Bankruptcy Law Commons^™

A New Role For Secondary Proceedings In International Bankruptcies, John A. E. Pottow

Articles

Secondary proceedings-the ugly stepsisters to main proceedings-get short shrift in international bankruptcy scholarship. This article seeks to remedy that deficiency. First, it describes what it argues are the traditional conceptions-both stated and implicit-of secondary proceedings in international bankruptcies. Second, it offers a revised way of thinking about secondary proceedings, proposing to restrict their scope through the use of "synthetic" hearings. Third, it addresses some problems with the proposed new role of secondary proceedings and sketches a possible solution involving the creation of an international priorities registry.

Financial Literacy Or Financial Castigation?, John A. E. Pottow

Articles

This year, the Canadians- through their government-convened Task Force on Financial Literacy - have proudly produced, "Canadians and their Money: Building a Brighter Financial Future." Armed with 30 recommendations, its most dramatic innovation is to recommend the creation of a Financial Literacy Leader. I have been asked to provide an American perspective on this report specifically and the broader agenda of "financial literacy" more generally as a consumer welfare intervention. Let me start by acknowledging the critiques of the Canadian Task Force. For example, my Canadian colleague, Saul Schwartz, has already drafted a compelling analysis of the political economy behind …

A Minimalist Approach To State ‘Bankruptcy’, Steven L. Schwarcz

Faculty Scholarship

Increasingly finding themselves in financial straitjackets, states have been turning to austerity measures, tax increases, privatization of services, and renegotiation of collective bargaining agreements. Absent a federal government bailout, however, states will also need debt relief if their debt burden becomes so crushing that reasonable efforts at fiscal reform will fail to avoid default. Some advocate providing this relief by, effectively, extending municipal bankruptcy law to states. That approach brings in excess baggage, however, engendering political opposition and constitutional concerns. There is a simpler solution: Enable states to work out their debt problems with their creditors. Although the main obstacle …

Race, Educational Loans & Bankruptcy, Abbye Atkinson

Michigan Journal of Race and Law

This Article reports new data from the 2007 Consumer Bankruptcy Project revealing that college graduates and specifically White graduates are less likely to file for bankruptcy than their counterparts without a college degree. Although these observations suggest that a college degree helps graduates to weather the setbacks that sometimes lead to financial hardship as measured by bankruptcy, they also indicate that a college degree may not help everyone equally. African American college graduates are equally likely to file for bankruptcy as African Americans without a college degree. Thus, a college education may not confer the same protective benefit against financial …

Why Banks Are Not Allowed In Bankruptcy, Richard M. Hynes, Steven D. Walt

Washington and Lee Law Review

Unlike most other countries, the United States uses different Procedures to resolve insolvent banks and nonbank firms. The Bankruptcy Code divides control over nonbank firms among the various claimants, and a judge supervises the resolution process. By contrast, the FDIC acts as the receiver for an insolvent bank and has almost complete con trol. Other claimants can sue the FDIC, but they cannot obtain injunctive relief and their damages are limited to the amount that they would have received in liquidation. The FDIC has acted as the receiver of insolvent banks since the Great Depression, and the concentration of power …

Tragedy On The Descent: The Ascent And Fall Of Eddie Bauer, Austin Fleming, Bryan C. Hathorn

Chapter 11 Bankruptcy Case Studies

For many entrepreneurs, bankruptcy is the unfortunate end of what began as a business dream. The birth of a business is an exciting time for the entrepreneur, but its death is often a painful process—both for the company's owners and its creditors. Those businesses that choose not to reorganize close their doors forever. However, reorganization can often salvage a business enterprise that is a good one but is impaired by debt, crisis, or simple bad luck.

The goals of the reorganization process are clear—the idea is to produce a viable business enterprise but one not necessarily owned by the original …

Appalachian Oil Company, Inc.: A Company's Journey After Running Out Of Gas, Allison S. Jackson, Raymond G. Lewallen Jr., Jennifer T. Mcginn

Chapter 11 Bankruptcy Case Studies

When Appalachian Oil Company, Inc. filed for Chapter 11 protection on February 9, 2009, it marked the end of an era for a company with more than eighty-six years of experience in the petroleum products industry. The company’s failure was attributable to a couple of factors, including the worst financial crisis since the Great Depression and a parasitic parent company. The combination of a lack of operating income and access to credit rendered the company insolvent and unable to continue its operations. Appalachian Oil Company, Inc.’s journey through Chapter 11, however, was unique in that it never reemerged; rather, the …

Active Ride Shop : Chapter 11 Bankruptcy, Matt Fink, Philip Meyer

Chapter 11 Bankruptcy Case Studies

In 2008, hundreds of people waited in the rain for the grand opening of Active Ride Shop’s new Chico Hills location, its twenty-sixth store and its biggest opening event yet. In the same year, Active was awarded the Surf Industry Men’s Retailer of the Year Award, yet less than a year later the company would file for chapter 11 protection. This paper will explore Active’s financial downturn and resulting chapter 11 case, inform the reader about the workings of the chapter 11 process, and impart an understanding of how the process works in the context of a non-plan sale of …

Death Of A (Used Car) Salesman: An Examination Of The Incredible Auto Sales, Llc Bankruptcy, Alicia Teubert, Melissa Carraso

Chapter 11 Bankruptcy Case Studies

At first glance, the Incredible Auto Sales, LLC (“Incredible Auto”) Chapter 11 bankruptcy appeared fairly standard. A once prospering business found itself in the red trying to keep its inventory stocked, pay its bills, and remain a going concern. On paper, the prospects of reorganization seemed promising. It had nearly $2 million worth of inventory. It had nearly $200,000 worth of machinery, fixtures, parts, and supplies. Plus, there was a market for its product because Incredible Auto was the only Kia MotorsAmerica (“KIA”) dealership in a 250-300 mile radius. However, the Incredible Auto on paper was not the same Incredible …

In Re Crabtree & Evelyn: "Almost Washed Up", Kristina Chuck, Lin Ye

Chapter 11 Bankruptcy Case Studies

Crabtree and Evelyn (“C&E”) started in 1972 as an outlet of fine soaps from all over the globe. The name was derived from the crabapple tree and John Evelyn who was a Renaissance Englishman who had works on the conservation of forests and timber. Over the almost forty years since then it has expanded what it has to offer from fine soaps to a variety of other products including “personal care products and related accessories, fragrances, comestibles (i.e., food products including cookies, teas and jams), products for the home and gift arrangements.”

It also “manufactures and distributes more …

Assessing The Chrysler Bankruptcy, Mark J. Roe, David Skeel

Michigan Law Review

Chrysler entered and exited bankruptcy in forty-two days, making it one of the fastest major industrial bankruptcies in memory. It entered as a company widely thought to be ripe for liquidation if left on its own, obtained massive funding from the United States Treasury, and exited via a pseudo-sale of its main assets to a new government-funded entity. The unevenness of the compensation to prior creditors raised concerns in capital markets, which we evaluate here. We conclude that the Chrysler bankruptcy cannot be understood as complying with good bankruptcy practice, that it resurrected discredited practices long thought interred in the …

Bankruptcy Federalism: A Doctrine Askew, Margaret Howard

Scholarly Articles

No abstract provided.

The Complications Of Fla. Stat. Section 222.25(4). Does Florida's Wildcard Exemption Allow Married Debtors To Double Dip, Rubina K. Shaldjian

St. Thomas Law Review

Bankruptcy courts in every Florida district have addressed how the new wildcard exemption fits into the Florida exemption scheme. Part II of this paper outlines the relevant cases and explains the reasoning behind their differences. While not all of the cases directly address whether a married debtor exempting real property under tenancy by the entirety can also claim the additional $4,000 wildcard exemption, the analyses they contain are germane to the issue. Generally, debtors who do not affirmatively claim the homestead exemption are entitled to the wildcard exemption if they do not receive the benefit of constitutional homestead. Part III …

Ideas, Interests And Institutions And The History Of Canadian Bankruptcy Law 1867-1880, Thomas G. W. Telfer

Law Publications

Michael Trebilcock's scholarship has long recognized the importance of ideas, interests, and institutions in shaping policy. Taking the same analytical approach that Michael Trebilcock and Ninette Kelley use in their ground-breaking book on the history of Canadian immigration, which focuses on economic interests, contested ideas, and institutions, this article examines the Canadian historical experience to gain an understanding of the ideas, interests, and institutions that have been influential in shaping the evolution of Canadian bankruptcy law. Specifically, the article addresses the rise of Canadian bankruptcy legislation in the early post-Confederation period and its ultimate repeal in 1880. Bankruptcy law represented …

A Reappraisal Of Attorneys' Fees In Bankruptcy, Michelle A. Cecil

Faculty Publications

This Article attempts to create a new method for approaching the priority of attorneys’ fees in bankruptcy. It criticizes Lamie for not going far enough toward resolving the attorneys’ fees issue, and proposes a statutory amendment to the Bankruptcy Code that will harmonize the interests of both creditors and debtors who are seeking bankruptcy protection during these difficult economic times.

Collective Bargaining Agreements In Corporate Reorganizations, Andrew B. Dawson

Articles

Congress enacted § 1113 to the Bankruptcy Code in 1984 in order to establish a standard for the rejection of Collective Bargaining Agreements. But the statute's ambiguous language has caused a split between the Second and Third Circuits, and has precipitated a lengthy academic debate largely centered on the interpretation of one word: "necessary." This debate has focused on proper statutory interpretation as well as deeper concerns regarding the policy goals behind the Bankruptcy Code. The present study reports data that indicate that the different interpretations are irrelevant in practice. No matter how "necessary" is defined, the result is always …

Cutting The Gordian Knot: The Case For Allowing Modification Of Home Mortgages In Bankruptcy, Susan E. Hauser

Journal of Business & Technology Law

No abstract provided.

Single Asset Real Estate And Development Projects: The Kara Homes Mistake, Marshall E. Tracht

Articles & Chapters

The Kara Homes decision held that various affiliates of Kara Homes, Inc., each of which owned a separate real estate project, were "single asset real estate" ("SARE'') cases under the Bankruptcy Code's definition. According to the author of this article, the designation as single asset real estate substantially increased the difficulty faced by the debtors in maintaining their reorganization efforts, and has given lenders and their counsel a significant amount of comfort. However, the definition runs against the actual wording of the Bankruptcy Code, the intent underlying the SARE provisions, and the political winds. It should, and may well, be …

Nothing Natural About It: Still Searching For A Solution To The Chapter 11 Stamp Tax Exemption, Lindsay K. Taft

Seattle University Law Review

In June of 2008, in Florida Department of Revenue v. Piccadilly Cafeterias, Inc., the Supreme Court settled a circuit split and issued a bright line rule stating that asset transfers made prior to the confirmation of a Chapter 11 plan of reorganization no longer benefit from certain tax exemptions. As a result, the cost of selling assets in a bankruptcy case outside of a plan will increase. The provision at issue in the case, which exempts asset transfers and sales from certain state taxes, contains language ambiguous enough that four federal circuit courts have contemplated which types of asset …

Through Gritted Teeth And Clenched Jaw: Court-Initiated Sanctions In Bankruptcy Opinions, Nancy B. Rapoport

Scholarly Works

This article discusses what types of behavior can trigger a bankruptcy court's initiation of sanctions against an attorney.

Rethinking Professional Fees In Chapter 11 Cases, Nancy B. Rapoport

Scholarly Works

This article discusses the many ways in which professional fees can spiral out of control in chapter 11 bankruptcy cases and evaluates the possible ways to monitor and control those fees.

Saving Up For Bankruptcy, Ronald J. Mann, Katherine Porter

Faculty Scholarship

Bankruptcy is a numbers game. Policymaking, public perception, and the scholarly literature are captivated with the number of annual bankruptcy filings, which hit one million in 2008. The number of annual bankruptcy filings has become a barometer of economic health, reflecting an implicit assumption that bankruptcy is a useful proxy for financial distress.

But at the level of the individual family, the causative relation between financial distress and bankruptcy filings is unclear. On the one hand, only a fraction of those in serious financial distress will ever file for bankruptcy. For example, a study by Michelle White examined a group …

The Sec In Bankruptcy, G. Ray Warner, Keith Sharfman

Faculty Publications

(Excerpt)

Since its founding, the Securities and Exchange Commission ("SEC") has played an important role as both an advisor and regulator in bankruptcy cases, valuing debtor assets, opining on plans of reorganization, regulating the trading of claims and the disclosure of information, and much else. After a period of relative inactivity following the passage of the Bankruptcy Code (which has a less expansive view of the SEC's role than that of the former Chandler Act whose regime the Code replaced), the SEC's involvement in bankruptcy has intensified in recent years with the ascendancy of equity committees and with the increased …

Anna Nicole Smith Goes Shopping: The New Forum-Shopping Problem In Bankruptcy, G. Marcus Cole, Todd J. Zywicki

Journal Articles

In the United States, relations between debtors and their creditors are governed by two distinct legal regimes. For the overwhelming majority of credit relationships, state law of contract, property, tort, and consumer protection set up the framework within which the debtor-creditor relationship is established, functions, and in the end, is dissolved. In a smaller but significant number of these relationships, a different forum orchestrates the end of these relationships, namely, federal bankruptcy court. These two distinct forums for debtor-creditor relations coexist side by side, with some disputes moving over time from one forum to the other. As with any system …

Ask The Professor: Portfolio Margining – How Will Dodd-Frank Impact Its Utilization?, Ronald Filler

Articles & Chapters

This article analyzes the background and current status of portfolio margining, how it has evolved over the past several years, and how the recent Dodd-Frank Act will impact its utilization and effectiveness. Portfolio margining allows a broker-dealer to analyze a client's total overall portfolio from a risk-based analytical model, establishing the proper minimum initial margin requirements for the entire portfolio applying certain parameters. To be a more effective tool, changes to the U.S. Bankrupcty Code were needed. The Dodd-Frank Act made those legislative changes. It's now up to the regulators to make portfolio margining an even more effective and utilized …

Government Involvement In Chrysler Bankruptcy: The Least-Worst Alternative?, John A. E. Pottow

Articles

As usual, my colleague Jim White has hit many nails on many heads. Also as usual, however, I’m going to be a pain and part ways with him a bit. First, was Chrysler’s bankruptcy “suspicious” in its use of section 363 of the Bankruptcy Code? You bet. Leaving aside the proliferation of 363 sales to swallow Chapter 11 as we once knew it, Chrysler was out in left field. Not only was it a “sale” of everything meaningful in the company, it was to a seller—Fiat—that put in no money. (To be fair, Fiat agreed to contribute technological know-how on …

Chrysler's Bankruptcy: Money Laundering On A Grand Scale, James J. White

Articles

The interesting issue in Chrysler is not the lawyers’ manipulation of the law; it is the politicians’ use of the bankruptcy to launder money. Had the President simply announced that the federal government would give $4 billion to the UAW, the public, even the public in the UAW’s home state of Michigan, would have been up in arms. By laundering the money through the Chapter 11 process, the administration disguised the payment and avoided the outrage.

The Evolution Of The Italian And U.S. Bankruptcy Systems: A Comparative Analysis, Paolo Manganelli

Journal of Business & Technology Law

No abstract provided.

The Role Of Valuation In Federal Bankruptcy Exemption Process: The Supreme Court Reads Schedule C, David G. Carlson

Articles

In Taylor v. Freeland & Kronz, a debtor claimed a law suit was exempt. The bankruptcy trustee failed to object within the required period. Later, the law suit realized an amount that far exceeded the monetary limit to which the debtor was entitled. The Supreme Court permitted the debtor to keep all of the proceeds, even beyond the statutory limit, claiming that a deadline was a deadline. Recently, in Schwab v. Reilly, the Supreme Court overruled Taylor, holding that a claim to a monetarily limited item can only exempt the monetary limit. The Court tries and fails to "reconcile" these …

The Secondary Market For Gift Cards And The Role Of Corporate Bankruptcy Risk, Kaitlyn A. Desai

CMC Senior Theses

The website, Plastic Jungle, is taking advantage of the rapidly growing gift card phenomena by creating a secondary market that enables consumers to buy, sell, and exchange gift cards online at a discount. This paper examines the relationship between this secondary gift card market and the corporate bankruptcy risk of companies with gift cards listed on the market. When a company issues a gift card, the card is unsecured debt and the cardholder becomes an unsecured creditor to the company. This paper investigates whether the cardholder acts similarly to other unsecured creditors or as someone who is merely holding another …