Bankruptcy Law Commons^™

Credit Cards, Attorney's Fees, And The Putative Debtor: A Pyrrhic Victory? Putative Debtors May Win The Battle But Nevertheless Lose The War, Jennifer M. Smith

Maine Law Review

For decades, scholars have written about credit cards and attorney’s fees, but rarely together. This Article addresses the current financial crises of Americans, the credit card industry (including the Bankruptcy Abuse Prevention and Consumer Protection Act) and attorney’s fees—perhaps a unique combination. It is based upon an actual case that left the putative debtor in a worse financial crisis than before the lawsuit was filed. This Article addresses the current credit card industry and its detrimental impact on society, and it discusses the history and purpose of attorney’s fees, as well as the pitfalls in attorney’s fee legislation. It analyzes …

The Bankruptcy Of Refusing To Hire Persons Who Have Filed Bankruptcy, Terrence Cain

Law Faculty Scholarship

In 1978, Congress made it illegal for government employers to deny employment to, terminate the employment of, or discriminate with respect to employment against a person who has filed bankruptcy. In 1984, Congress extended this prohibition to private employers by making it illegal for such employers to terminate the employment of, or discriminate with respect to employment against a person who has filed bankruptcy. Under the law as it currently exists, private employers can refuse to hire a person who has filed bankruptcy solely because that person has filed for bankruptcy. Meanwhile, employers have substantially increased their use of credit …

A Lender’S Knowledge Of Alleged Breaches Of Fiduciary Duties Shall Not Be Imputed Upon Debtors In A Statute Of Limitations Analysis, Michael Derosa

Bankruptcy Research Library

(Excerpt)

Section 541 of the United States Bankruptcy Code (the “Code”) provides in part that the debtor’s estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” The debtor’s interests include “whatever causes of action the debtor may have possessed prior to the petition date.” In certain circumstances, a creditor may obtain the right to bring claims of the debtor. In such a case, generally the creditor is stepping into the shoes of the debtor, and the creditor is subject to all defenses proffered by the defendant that would apply had …

Substantive Consolidation Of Debtor And Non-Debtor Entities, Eileen Ornousky

Bankruptcy Research Library

(Excerpt)

Based on section 105’s grant of equitable powers, bankruptcy courts have the power to substantively consolidate debtors. Substantive consolidation pools the assets of separate legal entities and treats them as one, allowing each entity’s liability to be satisfied out of the common pool. Although it has been accepted that courts have the power to consolidate a debtor with other related debtors, it its less clear when courts can consolidate a debtor with a non-debtor, or if courts have the authority to do so at all.

Even though most courts have determined that they do have the power to substantively …

All Talk, But No Action Leads To The Loss Of Ground Breaking Cancer Research, Nicholas Marcello

Bankruptcy Research Library

(Excerpt)

Each year, the government awards millions of dollars in federal grants to fund scientific research. Despite this huge allocation of resources, the government’s claim in such funded research may be limited should the receiving institution become a debtor in bankruptcy. Last year, the United States Bankruptcy Court for the District of Massachusetts allowed the destruction of government funded research to benefit the debtor estate.

Application Of The Automatic Stay To A Non-Debtor Corporation, Joanna Matuza

Bankruptcy Research Library

(Excerpt)

When a corporation files for bankruptcy, it is entitled to an automatic stay of any action that has been filed against it pursuant to section 362(a)(1) of title 11 of the United States Code (the “Bankruptcy Code”). But today, litigation is often complex and involves more than one defendant. For example, I may commence an action against corporations X, Y and Z. Corporation X then files for bankruptcy and is entitled to an automatic stay. The question in these cases is whether the automatic stay applicable to the debtor corporation (Corporation X) also applies to the non-debtor corporations (Corporations …

Creditor And Debtor Burdens When Confirming A Chapter 11 Reorganization Plan, Corey Trail

Bankruptcy Research Library

(Excerpt)

In Chapter 11 bankruptcy, after a debtor has submitted a reorganization plan, the creditor has the right to vote on that plan. However, the right to vote on that plan is grounded in the understanding that the creditor will not vote against a debtor’s reorganization plan in bad faith. If a court finds that the creditor rejected the plan in bad faith, the court may “designate” the votes of the creditor that voted against the plan. But the issue of good faith does not solely lie with the creditor’s behavior. Reorganization under Chapter 11 also demands that the debtor …

Time For An Update: A New Framework For Evaluating Chapter 9 Bankruptcies, Michael J. Deitch

Fordham Law Review

    Municipal bankruptcies have been making national news since the “Great Recession.” Municipalities like Stockton, Vallejo, and Jefferson County gained notoriety for the record scale of their bankruptcy filings, only to be surpassed by Detroit shortly thereafter as the largest and most populous municipal bankruptcy filing. Historically, municipal bankruptcy occurred infrequently, leaving the nuances of many critical issues, including insolvency, asset utilization, and good faith, unexplored in case law. For example, how should a bankruptcy court analyze Detroit’s cityowned art museum that houses billions of dollars of art when bondholders, pensioners, and other unsecured creditors have unpaid claims? And how should …

Betting On The Upside: Why Affirming River Road Favors Distressed Debt Speculators Over The Rehabilitation Of Businesses, Julia L. Onorato

Northwestern University Law Review

The Chapter 11 bankruptcy process demands a careful balance between protecting the creditors’ rights to be repaid and allowing a failing entity the ability to restructure. The Supreme Court in RadLAX Gateway Hotel affirmed the Seventh Circuit’s holding in River Road and interpreted the Bankruptcy Code in a way that improperly shifts this balance towards the most senior creditors at the expense of business. This Note will analyze the circuit disagreement over the cramdown provision in the Bankruptcy Code and the Supreme Court’s ultimate resolution. It will argue that in light of recent trends in the credit markets - including …

Despite A Very High Income, Chapter 7 Debtor’S May Succeed, Pamela Frederick

Bankruptcy Research Library

(Excerpt)

Section 707 of the Bankruptcy Code governs when a court may dismiss a chapter 7 bankruptcy case. Under section 707(a), a court may dismiss a chapter 7 case “for cause.” In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) and amended section 707(b) to include the so-called “means test,” which provides a formula for determining whether “cause” exists to dismiss (or convert with the debtor’s consent) the debtor’s case. Courts split as to whether this amendment to section 707(b) permits a court to consider the debtor’s income when deciding whether to dismiss the debtor’s chapter …

Determining The Meaning Of “Instrumentality” In The Bankruptcy Code, Nicholas Panzarella

Bankruptcy Research Library

(Excerpt)

The Bankruptcy Code dictates who is eligible to be a debtor in bankruptcy. Section 109(a) generally provides that “a person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under [the Bankruptcy Code].” Although a debtor that is a “person” or a “municipality” maybe eligible to file for bankruptcy, section 109 restricts which chapters that a debtor may file under. In particular, subject to various restrictions, a “person” may be a debtor under chapter 7, 11, 12, or 13. A municipality, however, is only eligible …

Disciplining The Financial Failure: An Exploration Of Bankruptcy Law As An Active Discourse In Market Capitalism, Linda E. Coco

Faculty Scholarship

No abstract provided.

Are Government Creditors Exempt From U.C.C. Article 9 Filing And Perfection Requirements?, Thomas Sica

Bankruptcy Research Library

(Excerpt)

Article 9 of the Uniform Commercial Code (the “UCC”) requires a creditor to perfect its security interests against its collateral in order to recover the creditor’s priority in such collateral. Former versions of the UCC that predate 2001 provided that the Article 9’s perfection requirements did not apply “[t]o a transfer by a government or a governmental unit of the state.” This exception was eliminated from the UCC in 2001. Thirty-two states, however, still have versions of the UCC that contain some version of this exception. Within the states that still enforce this exception for governmental units, there are …

Judicial Estoppel: Essentially Locking In Representations Made During Bankruptcy Proceeding, Sophie Tan

Bankruptcy Research Library

(Excerpt)

The Bankruptcy Code provides that a debtor is required to file with the bankruptcy, among other things, “a list of [its] creditors,” a “schedule of [its] assets and liabilities,” and “a statement of [its] financial affairs.” With the filing of its schedules, the debtor asserts a position with respect to its assets, liabilities, and financial affairs, which is relied on by the bankruptcy court, the debtor’s creditors, and the other parties in interest. Accordingly, various circuit courts have recognized that “the success of our bankruptcy laws requires a debtor’s full and honest disclosure,” and that there needs to be …

Secured Credit And Insolvency Law In Argentina And The U.S.: Gaining Insight From A Comparative Perspective, Guillermo A. Moglia Claps, Julian B. Mcdonnell

Georgia Journal of International & Comparative Law

No abstract provided.

Not Just Anna Nicole Smith: Cleavage In Bankruptcy, David G. Epstein

Law Faculty Publications

This is an essay about the unwarranted erosion of two basic bankruptcy principles:the cleavage effect of a debtor's filing of a bankruptcy petition and the equality of treatment of prepetition unsecured claims. These are two of the most fundamental bankruptcy concepts. First courts and then Congress have fashioned rules favoring the prepetition unsecured claims of vendors and lessors that are inconsistent with these concepts. We explore the origins of such favored treatment, question the commonly offered policy justifications, and argue that the prepetition unsecured claims of vendors and lessors generally should be afforded the same treatment in bankruptcy as other …

The Differences Between The Right To Setoff Under 11 U.S.C. §553 And 11 U.S.C. §558, Maria Ehlinger

Bankruptcy Research Library

(Excerpt)

In bankruptcy cases, the right to setoff is a powerful tool used by both debtors and creditors to avoid having to pay a debt owed to another. The right to setoff is defined as “[a] debtor’s right to reduce the amount of a debt by any sum the creditor owes the debtor the counterbalancing sum owed by the creditor.” A right to setoff usually arises when a debtor owes a debt to a creditor and the creditor owes a debt to the debtor. The purpose of a setoff is to “allow entities that owe each other money to apply …

The Unlucky Penny: How $0.01 In Collateral Value Can Limit The Debtor's Ability To Strip Off A Junior Mortgage In A Chapter 7 Bankruptcy Proceeding, Keri Mahoney

Touro Law Review

No abstract provided.

The Manville Corporation Bankruptcy: An Abuse Of The Judicial Process?, Mark Kunkler

Pepperdine Law Review

Federal bankruptcy law offers a refuge to the honest debtor who is unable to pay his creditor's when his debts are due. Here, the twin aims of bankruptcy law, to give the debtor a fresh start and to provide roughly equal treatment for his! Creditors, are laudably accomplished. But what policies support the use of federal bankruptcy law when the "debtor" is in fact solvent and apparently seeks refuge only to escape liability for the products it manufactures? This comment examines the recent filing of the Manville Corporation for Chapter 11 protection under bankruptcy law with this question in mind.

Turnover Actions And The “Floating Check” Controversy, David R. Hague

Faculty Articles

When a debtor files for Chapter 7 bankruptcy, a Chapter 7 trustee is appointed and is charged with collecting and reducing to money the property of the bankruptcy estate. One of the most basic collection methods a trustee possesses is its turnover power under § 542(a) of the Bankruptcy Code. Pursuant to § 542(a), an entity in possession, custody, or control, during the bankruptcy case, of property that the trustee may use, sell, or lease, must deliver to the trustee, and account for, such property or the value of such property.

An interesting issue has arisen that is placing debtors …

Home Mortgage Strip Down In Chapter 13 Bankruptcy: A Contextual Approach To Sections 1322(B)(2) And (B)(5), Mark S . Scarberry, Scott M. Reddie

Pepperdine Law Review

No abstract provided.

The Long And Winding Road: State Sovereign Immunity's Effect On Gaming License Revocation For The Casino Debtor, Christopher M. Humes

UNLV Gaming Law Journal

One of the most vital and contentious proceedings between a casino debtor and a regulatory agency is a post-petition license revocation hearing. Much debate exists about whether the license qualifies as property of the estate and whether the regulatory agency can be exempted from the protections inherent in the Bankruptcy Code due to the use of police and regulatory power. However, maybe the most contentious and impactful debate is whether the regulatory agency is free from the bankruptcy court’s jurisdiction due to the Eleventh Amendment’s guarantee of sovereign immunity.

At the center of the tension concerning sovereign immunity lies 11 …

Improving Bankruptcy Sales By Raising The Bar: Imposing A Preliminary Injunction Standard For Objections To § 363 Sales, Matthew A. Bruckner

Catholic University Law Review

No abstract provided.

Trademark Licenses: Even In A Hypothetical Or Actual World, Footstar Got It Right, Saul Ehrenpreis

Student Articles and Papers

The core of many companies' business model depends heavily on access to a trademark license. Unfortunately, despite possessing a license and turning a profit, some of these companies run into difficulties and are forced to file for chapter 11. This article analyzes the legal issues faced by a company in this situation. First, it explores the existing tension at the intersection of bankruptcy and trademark law, then discusses the three approaches courts have taken to resolving this tension. It concludes with the proposal that only one of these approaches appropriately balances the competing interests at stake.

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 …

Modified Plans Of Reorganization And The Basic Chapter 13 Bargain, David G. Carlson

Articles

A very large number of chapter 13 plans are confirmed each year. Unlike chapter 11 plans (for non-individuals), these plans may be revised after confirmation. The modification provisions of the Bankruptcy Code, however, give very little guidance as to what constitutes a permissible modification. In contrast, confirmation of the original plan is very carefully governed. This article theorizes that modification must honor the basic chapter 13 bargain. According to this bargain, the debtor is entitled to the bankruptcy estate and the creditors are entitled to net surplus income. The article assesses whether the diffuse and disorganized caselaw of modification adheres …

Case Analysis Of In Re Atlantic Gulf Comtys. Corp., Meagan Mahar

Bankruptcy Research Library

(Excerpt)

In In re Atlantic Gulf Comtys. Corp., a Delaware Bankruptcy Court applied New York law to both equitable and legal arguments made by the debtor, holding that funds in an escrow account created by the debtor were not property of the debtor’s estate. 369 B.R. 156, 164–65 (Bankr. D. Del. 2007). First, this memo will examine the two opposing legal and equitable arguments made by the parties, with each relying on different theories of characterizing the debtor’s interest in escrow accounts as they have evolved throughout New York caselaw. Second, it will analyze the contingency argument made by the …

The Chapter 13 Estate And Its Discontents, David G. Carlson

Articles

Thirty years after the enactment of the Bankruptcy Code, the courts have yet to agree on a theory of the bankruptcy estate in Chapter 13 cases. This is not the fault of the courts. The Bankruptcy Code is contradictory as to the composition of the chapter 13 estate. This article selects one of four possible theories and defends it as the one that does the least violence to the plain meaning of the Bankruptcy Code.

This theory is referred to in this article as the "Divestment Theory," because it holds that, upon confirmation of a chapter 13 plan, the debtor …

In Re Davis, Adam Schlusselberg

NYLS Law Review

No abstract provided.

Chip Away At The Stone: The Validity Of Pre-Bankruptcy Clauses Contracting Around Section 363 Of The Bankruptcy Code, Matthew P. Goren

NYLS Law Review

No abstract provided.