Bankruptcy Law Commons^™

An Innovative Framework: Evaluating The New German Business Stabilization And Restructuring Law (Starug), Andreas Rauch

Northwestern Journal of International Law & Business

This comment examines the restructuring framework, restrukturierungsgesetz (“StaRUG”), and argues that this new law represents an effective—albeit radical—departure from Germany’s previous, conservative insolvency regime. Passed in response to a 2019 EU Directive aimed at modernizing restructuring law Union-wide, and integrated into the German legal system against the backdrop of the COVID-19 pandemic, StaRUG and its ancillary reforms in other areas of German law create a restructuring proceeding that places a premium on a debtor’s continued business operations. Thus, in a striking shift from the traditional German approach to business distress, which strongly emphasized creditor rights, the new StaRUG focuses on …

Riding The Wave: Fairness For Foreign Investors In India’S Impending Insolvency Tsunami, Nicole Mecca

Fordham Journal of Corporate & Financial Law

Reminiscent of the warning signs of a tsunami, bankruptcy and insolvency courts across the globe have been eerily calm despite unprecedented conditions during the COVID-19 pandemic. The full extent of the pandemic’s effect, including a tidal wave of wide-spread corporate and financial sector harm and wide-spread economic distress, remains to be seen. Much like victims of natural disasters, unsuspecting and increasingly delayed courts will find themselves totally overwhelmed. The inconvenience felt by the courts is distinct, however, from potential harm to financial investors. Although investors could also be harmed by these judicial conditions, they knowingly assumed certain financial risk when …

Billing Judgment, Nancy B. Rapoport, Joseph R. Tiano Jr.

Scholarly Works

In most situations, when a lawyer sends a bill to a client, the client pays the fees. When the client believes that a fee or expense is unreasonable, the client will ask for reductions. Conscientious lawyers review a bill before sending it to the client, exercising judgment in terms of what fees and expenses are reasonable. But in bankruptcy cases, the estate pays the court-appointed professionals' fees and expenses out of unsecured funds or from a cash collateral carve-out. Thus, the responsibility for scrutinizing the fees and expenses falls not to a particular client, but to the court, per 11 …

A Process For Politics, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

I argue that consistent and public process observance has a distinctly valuable function in sovereign debt restructuring, with no precise equivalent in national insolvency regimes. National regimes reflect the distribution bargains of their enactment, presumptively legitimate and binding. Debtors and creditors allocate insolvency losses in their shadow, with liquidation as a backstop and politics just outside the frame. All else equal, the restructuring process has a harder job with sovereign debt. There is no liquidation backstop and no default distribution scenario. Each crisis resolution episode must allocate losses from scratch among the country’s citizens, foreign and domestic creditors, and other …

Steering Loan Modifications Post-Pandemic, Pamela Foohey, Dalie Jimenez, Christopher K. Odinet

Scholarly Works

As part of federal and state relief programs created during the COVID-19 pandemic, many American households received pauses on their largest debts, particularly on mortgages and student loans. Others may have come to agreements with their lenders, likewise pausing or altering payment on other debts, such as auto loans and credit cards. This relief allowed households to allocate their savings and income to necessary expenses, like groceries, utilities, and medicine. But forbearance does not equal forgiveness. At the end of the various relief periods and moratoria, people will have to resume paying all their debts, the amounts of which may …

Custodian Or Not: Scrivener's Error In A Bankruptcy Code Safe Harbor, Thomas E. Plank

Emory Bankruptcy Developments Journal

This Article analyzes a drafting error in the United States Bankruptcy Code that remained latent for 36 years until 2020. This drafting error limits a safe harbor that Congress enacted in 1984 and expanded in 2005 to protect an important segment of the securities and mortgage loan markets.

When a person becomes a debtor in bankruptcy, the Bankruptcy Code imposes an automatic stay on substantially all actions by creditors and other entities against the debtor or the debtor’s bankruptcy estate. It also abrogates contractual provisions, known as ipso facto clauses, that otherwise permit a party to terminate a contract because …

Bankruptcy, Honorable Harlin D. Hale, Grayson Williams

SMU Annual Texas Survey

No abstract provided.

Bankruptcy And The State, Adam Feibelman

Emory Bankruptcy Developments Journal

Anticipating a wave of bankruptcies caused by the economic and financial effects of the COVID-19 pandemic, numerous commentators proposed measures to expand the institutional capacity of the bankruptcy system. A number of these proposals would represent dramatic and systematic government involvement in the U.S. bankruptcy system. Such involvement by the government in the bankruptcy system is a topic that is largely ignored in the literature on bankruptcy. Where it is observed, it is generally criticized. Among other things, it sits uneasily with dominant theories of bankruptcy that assume the bankruptcy system should be driven by the interests of direct stakeholders …

Bankruptcy And The Anti-Assignment Acts: A New Approach To The Issue Of Assumption And Assignability Of Government Contracts, Ha Khuong

Emory Bankruptcy Developments Journal

One of the most important and valuable tools that a business debtor has for reorganization under the bankruptcy proceedings is assuming and assigning executory contracts. However, circuit courts are divided on the issue of whether the Anti-Assignment Act, in conjunction with Section 365(c)(1)(A) of the Bankruptcy Code, prohibits the assumption of an executory government contract over the objection of the government where the contract is to be performed by the debtor-in-possession. Some circuit courts apply the “Hypothetical Test” which restricts a debtor-in-possession from assuming an executory contract over an objection if applicable law would bar assignment to a hypothetical third …

Table Of Contents, Seattle University Law Review

Seattle University Law Review

Table of Contents

Putting With A Pitching Wedge: Indiscriminating Termination Of The Automatic Stay, Lawrence Ponoroff

Emory Bankruptcy Developments Journal

The serial filing of chapter 13 cases solely for the purpose of frustrating and delaying foreclosure or other legitimate collection efforts, and with no serious intent to reorganize, has long been perceived as an abuse of the bankruptcy system requiring a fulsome response. In 2005 Congress seized on a solution involving withdrawal or withholding of the automatic stay. Since it is the existence of the stay that most prompts abusive filings, the solution seemed appropriate. It was not for a variety of reasons examined in this article, but most notably because not all serial filings are abusive, and the stay …

Rethinking Roadblocks To Municipal Bankruptcy, Tejas Dave

Emory Bankruptcy Developments Journal

This Comment argues that Congress should remove roadblocks that prevent municipalities from easily filing for bankruptcy. It shows that statutory and ad hoc roadblocks allow states and the federal government to exert excessive pressure on fiscally distressed municipalities. Further, while scholars claim that the Bankruptcy Code provides bankruptcy courts with too little power to adjudicate municipal bankruptcies and that municipal fiscal distress should be resolved by states, this Comment argues that federal bankruptcy courts are the proper venue to resolve municipal distress and that these courts have sufficient power. This power could be used more effectively by removing chapter 9’s …

Having Your Cake And Eating It Too: Why Voluntary Post-Petition 401(K) Contributions Are Disposable Income, Austin S. Howell

Emory Bankruptcy Developments Journal

Following the 2005 amendments to the Bankruptcy Code, the majority of chapter 13 debtors have been successful in minimizing their repayment obligations to creditors while bolstering their financial stability during retirement. The Bankruptcy Code allows chapter 13 debtors to retain their assets and repay their debts to creditors using their earned income. Alternatively, debtors may simply avoid some of the liability by dedicating a portion of their earned income for reasonably necessary expenses. Judicial inconsistencies have emerged concerning whether voluntary post-petition 401(k) retirement contributions for chapter 13 debtors constitute disposable income in accordance with Sections 541(b)(7) and 1325(b) of the …

The "Ideal Debtor" And The "Traditional" American Household, A. Mechele Dickerson

Emory Bankruptcy Developments Journal

Laws that award governmental benefits reflect an archetype of the type of person deemed worthy of governmental assistance and generally favor and reward people who have specific personal attributes or who engage in activities deemed socially desirable. Just as the Bankruptcy Code favors the “Ideal Debtor,” state and federal laws favor and subsidize Americans who live in a “traditional household.” Historically, this household consisted of husbands who earned income in the paid labor market and wives who stayed home to provide unpaid care for their husbands and minor children. Households that deviated from that norm rarely received the full range …

The Hardship Discharge And How It Can Improve Debtor Success, Abbie Schmadeke

Emory Bankruptcy Developments Journal

Chapter 13 bankruptcy has long been heralded as a moral alternative to chapter 7 liquidations. Despite this, success among chapter 13 debtors is limited, and debtors who opt for this route face other challenges. The hardship discharge allows chapter 13 debtors to receive a discharge of their debts without plan completion. While the provision has been a piece of the bankruptcy law for nearly a century, little research on its effects on debtors exists. The struggles that chapter 13 debtors face underlies the need for more research on the hardship discharge as a potential solution. This Comment seeks to utilize …

Changes And Convergence Of Bankruptcy Law: Recent Experience In Brazil, Joao Guilherme Thiesi Da Silva

LL.M. Essays & Theses

Bankruptcy regimes across the globe have been constantly changing in response to new market demands and the evolution of insolvency law principles and objectives. Part of the academic community argues that such changes may lead to a convergence of domestic bankruptcy laws, as a result of globalization and market integration. Scholars have reviewed the phenomena of changes and convergence of bankruptcy laws in Europe, East Asia and Africa. However, little attention has been given to Latin American countries, such as Brazil. This paper aims at contributing to the discussion on changes and convergence of bankruptcy law, by focusing on four …

Reverse Vesting Orders – Developing Principles And Guardrails To Inform Judicial Decisions, Janis P. Sarra

All Faculty Publications

Reverse vesting orders (RVO) are a new tool being used by insolvency practitioners in Canada’s Companies’ Creditors Arrangement Act (CCAA) and other insolvency proceedings, where the debtor is not required to propose a restructuring plan and creditors are not permitted a vote on the going-forward strategy. The article starts from the premise that the court has authority to approve an RVO pursuant to sections 11 and 36 of the CCAA and the court’s general authority under the statute. However, it suggests that there must be exceptional circumstances for the court to be persuaded to bypass provisions of insolvency legislation aimed …

Private Student Loans May Be Dischargeable In Bankruptcy Without Meeting The Undue Hardship Requirement And If Not, There Are Two Ways To Prove Undue Hardship, Kimberly Lee

Bankruptcy Research Library

(Excerpt)

Section 523 of title 11 of the United States Code (the “Bankruptcy Code”) prevents former students from discharging certain educational debts in bankruptcy, unless the failure to discharge “would impose an undue hardship on the debtor and the debtor’s dependents.” Typically, it is a debtor’s burden to show that their loans may be discharged on the grounds of “undue hardship.” However, Congress has not defined “undue hardship” leaving jurisdictions divided regarding the appropriate test. Most courts have followed the Brunner three-prong test, while only the First and Eighth Circuits use the totality of the circumstances test.

Additionally, section 523(a)(8) …

Analysis Of Courts' Discretion To Enforce Arbitration Of Core Claims, Sarah L. Hautzinger

Bankruptcy Research Library

(Excerpt)

In general, a bankruptcy court has original and exclusive jurisdiction of chapter 11 bankruptcy cases. However, problems arise when a prepetition contract contains an arbitration clause, and a court must decide if it has discretion to enforce arbitration of a core claim. The statutes that play essential (but competing) roles in a court's analysis are the Federal Arbitration Act ("FAA") and the United States Bankruptcy Code (the "Bankruptcy Code"). In sum, "bankruptcy policy exerts an inexorable pull towards centralization while arbitration policy advocates a decentralized approach toward dispute resolution."

In these cases, a bankruptcy court must determine if there …

Availability Of Setoff To Foreign Debtors And Representatives In U.S. Courts, Joseph Muschitiello

Bankruptcy Research Library

(Excerpt)

Setoff is the principle of allowing a party to reduce the debt it owes to an entity by applying a credit for any claim it has against the same entity. The purpose of setoff rights is rooted in “avoiding the absurdity of making A pay B when B owes A.” It is meant to be used by debtors as affirmative defenses or counterclaims. Section 553 of title 11 of the United States Code (the “Bankruptcy Code”) generally preserves the right of setoff in bankruptcy cases.

This memorandum explores how and when foreign debtors and representatives may exercise setoff rights …

Equitable Subordination Of A Claim Depends On Insider Status, Conduct Of The Claimant, And If There Was Harm, Nicholas Smargiassi

Bankruptcy Research Library

(Excerpt)

Equitable subordination is a remedial doctrine pursuant to which a creditor’s claim may be subordinated to other claims. The doctrine is designed to “undo or to offset any inequality in the claim position of a creditor that will produce injustice or unfairness to other creditors in terms of the bankruptcy results.” Equitable subordination is codified in section 510(c) of Title 11 of the United States Code (the “Bankruptcy Code”). Section 510(c) of the Bankruptcy Code “authorizes a bankruptcy court to ‘subordinate for purposes of distribution all or part of an allowed claim to all or part of another allowed …

The Barton Doctrine's Applicability To Suits Against Bankruptcy Trustees When The Bankruptcy Court Lacks Jurisdiction Over The Matter, Chelsea Frankel

Bankruptcy Research Library

(Excerpt)

In Barton v. Barbour, the Supreme Court established the general rule that a lawsuit cannot be brought against a receiver for acts done within their authority without leave of the court that appointed such receiver. The Court precluded a personal injury suit against a company's receiver without leave of the appointing court, finding that if the plaintiff were permitted to recover on his personal injury claim against the receiver, he would be recovering from the receivership property "without regard to the rights of other creditors or the orders of the court which is administering the trust property." The …

Ownership Status Of Inherited Retirement Accounts In Bankruptcy, Aron Kaplan

Bankruptcy Research Library

(Excerpt)

Immediately upon filing a petition for relief under title 11 of the United States Code (the “Bankruptcy Code”), a bankruptcy estate is created by operation of law that consists of the debtor’s assets from which the creditors will be repaid. The Bankruptcy Code states that the estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” This broad language reflects Congress’s intent that there be sufficient assets in the estate to protect the interests of creditors.

Despite this broad legislative language, there are certain categories of property that the debtor …

Fdcpa Claims: Are Intangible Injuries “Concrete” Injuries?, Kimberly Moyal

Bankruptcy Research Library

(Excerpt)

The Fair Debt Collection Practices Act (“FDCPA”) was passed to prohibit a debt collector from engaging in abusive debt collection practices. The FDCPA serves to protect a consumer by giving a consumer a statutory claim against an abusive debt collector. In 2016, the U.S. Supreme Court, in Spokeo, Inc. v. Robins, ruled that a party pursuing a statutory claim, like an FDCPA claim, must meet the Article III standing requirements of the U.S. Constitution. To establish the first element of the Article III standing analysis, the plaintiff must prove that they suffered a “concrete and particularized” injury.

After …

A Hotel Does Not Meet The Definition Of "Single Asset Real Estate" And May Reorganize Under Subchapter V Of Chapter 11 Of The Bankruptcy Code, Patrick Canavan

Bankruptcy Research Library

(Excerpt)

Enacted via the Small Business Reorganization Act ("SBRA") in 2019, Subchapter V streamlines the reorganization process, allowing small business debtors to file bankruptcy in a timely and cost-effective manner. The goal behind the legislation is to encourage reorganizations, which will generally result in creditors receiving a higher distribution than in a liquidation and more small businesses surviving. Section 1182(1) of title 11 of the United States Code (the "Bankruptcy Code") limits those who can file a Subchapter V case to a "small business debtor" who does not own a "single asset real estate" project ("SARE"). Thus, if the debtor …

The Effect Of Insider Status On The Court's Approval Of A Key Employee Retention Plan, Perry Chresomales

Bankruptcy Research Library

(Excerpt)

When a company that has filed for relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") seeks to retain essential employees through the course of its bankruptcy, the payments made with the goal of retaining key employees are subject to the requirements of section 503(c) of the Bankruptcy Code. These payment plans, also known as Key Employee Retention Plans or "KERPs", are designed to "provide certain Key Employees with a financial incentive to forgo seeking alternative employment during the Debtors' bankruptcy proceeding as well as after confirmation of a chapter 11 plan." In …

Courts Apply A Case-By-Case Analysis In Distinguishing A Meritorious Motion To Disqualify From A Delaying Litigation Tactic, Cathrena Collins

Bankruptcy Research Library

(Excerpt)

It is becoming increasingly rare for an attorney to remain at the same firm for an entire career. Lateral movements of lawyers coupled with large firms employing hundreds of attorneys creates ample opportunity for conflicts of interest to arise. The American Bar Association explains a conflict of interest is present when "there is a significant risk that a lawyer's ability to consider, recommend or carry out an appropriate course of action for the client will be materially limited as a result of the other lawyer's responsibilities or interest." Furthermore, Rule 1.10(b) dictates that a lawyer joining a new firm …

The Various Methods Circuit Courts Use To Define "Initial Transferee" In Fraudulent Transfers, Anthony J. Crasto

Bankruptcy Research Library

(Excerpt)

Transfers of a debtor's interest or obligation in property to a third party, made to prevent creditors from reaching assets in a bankruptcy case, are known as fraudulent transfers. Under current law, there are two types of fraudulent transfers: actual fraud and constructive fraud. Actual fraud requires findings of a debtor's "intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted." Constructive fraud does not require a finding of intent and occurs when a debtor receives "less than …

Erisa Withdrawal Liability Claims Unlikely To Receive Administrative Expense Priority Status In A Chapter 11 Reorganization, Bridget Golden

Bankruptcy Research Library

(Excerpt)

An employer who withdraws their participation in a multi-employer defined benefits plan is statutorily required to pay the plan a withdrawal liability. Employee Retirement Income Security Act of 1974 ("ERISA"), as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), provides a number of formulas to assist a multi-employer defined benefits plan's actuary with calculating the withdrawal liability amount. Congress imposed withdrawal liability on withdrawing employers "(1) to protect the interests of participants and beneficiaries in financially distressed multiemployer plans, and (2) ... to ensure benefit security to plan participants." An employer's ability-and willingness-to pay withdrawal liability …

Enforceability Of Third-Party Releases In Foreign Proceedings Under Chapter 15, Anastasia Greer

Bankruptcy Research Library

(Excerpt)

In our increasingly globalized world, cross-border insolvency proceedings brought under chapter 15 (herein "Chapter 15") of title 11 of the United States Code (the "Bankruptcy Code") are on the rise - with over 100 additional filings in 2020 alone. Third-party releases are provisions in bankruptcy plans intended to release non-debtors (including shareholders, directors, officers, and affiliates) from claims creditors hold against other members of their class. A third­ party release can "act as a complete release, waiver, and discharge of that party ... arising out of or in connection with the debtor and its plan of reorganization." While the …