension.

In trying to walk the fine line between taming and preserving secured creditors' rights, Congress created one of the most extraordinary provisions in the history of bankruptcy law. Section 1111(b) of the Bankruptcy Act of 19781 suspends two …

"Good Faith" And The Discharge Of Educational Loans In Chapter 13: Forging A Judicial Consensus, Jerome M. Organ

Vanderbilt Law Review

In the Bankruptcy Reform Act of 19781 Congress sought to accomplish many goals, some of which appear internally incompatible. For example, Congress enacted section 523(a)(8) to limit the dischargeability of educational loans in Chapter 7 liquidations. At the same time, however, Congress enacted the new Chapter 13 to encourage consumer debtors--including student borrowers--to elect repayment plans whenever feasible. Chapter 13 contains a"superdischarge" provision, which offers debtors a much broader discharge than the discharge that is available under section 523(a) in straight bankruptcy. While section 523(a)(8) excepts educational loans from discharge, section 1328(a) of Chapter 13 does not except them from …

Belly Up Down In The Dumps: Bankruptcy And Hazardous Waste Cleanup, Katherine S. Allen

Vanderbilt Law Review

In recent years, the critical risks of improper storage and disposal of hazardous and toxic substances have become frighteningly apparent,' and the regulation of hazardous waste disposal has become increasingly comprehensive and complex, on both the federal and state level. On the federal level, the Resource Conservation and Recovery Act (RCRA) and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, or the Super fund Act) together provide a comprehensive statutory and regulatory scheme designed to cleanup existing hazardous waste disposal sites and to prevent the growth of future dangerous sites. Other federal statutes address in a more general way …

The Tax Benefit Rule -- A Judicially Broadened Tool For Transactional Tax Equity, Jerry N. Smith

Vanderbilt Law Review

In light of the recent Supreme Court holding in United States v. Bliss Dairy, Inc.10 that the tax benefit rule requires income recognition by a corporation when it distributes previously expensed assets in complete liquidation, this Note assesses the dubious continued vitality of the tax benefit rule's single taxpayer construct-that is, the requirement that the same individual or entity serve as both the deducting and the recovering taxpayer. As the following analysis indicates, expansion of the tax benefit rule into a multiple taxpayer construct potentially requires some form of "recapture" in numerous factual settings previously considered non-taxable under existing nonrecognition …

The Continuing Puzzle Of Secured Debt, Alan Schwartz

Vanderbilt Law Review

In 1981, I wrote an article showing that no good answer had been given to the question why corporations issue some debt on a secured basis and other debt on an unsecured basis.' This showing had normative implications because claims that the institution of personal property security is efficient or otherwise desirable must be impeached if the actual purposes that security serves are unknown. Consequently, the law's favorable treatment of secured debt-for example, giving it first place in bankruptcy distributions--is without plausible support. My article did not advocate repealing the privileges attached to secured debt, however, because then--current knowledge also …

Efficiency Justifications For Personal Property Security, James J. White

Vanderbilt Law Review

It is always more interesting to challenge the received wisdom than to defend it. Yet in this case, a careful analysis of the facile assertions about the expansion of credit by the granting of security and about the other presumed efficiencies of security produces arguments and evidence that strengthen rather than weaken the efficiency arguments. In the first place, it appears that the granting of security does in fact expand the credit granted to risky debtors and thus that any efficiency equation must consider the probable benefits of such expansion. Second, a close examination of the actual experience not only …

Lifting The Cloud Of Uncertainty Over The Repo Market: Characterization Of Repos As Separate Purchases And Sales Of Securities, William F. Hagerty, Iv

Vanderbilt Law Review

In light of the actual and potential financial harm that repo investors faced after failures of several repo market participants,this Note proposes a new legal characterization of repos and argues for adoption of proposed Bankruptcy Code amendments pertaining to repos. Both of these suggestions would give repo investors significant future financial protection without destroying the financially attractive characteristics of repurchase agreements.

Part II of this Note begins laying the foundation for this proposal by discussing current repo market problems that the failures of several repoissiers have exposed.

Part II discusses new policies concerning the appropriate uses of the collateral securities …

Inflation And The Concept Of Reorganization Value, Elizabeth J. Schwartz

Vanderbilt Law Review

This Recent Development examines the validity of this formula, with and without allowances for future inflation, as a tool for valuing the stock to be distributed to creditors in corporate re-organization proceedings. This discussion considers the valuation method both under Chapter 11 of the new Bankruptcy Code and under Chapter X of the now superseded Bankruptcy Act, which is still effective in many pending cases. The Recent Development describes the purpose and effects of equity share valuations in bankruptcy reorganization proceedings, compares the methods that have been used by the courts with methods used by investors to ascertain the investment …

The Reclaiming Seller Under The Bankruptcy Reform Act: Resolution Or Renewal Of An Old Conflict?, Richard A. Mann, Michael J. Phillips

Vanderbilt Law Review

This Article will assess the impact of the Bankruptcy Reform Act upon the conflict of the Code cash and credit sellers with the trustee in bankruptcy. The article will begin by discussing the legal position of the reclaiming seller at common law, both because the new Act's interaction with the Code cannot be understood without reference to such doctrines, and because these doctrines are often likely to be of continued applicability under the new Act. It will then examine the seller's rights under the U.C.C., and will discuss his relations with certain bankruptcy-relevant Code third parties. Following this, the Article …

Section 337 Sales As Part Of Reorganizations, James H. Lokey, Jr.

Vanderbilt Law Review

This Note demonstrates that by applying the meaning of "complete liquidation" developed in several liquidation-reincorporation cases to the obviously distinguishable facts of FEC, the Court of Claims has adopted an unnecessarily restrictive view of section 337's "complete liquidation" requirement...

This Note has demonstrated that although the liquidation-reincorporation cases appear to support the traditional view that a "complete liquidation" cannot occur during a reorganization, when taken in context they are weak authority for the holding in FEC.

The Cost Of Realization By A Secured Creditor In Bankruptcy, J. Hobson Presley, Jr.

Vanderbilt Law Review

In October 1974, business failures increased by eighteen percent, reaching the highest level in any month since March 1971. The number of business failures for that month was the highest in eighty years.' As creditors seek to realize on their security interests, and encounter the problem of who should bear the expense incurred, they may discover that the term "secured" does not adequately describe the ability to recover advances made to the bankrupt debtor. Despite the confusing state of the law in this area, the increasingly inordinate expense of foreclosure in bankruptcy, and the pressures of the current economy, the …

Section 60c Of The Bankruptcy Act: Inadequate Protection For The Running Account Creditor, E. Hunter Taylor, Jr.

Vanderbilt Law Review

Although the unsecured creditor long has occupied a precarious position, the widespread passage of article 9 of the Uniform Commercial Code has created additional perils for him by making virtually all of his debtor's assets available to a secured lender.' The Bankruptcy Act, while not so one-sided, also contains snares and pitfalls for the unsecured creditor. One potential trap is contained in the seemingly straightforward declaration of section 60c... This article focuses upon, and proposes a means for the elimination of, the unnecessary paradoxes implicit in section 60c's treatment of an unsecured creditor who extends continuing credit to a debtor …

The Priority Conflict Between A Purchase Money Security Interest And A Prior Security Interest In Future Accounts Receivable, Howell J. Reeves

Vanderbilt Law Review

Article 9 of the Uniform Commercial Code established an exhaustive scheme for the determination and control of security interest in personal property and fixtures' which is now the law of all but one of the states and the District of Columbia Not the least momentous of the provisions in Article 9 are those that govern priorities among conflicting security interests in the same collateral. The purpose of this inquiry is to examine the rules of priority that the U.C.C. provides for a conflict between the holder of a purchase money security interest in inventory and proceeds and a holder of …

Recent Cases, Law Review Staff

Vanderbilt Law Review

Bankruptcy--Transfers--Drawee Bank Not Liable for Payment of Depositor's Check After His Voluntary Petition in Bankruptcy Where Notice Is Not Given to Bank

===============================

Constitutional Law--States Must Apply Federal Harmless--Error Standard to Federal Constitutional Error

===============================

Juvenile Courts--Juveniles in Delinquency Proceedings Accorded Same Rights as Adults in Criminal Trials

===============================

Taxation--Federal Income Taxation--Section 267 of the IRC Applies to Involuntary Sale

===============================

Torts--Right of Privacy--Rule of New York Times v. Sullivan Extended to Actions for Invasion of Privacy

Bankruptcy As An Occasion For Restitutionary Claims, William F. Young Jr.

Vanderbilt Law Review

Whether we are concerned with claims against the estate or with voidable transfers, it is essential to note that the Bankruptcy Act makes the filing of a bankruptcy petition a decisive event: a transaction occurring after the filing is likely to have consequences far different from what would have ensued if it had occurred before. The date of filing is, indeed, one of the very meanings of the word "bankruptcy" as it appears in the act. This point of distinction must be observed in each part of the discussion that follows. In the main, Part II concerns restitutionary principles in …

Recent Cases, Law Review Staff

Vanderbilt Law Review

Antitrust--Robinson-Patman-Adoption of Physical Comparison Test To Determine "Like Grade or Quality"

================================

Antitrust--Tying Arrangement Held Unfair Method of Competition Under Section 5 of Federal Trade Commission Act Atlantic Refining Company agreed to promote

================================

Bankruptcy--Tax-Rights of a Trustee in Bankruptcy Against an Unrecorded Tax Lien

================================

Constitutional Law--Applicability of the Fourteenth Amendment to a Charitable Trust in Which a State Agency Was the Original Trustee

================================

Constitutional Law--Clandestine Surveillance of Public Toilet--Not an Unreasonable Search

================================

Criminal Law--Joint Trials--Admission of Confession Implicating Both Defendants Held Erroneous

=================================

Evidence--No Cross-Examination of Defendant's Character Witnesses as to His Prior Arrests and Conviction …