Bankruptcy Law Commons^™

Intangible Property Can Satisfy The Debtor Eligibility Requirement Under Section 109(A), Edward Cho-O’Leary

Bankruptcy Research Library

(Excerpt)

Section 109(a) of title 11 of the United States Code (the “Bankruptcy Code”) states that “only a person that resides or has a domicile, a place of business, or property in the United States … may be a debtor under this title.” While a “foreign entity or individual domiciled abroad but owning property or doing business in the United States is eligible to be a debtor under 11 U.S.C. § 109,” the requirement can be difficult if the foreign entity or individual domiciled abroad has no commercial connection to the US. Consequently, the property component of Section 109(a) has …

Circuit Courts Interpret The Section 1123(A)(4) Equal Treatment Rule, Morgan Liptak

Bankruptcy Research Library

(Excerpt)

Under section 1123(a)(4) of title 11 of the United States Code (the “Bankruptcy Code”), a plan of reorganization must “provide the same treatment for each claim or interest of a particular class, unless the holder of a particular claim or interest agrees to a less favorable treatment of such particular claim or interest.” The Supreme Court has never interpreted this provision, nor has the Bankruptcy Code defined the standard of equal treatment. As a result, the circuit courts have created a standard for what exactly the equal treatment rule requires.

The first part of this memorandum discusses what the …

Circuit Split As To Whether Rejection Of Power Purchasing Agreements Are Subject To Bankruptcy Court Or Ferc Jurisdiction, Gabriela Zapata

Bankruptcy Research Library

(Excerpt)

Chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) enables troubled enterprises to be restructured, so that they can operate successfully in the future. Under section 365 of the Bankruptcy Code, a debtor in possession may reject a contract subject to bankruptcy court approval. The Federal Energy Regulatory Commission (“FERC”), however, has “exclusive jurisdiction” over the transmission of electric energy in interstate commerce, including power purchase agreements (“PPAs”). Accordingly, there is a dispute as to whether the rejection of a PPA is subject to bankruptcy court or FERC approval.

This memorandum addresses how courts have …

The High Burden Of A “Minimal Standard Of Living” Under The First Prong Of The Brunner Test, Samantha Alfano

Bankruptcy Research Library

(Excerpt)

Under section 523(a)(8) of title 11 of the United States Code (the “Bankruptcy Code”), student loan debt is not dischargeable unless the debtor can show “undue hardship.” Courts have concluded that section 523(a)(8) creates a presumption that student loans are nondischargeable, finding that the burden of challenging this presumption rests upon the individual debtor. The United States Court of Appeals for the Second Circuit in Brunner v. New York State Higher Educ. Servs. Corp., articulated what has become the standard test (the “Brunner test”) for determining undue hardship. Subsequently, the Brunner test has been adopted by the …

Sdny Bankruptcy Judges Have Differing Views On A Bankruptcy Court’S Jurisdiction To Issue Third-Party Releases, Brandon Auerbach

Bankruptcy Research Library

(Excerpt)

Under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”), a debtor may receive a discharge from claims under its plan of reorganization. A chapter 11 discharge functions as a release of liability for the debtor. Often debtors attempt to include releases for non-debtor parties as part of their reorganization plans to preclude creditors from asserting claims against non-debtors. However, the Bankruptcy Code does not expressly provide for such “third party releases,” except in the context of asbestos cases. Nevertheless, bankruptcy courts have approved third-party releases in other circumstances. The courts, however, are divided as …

Inconsistent Standards To Approve A Settlement Under Rule 9019, Zach Benaharon

Bankruptcy Research Library

(Excerpt)

“Settlements and compromises are favored in bankruptcy as they minimize costly litigation and further parties’ interests in expediting the administration of the bankruptcy estate.” In accordance with this policy, Congress promulgated Federal Rule of Bankruptcy Procedure 9019 (the “Bankruptcy Rules”), which governs settlements in a bankruptcy case. Rule 9019 gives a bankruptcy judge discretion to approve a proposed settlement and states in relevant part, that: “[o]n motion by the trustee, the court may approve a compromise or settlement.” Rule 9019 applies to both settlements brought before the court on a standalone basis as well as those presented as part …

The In Pari Delicto Defense May Bar Trustees That Bring Claims Which Are Property Of The Estate Under 11 U.S.C. § 541(A), Carmine Broccole

Bankruptcy Research Library

(Excerpt)

The in pari delicto doctrine states that “[i]n a case of equal or mutual fault … the position of the [defending] party … is the better one.” This doctrine is guided by the premise that it is not within the purview of the court to resolve disputes among wrongdoers, and that denial of judicial relief in these instances effectively deters illegal activity. Within the bankruptcy context, “every Circuit to have considered the question has held that in pari delicto can be asserted against a trustee bringing a claim on behalf of a debtor in bankruptcy.”

Under Section 541(a)(1) of …

Trademarks Are “Intellectual Property” Under Bankruptcy Code Section 365(N), Emily Clark

Bankruptcy Research Library

(Excerpt)

Under section 365 of title 11 of the United States Code (the “Bankruptcy Code”) a trustee or a debtor-in-possession may reject an executory contract. Rejection has the same effect as a breach outside of bankruptcy; rejection does not rescind the rights that the contract previously granted or terminate the contract. Under section 365(n) of the Bankruptcy Code, a licensee of intellectual property may retain the right to use such intellectual property notwithstanding the rejection of such license provided it is an executory contract. A contract is executory when there is performance due, to some extent, from both parties. A …

The Two Approaches To Center Of Main Interest Timing Determination, John Freeze

Bankruptcy Research Library

(Excerpt)

Under Chapter 15 of title 11 of the United States Code (the “Bankruptcy Code”), a bankruptcy court may grant recognition to a “foreign main proceeding.” A foreign main proceeding is “a foreign proceeding pending in the country where the debtor has the center of its main interests." The Bankruptcy Code offers little in the way of a definition of a foreign main proceeding, only that “the debtor’s registered office . . . is presumed to be the center of the debtor’s main interests.” Thus, chapter 15 provides a rebuttable presumption that a foreign debtor’s center of main interest is …

Discharging Student Loan Debt Under Brunner: Interpreting The Second Prong’S “Additional Circumstances” Requirement, Emily Gault

Bankruptcy Research Library

(Excerpt)

Under title 11 of the United States Code (the “Bankruptcy Code”), an individual debtor is not entitled to a discharge of his or her student loan debt “unless excepting such debt from discharge…would impose an undue hardship on the debtor and the debtor’s dependents.” Because the Bankruptcy Code does not define the term “undue hardship,” the courts have applied a broad range of standards which has resulted in a “state of considerable confusion.” Currently, the majority of circuit courts have adopted the test formulated by the United States Court of Appeals for the Second Circuit to determine what qualifies …

The Brunner Test Imposes A High Burden To Discharge Student Loan Debt, Lindsey Haynes

Bankruptcy Research Library

(Excerpt)

The United States Bankruptcy Code (the “Code”) makes it more difficult to discharge student loan debt than other debts. Student loans are treated differently from other loans because they are presumptively nondischargable. The government wants to ensure young debtors with promising future income streams remain liable to preserve student loan funding in the future. More specifically, section 523(a)(8) of the Code prevents abuses of the educational loan system and protects the continued viability of student loan programs. But, if certain circumstances are proven, student loan debt can be discharged.

The Code states if repayment “would impose an undue hardship …

Relief Afforded To Debtor Clients Harmed By A Bankruptcy Petition Preparer's Fraudulent, Unfair, Or Deceptive Conduct, Kathryn M. Ingle

Bankruptcy Research Library

(Excerpt)

A "Bankruptcy Petition Preparer" (the "Preparer") is a non-attorney who assists pro se debtors in the preparation of bankruptcy petitions and documents related to filing for bankruptcy. Preparers are regulated under section 110 of title 11 of the United States Code the (the "Code"). This section of the Code severely limits the scope of a Preparer's duties. Preparers lack the same rigorous legal and ethical training acquired by bankruptcy attorneys; therefore, some Preparers try to take advantage of debtors who are often ignorant of the bankruptcy system. Section 110 of the Code outlines sanctions to deter Preparers from behaving …

The Objective Standard For Holding A Creditor In Civil Contempt For Violating A Discharge Order, Alexander Cirkovic Koban

Bankruptcy Research Library

(Excerpt)

An individual debtor is generally entitled to a discharge at the conclusion of a bankruptcy case. A discharge is a legal injunction that both releases the debtor from liability for most pre-bankruptcy debts and bars creditors from collecting any debt that has been discharged. A creditor that violates the discharge may be held in contempt and subject to sanctions by a court.

In Taggart v. Lorenzen, the Supreme Court set the standard for when to impose civil contempt, holding that “a court may hold a creditor in civil contempt for violating a discharge order if there is no …

The Scope And Retroactivity Of The Honoring American Veterans In Extreme Need “Haven” Act In Chapter 7 And Chapter 13 Bankruptcy Cases, Carole Ann Liscio

Bankruptcy Research Library

(Excerpt)

On August 23, 2019, President Donald J. Trump signed the Honoring American Veterans in Extreme Need Act (the “HAVEN Act”). Congress stated that the HAVEN Act’s purpose is to correct an “obvious inequity” in title 11 of the United States Code (the “Bankruptcy Code”) as it relates to veterans. The HAVEN Act is silent as to whether it applies retroactively. Certain courts, however, have explored the idea that it should apply to cases pending as of the HAVEN Act’s enactment.

This memorandum analyzes whether the HAVEN Act can be applied retroactively or only to cases filed following its enactment. …

Center Of Main Interest For Members Of A Group Of Companies, Loredana Miranda

Bankruptcy Research Library

(Excerpt)

Under Chapter 15 of title 11 of the United States Code (the “Bankruptcy Code”), a court can recognize a foreign bankruptcy, insolvency, or restructuring proceeding (i.e., a foreign proceeding) as either a “foreign main proceeding” or a “foreign nonmain proceeding.” The Bankruptcy Code defines a foreign main proceeding as “a foreign proceeding pending in the country where the debtor has the center of its main interests.” The Bankruptcy Code does not define the “center of main interest” or “COMI.” Thus, bankruptcy courts have formulated different definitions and factors to determine a debtor’s COMI.

Complex corporate structures have made it …

Luxurious Lifestyles Alone May Not Constitute A Lack Of Good Faith Under The Bankruptcy Code, Spencer Nelson

Bankruptcy Research Library

(Excerpt)

Luxurious lifestyles implicate a debtor’s good faith when applying for the protections provided under title 11 of the United States Code (the “Bankruptcy Code”). Typically, bankruptcy courts avoid making the debtor’s luxurious lifestyle, on its own, a determinative factor because the good faith (or bad faith) analysis is determined under a totality of the circumstances approach. A debtor with continuing expenses typically indicative of bad faith can maintain such expenses if the debtor has made other concerted efforts to repay creditors or can otherwise justify those expenses. What is required depends on whether the debtor is applying for protections …

Creditors Are Unable To Directly Assert Claims For Breach Of Fiduciary Duty Or Fraudulent Transfer Against Another Creditor When The Debtor Is In Bankruptcy, Anthony Norris

Bankruptcy Research Library

(Excerpt)

In order to effectuate the efficient resolution of bankruptcy proceedings, courts have followed the public policy of reducing the number of suits that are ancillary to a bankruptcy case. Courts have achieved this goal by limiting those that have standing once a bankruptcy case is initiated. Thus, courts will appoint a trustee who alone has standing to handle the estate of the debtor.

Typically, the issue of standing will be straightforward when a creditor sues a debtor. However, the question becomes more complicated when a creditor sues another creditor, where their only connection is the debtor.

This memorandum focuses …

Domestic Support Obligation Not Necessarily A First Priority Claim, Gabrielle Pullo

Bankruptcy Research Library

(Excerpt)

During distribution of the proceeds of a debtor’s estate, creditor claims and expenses are paid in a specific order of priority pursuant to title 11 of the United States Code (the “Bankruptcy Code”). Domestic support obligations, which include monies owed to or recoverable by a spouse, former spouse, child of the debtor, or such child’s parents, are entitled to be paid first. Typically, these types of claims are first priority regardless of whether they are filed by the persons to whom they are owed or by a governmental unit on behalf of such persons. However, this top tier priority …

A Bankruptcy Court’S Authority To Find An Implicit Waiver Of A Debtor’S Rights Under A Chapter 11 Reorganization Plan, Benjamin Ranalli

Bankruptcy Research Library

(Excerpt)

In chapter 11 cases, bankruptcy courts often deal with parties seeking reorganization or the approval of a reorganization plan. However, repeated instances of post-confirmation disputes have led courts to address the issue of whether bankruptcy courts retain jurisdiction in disputes that arise after the plan has been confirmed. It is settled that bankruptcy courts retain post-confirmation jurisdiction regarding certain matters in chapter 11 cases. Since reorganization plans are treated like contracts between parties, issues of contract law regularly arise in bankruptcy court in post-confirmation cases. One such issue is whether a bankruptcy court may authorize an implicit waiver of …

The Standards The Court Uses To Determine The Priority Of A Party’S Entitlement To Dividends In A Bankruptcy Proceeding, Nally Ann Scaturro

Bankruptcy Research Library

(Excerpt)

Although the entitlement to receive dividends is not explicitly addressed in the United States Bankruptcy Code (the “Bankruptcy Code”), it is likely this right will be categorized as a security interest and thus be subordinated to creditors’ interests in a bankruptcy proceeding.

Creditors are entitled to be paid ahead of shareholders in the distribution of corporate assets. Furthermore, securities are subordinated to claims by creditors of the debtors. Presently, all interests not captured by the Bankruptcy Code are analyzed under the residual clause. This clause provides that unless the interest in dispute is explicitly excluded from the definition of …

Collusive Bidding On A Debtor’S Assets: A Question Of Fairness, Ross Weiner

Bankruptcy Research Library

(Excerpt)

Section 363(n) of title 11 of the United States Code (the “Bankruptcy Code”) prohibits “collusive bidding” -- a process where “the sale price [is] controlled by an agreement among potential bidders.” Section 363(n) only provides the trustee with the right to bring a claim of collusive bidding, [which if successful could undo a previously approved sale]. However, courts have allowed unsuccessful bidders to pursue such claims. Further, unsuccessful bidders have the right to recover “any costs, attorneys’ fees, or expenses incurred in avoiding such sale or recovering such amount.”

Today, a lack of clarity exists regarding when an unsuccessful …

Creditors Can Recover Post-Petition Interest By Incorporating Original Agreement Into The Plan Of Reorganization By Referencing A Specific Clause In The Original Agreement, Emmanuelle Yeremou-Ngah

Bankruptcy Research Library

(Excerpt)

Courts will generally interpret a contract according to its plain language, and any intent to incorporate a separate document must be clearly manifested with sufficient specificity. The parties’ intent will be inferred from the express language of the contract. Under section 506(b) of title 11 of the United States Code (the “Bankruptcy Code”), an oversecured creditor is entitled to post-petition interest on its secured claim up to the value of the collateral securing its claim. Additionally, most courts have ruled that a secured creditor is entitled to post-petition interest according to the rate specified in the contract or a …

Consumers’ Declining Power In The Fintech Auto Loan Market, Pamela Foohey

Scholarly Works

Automobiles have become part of America’s infrastructure. For most people, having access to a car is crucial to their livelihoods and they will take on significant amounts of debt to purchase vehicles. Auto debt is unlike any other consumer debt, both in its structure, which allows creditors to easily seize collateral, and in its lack of regulation. The unique and lucrative nature of auto debt has not gone unnoticed by lenders or by companies leveraging fintech to offer people new ways to purchase cars and car loans. This Article assesses the evolving marketplace for auto sales, leasing, and loans to …

The Limited Lifespan Of The Bankruptcy Estate: Managing Consumer And Small Business Reorganizations, Jonathan M. Seymour

Faculty Scholarship

Congress has a great affinity for debt adjustment bankruptcies. These are bankruptcies in which a debtor keeps rather than liquidates her assets and instead repays creditors out of future income. Chapter 13, which allows individual consumer debtors to reorganize in this way, was supplemented in 1986 by chapter 12 for farm bankruptcies. In 2019, in the largest expansion of debt adjustment bankruptcies since the Bankruptcy Code was enacted, Congress made debt adjustment bankruptcy available to small businesses.

The reality is, however, that most debt adjustment bankruptcies fail. For that reason, the relative rights of debtors and creditors when tensions arise …

Tuition As A Fraudulent Transfer, David G. Carlson

Articles

Bankruptcy trustees are suing universities because the insolvent parent of an adult student has written a tuition check while insolvent. The theory is that the university is the initial transferee of a fraudulent transfer that has provided benefit to the student but not to the parent debtor. This article claims that the university is never the initial transferee of tuition dollars. Rather, the student is. Where the university has no knowledge of parent insolvency, the university can count educating the student as a good faith transfer for value, thus immunizing the university from liability. The unpleasant side effect is that …

Giving Back A Fraudulent Transfer: A Defense To Liability?, David G. Carlson

Articles

In Whitlock v. Lowe (In re Deberry) (5th Cir. 2019), the Fifth Circuit court of appeals found it obvious that if a transferee gives back fraudulently transferred funds (which the debtor then dissipates), the transferee has a complete defense to liability to the transferor’s bankruptcy trustee. This puts the Fifth Circuit at odds with the Sixth and Seventh Circuits, where the prepetition give-back counted as no defense. This article concludes that a more nuanced position should mediate between these extremes, based on an “innocent donee” defense retrieved from Nineteenth Century precedent. The article emphasizes that if bad faith transferees for …

Bankruptcy’S Role In The Covid-19 Crisis, Edward R. Morrison, Andrea C. Saavedra

Faculty Scholarship

Policymakers have minimized the role of bankruptcy law in mitigating the financial fallout from COVID-19. Scholars too are unsure about the merits of bankruptcy, especially Chapter 11, in resolving business distress. We argue that Chapter 11 complements current stimulus policies for large corporations, such as the airlines, and that Treasury should consider making it a precondition for receiving government-backed financing. Chapter 11 offers a flexible, speedy, and crisis-tested tool for preserving businesses, financing them with government funds (if necessary), and ensuring that the costs of distress are borne primarily by investors, not taxpayers. Chapter 11 saves businesses and employment, not …

No Longer Lost In Translation : South African Admiralty And Insolvency Proceedings At A Crossroads, Phiwe Ngcobo

World Maritime University Dissertations

No abstract provided.

Perlindungan Hukum Nasabah Dalam Perjanjian Telemarketing Bank, Sri Lestari Poernomo

Jurnal Hukum & Pembangunan

Telemarketing is one of the banking products. This research is conducted to analyze the validity of the agreement that was born and the offering of banking products through telemarketing, transactions made in telemarketing activities almost entirely do not fulfill the legal agreement requirements, namely contracts because if there are elements of oversight and fraud, the Bank must be responsible if a loss occurs because the bank uses customer data to be referenced to the insurance company that works with the bank. The problem examined is how the validity of the agreement that was born from bank telemarketing activities and the …

Perlindungan Terhadap Simpanan Pernah Tercatat Pada Bank, Bukan Suatu Keniscayaan, Yudha Ramelan

Jurnal Hukum & Pembangunan

Many types of crimes occur in the banking sector, which has implications for losses suffered by people who save their money in banks. One example of crime is taking deposits out from the bank by breaking the law. It causes deletion data of customer deposits from the bank's balance sheet or a list of third party funds. Customers are declared to have already received payment from the bank, and hence the agreement to deposit funds between the customer and the bank is reported to have ended. This condition can make customers’ right to get a refund of their money from …