Bankruptcy Law Commons^™

Milavetz, Gallop & Milavetz, Pa. V. United States: "In Contemplation Of' The Meaning, Applicability, And Validity Of Attorney Restrictions In The Bapcpa, Joseph D. Orenstein

Mercer Law Review

In Milavetz, Gallop & Milavetz, PA. v. United States, the Supreme Court of the United States held that, under section 227 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), attorneys who provide bankruptcy counsel are "debt relief agencies." The Court also held two BAPCPA provisions constitutional: one provision that prevented debt relief agencies from advising a debtor to incur more debt in contemplation of bankruptcy and another that imposed disclosure requirements on debt relief agencies. In light of the inconsistent and unclear interpretations of BAPCPA provisions considered in this case, the Court's ruling acts to …

Integrating "Alternative" Dispute Resolution Into Bankruptcy: As Simple (And Pure) As Motherhood And Apple Pie?, Nancy A. Welsh

Faculty Scholarship

Today, there can be little doubt that “alternative” dispute resolution is anything but alternative. Nonetheless, many judges, lawyers (and law students) do not truly understand the dispute resolution processes that are available and how they should be used. In the shadow of the current economic crisis, this lack of knowledge is likely to have negative consequences, particularly in those areas of practice such as bankruptcy and foreclosure in which clients, lawyers, regulators, and courts work under pressure, often with inadequate time and financial resources to permit careful analysis of procedural options. Potential negative effects can include: (1) impairment of a …

The Potential Value Of Dynamic Tension In Restructuring Negotiations, Michelle M. Harner, Jamie Marincic

Faculty Scholarship

No abstract provided.

"Some Portion Of Misconduct": The Argument For A Negligence Standard For Expecting Discharge Of Debts Incurred Through Defalcation, Alyssa Miller

William & Mary Business Law Review

The United States Circuit Courts are currently split on the correct standard for defalcation: that is, they are split on what level of mental culpability a fiduciary must possess before bankruptcy courts exclude debts incurred through misconduct from discharge. The First, Fifth, Sixth, and Seventh Circuits apply a recklessness standard. The Fourth, Eighth, and Ninth Circuits apply a negligence standard. The time has come to resolve the circuit split because the inter-jurisdictional nature of business in the twenty-first century creates a danger that fiduciaries will not have notice of potential liability if standards for liability vary from jurisdiction to jurisdiction. …

The Story Of Kmart's Reorganization, John Fisher, Justin Wolbert

Chapter 11 Bankruptcy Case Studies

No abstract provided.

Debarring Faithless Corporate And Religious Fiduciaries In Bankruptcy, Lyman P.Q. Johnson

Scholarly Articles

Fiduciary duties for the top governance officials of both business and religious organizations demand faithfulness to the institution’s mission, a seemingly strict demand. Meaningful sanctions for breach, however, are difficult to obtain and may not deter future misconduct, including that kind of conduct leading to organizational bankruptcy. This article advocates that, to attain both special and general deterrence, bankruptcy law should look to other regulatory regimes and permit a bankruptcy court to debar faithless secular and ecclesiastical fiduciaries from holding certain leadership positions. Although written shortly before the 2012 Supreme Court Hosanna-Tabor decision, that opinion – addressing the “ministerial exception” …

Bankruptcy, Relocation, And The Debtor's Dilemma: Preserving Your Homestead Exemption Versus Accepting The New Job Out Of State, Timothy R. Tarvin

Loyola University Chicago Law Journal

Current unemployment levels have forced a significant portion of homeowners to contemplate bankruptcy. In an attempt to avoid the impending bankruptcy, those homeowners have sought new employment, even when that new employment would entail moving to a different state. Yet crossing state lines may be the worst strategy for a debtor considering bankruptcy. Most jurisdictions limit the homestead exemption in bankruptcy to residents; to exempt a home from creditor claims, a debtor must have lived in her current domicile for two years. Thus, the unemployed debtor who is trying to avoid bankruptcy by moving out of state to begin new …

A Delicate Balancing Act: Satisfying The Fourth Amendment While Protecting The Bankruptcy System From Debtor Fraud, 28 Yale Journal On Regulation 367 (2011), Michael D. Sousa

Sturm College of Law: Faculty Scholarship

Since the Middle Ages, bankruptcy laws have been concerned with preventing and deterring fraudulent debtors, most notably debtors who willfully fail to fully disclose all of their assets to their creditors. This concern was no less prevalent during the passage of the first Bankruptcy Act in the United States in 1800, which established bankruptcy fraud as a criminal offense. No doubt, the evolution of modern American bankruptcy law has moved toward a more liberal treatment of debtors. Significantly, so long as debtors conform to certain behavioral norms prescribed in the Bankruptcy Code, honest, but unfortunate debtors can expect to receive …

The Legal Infrastructure Of Ex Post Consumer Debtor Protections, Melissa B. Jacoby

Fordham Urban Law Journal

This article reviews the legal infrastructure of tools that protect debtors’ assets or income, or that enable debtors to resolve secured credit problems during ordinary times (e.g., not specific crisis interventions). Part I divides consumer protection tools into functional categories: protection of assets and future income, and retention of property subject to a security interest in default. Part II identifies the location of similar tools in federal law, uniform state law, and non-uniform state law. Part III examines implications of this divided system, with a special focus on the bundling of debtor protections and the role of intermediaries. This discussion …

The "Current Monthly Income" Debate: Unemployment Compensation As A "Benefit Received Under The Social Security Act"?, 44 J. Marshall L. Rev. 801 (2011), Brent Wilson

UIC Law Review

No abstract provided.

Financial Stability Is A Volume Business: A Comment On 'The Legal Infrastructure Of Ex Post Consumer Debtor Protections', Anna Gelpern

Fordham Urban Law Journal

In this response to Professor Melissa B. Jacoby's "The Legal Infrastructure of Ex Post Consumer Debtor Protections," the author expands the scope of the household debt discussion beyond the consumer level and examines the effect that a fragmented infrastructure for legal service delivery can have on financial stability nationwide.

Nondebtor Releases In Chapter 11 Reorganizations: A Limited Power, Elizabeth Gamble

Fordham Urban Law Journal

This note concerns the ability of bankrupt companies to file Chapter 11 reorganization plans that contain provisions releasing the liabilities of parties other than the companies themselves. One such mechanism, used in conjunction with the 2010 BP oil spill in the Gulf of Mexico, is a trust releasing a financially-troubled company from liability to certain types of tort claimants. The author argues that although bankruptcy courts do have the power to approve such plans, such power should be carefully limited when companies seek to grant releases to insiders and insurance companies.

Debts, Defaults And Details: Exploring The Impact Of Debt Collection Litigation On Consumers And Courts, Mary B. Spector

Faculty Journal Articles and Book Chapters

This Article explores consumer collection litigation through original research from more than five hundred cases filed in the Dallas County courts. It analyzes the data within the context of the modern debt collection industry, paying special attention to the role of debt buyers and to the peculiar legal issues their involvement raises. After explaining the methodology and mechanics used to gather and analyze the data, the Article discusses the data collected, identifying and analyzing the most significant findings and placing them within a larger legal landscape. While the research confirms anecdotal reports of litigation abuse in consumer collection cases, it …

Drug Fair Group, Inc., Robby Lockett, Scott Lochridge, Jessica Manning

Chapter 11 Bankruptcy Case Studies

No abstract provided.

Unveiling The Mystery, History, And Problems Associated With The Jurisdictional Limitations Of Bankruptcy Courts Over Personal Injury Tort And Wrongful Death Claims, Ishaq Kundawala

Articles

The current jurisdictional structure of bankruptcy courts in the United States is nothing short of a mystery. Scholars, judges, and practitioners have long struggled with finding their way through the confusing labyrinth of jurisdictional rules, exceptions, and exclusions in our current bankruptcy system. Courts spend countless hours each year considering all kinds of jurisdictional issues that arise in bankruptcy cases. This results in a diversion of judicial resources from substantive matters. Adding to this quandary is the limited scope of bankruptcy courts' jurisdiction over a small but very significant subset of claims-personal injury tort and wrongful death claims-which weaves yet …

The Terrible TousaS: Opinions Test The Patience Of Corporate Lending Practices, Jessica D. Gabel

Faculty Publications By Year

Two diametrically opposed decisions pit creditors against debtors. The case of troubled homebuilder TOUSA has generated shockwaves through the lending industry. Set against the backdrop of the housing collapse and risky lending, the bankruptcy court’s decision left secured creditors with a mixture of shock, anger, and worry over the repercussions. In that opinion, the bankruptcy court unwound a nearly $1 billion transaction of liens and loan proceeds, on grounds that the transactions drove the debtor company into the ground. In other words, the court found that a fraudulent transfer had occurred. Not surprisingly, the lenders appealed and the next decision …

Midnight In The Garden Of Good Faith: Using Clawback Actions To Harvest The Equitable Roots Of Bankrupt Ponzi Schemes, Jessica D. Gabel

Faculty Publications By Year

This paper addresses an increasingly relevant issue in bankruptcy – does it make sense to protect “good faith” investors who have invested (some quite profitably) in a Ponzi scheme from clawback actions by the trustee? This article presents issues of economic equity (equitable payouts to individual creditors vs. equitable distribution among all creditors); bankruptcy policy (retaining antiquated notions of good faith in an ever-evolving financial playground); and judicial inconsistency (disparities in the treatment on Ponzi investors). * In the aftermath of the financial crisis, investors have attempted to pull their money back from the markets, collapsing hundreds of Ponzi schemes …

Committee Capture? An Empirical Analysis Of The Role Of Creditors' Committees In Business Reorganizations, Michelle M. Harner, Jamie Marincic

Faculty Scholarship

The number of businesses experiencing financial distress increased significantly during the past several years. The number of Chapter 11 reorganization cases likewise rose. And many of these business failures were spectacular, leaving little value for creditors and even less for shareholders. Consequently, how the business debtor’s limited asset pie is divided and who gets to allocate the pieces are very relevant and important questions.

The U.S. Bankruptcy Code generally contemplates the appointment of a committee of the debtors’ unsecured creditors to serve as a fiduciary for all general unsecured creditors and as a statutory watchdog over the debtor and its …

Behind Closed Doors: The Influence Of Creditors In Business Reorganizations, Michelle M. Harner, Jamie Marincic

Faculty Scholarship

General corporate law delegates the power to manage a corporation to the board of directors. The board in turn acts as a fiduciary and generally owes its duties to the corporation and its shareholders. Many courts and commentators summarize the board’s primary objective as maximizing shareholder wealth. Accordingly, one would expect a board’s conduct to be governed largely by the interests of the corporation and its shareholders. Yet, anecdotal and increasing empirical evidence suggest that large creditors wield significant influence over their corporate debtors. Although this influence is most apparent as the corporation approaches insolvency, the strength of the creditors’ …

Serving A Summons By First Class Mail: Why Bankruptcy Rule 7004(B)(1) Violates Due Process, Jonathon S. Byington

Faculty Law Review Articles

This article argues that even though it has been accepted and widely used throughout the nation for thirty-five years by courts, practitioners, and commentators, the service method of delivering a summons and complaint solely by first class mail under Bankruptcy Rule 70004(b)(1) violates due process. Part I shows that the establishment of first class mail as an alternate service method occurred before the vast expansion of bankruptcy court jurisdiction. Part II evaluates the various reasons why Rule 7004(b)(1) violates due process. The article concludes in Part III by recommending a two-part solution to revise the rule.

Bankruptcy’S Protection For Non-Debtors From Securities Fraud Litigation, John M. M. Wunderlich

Fordham Journal of Corporate & Financial Law

Given the recent economic climate, the judiciary faces an all too familiar challenge: navigate through the web that is bankruptcy and securities fraud. So far, bankruptcy has evolved into a tool to resolve mass tort litigation, like securities fraud. However, this Article explores bankruptcy as a tool to resolve securities litigation against non-debtors, those that never file for bankruptcy protection. The protection the Bankruptcy Code provides to non-debtors, like officers and directors, goes largely unnoticed, much to the detriment of securities fraud victims. Mindful that we now are in the midst of another financial crisis and that attention will slowly …

Lessons For Competition Law From The Economic Crisis: The Prospect For Antitrust Responses To The “Too-Big-To-Fail” Phenomenon, Jesse W. W. Markham, Jr.

Fordham Journal of Corporate & Financial Law

This article examines whether, and the extent to which, antitrust law could contribute to a broader regulatory effort to control the too-big-to-fail problem. The article begins by exploring the nature of the problem. Against this backdrop, it considers antitrust policy and rules to evaluate whether antitrust might play a meaningful role. The article concludes that antitrust law, if vigorously enforced with an emphasis on avoiding too-big-to-fail problems, can be a useful public policy tool to address the problem. However, it can come nowhere near solving it or preventing recurrences of recent systemic failures.

Mortgage Foreclosures, Mortgage Morality, And Main Street: What’S Really Happening?, Jennifer M. Smith

Journal Publications

The American economy is in the tank. Millions of citizens are without jobs, overwhelmed with credit card debt, and losing their homes. The brighter side is that as a result, America has finally embraced financial reform, and the unstable economy is stabilizing marriages. Nevertheless, the United States remains in the midst of a housing crisis, and the ending remains uncertain.

There has been a media blitz about the housing crisis and Wall Street - corporate interests, but much less about the actual impact of the housing crisis on Main Street - America's working class people and small business owners. This …

Reconceptualizing Present-Value Analysis In Consumer Bankruptcy, Rafael I. Pardo

Washington and Lee Law Review

During the three decades following the enactment of the Bankruptcy Code, courts and commentators have been vexed by the problem of determining the present value of future payments to creditors proposed in a debtor’s repayment plan. The issue central to this problem has been the discount rate to be applied when conducting present-value analysis. While the Code unmistakably requires the discounting of future payments as part of the process for confirming a repayment plan, the Code does not explicitly specify the rate itself or the manner in which the rate should be calculated. No uniform rule of decision has emerged …

Article 9'S Bankrupt Proceeds Rule: Amending Bankruptcy Code Section 552 Through The Ucc Proceeds Definition, G. Ray Warner

Faculty Publications

Ten years ago, just as revised Article 9 was becoming effective, I documented how several of the Article 9 revisions had little or no nonbankruptcy function, but were designed primarily to alter bankruptcy law outcomes in favor of secured creditors. I argued that such attempts to amend federal bankruptcy law through the state uniform laws revision process were improper and suggested theories that would limit or avoid the intended bankruptcy law changes. This anniversary symposium provides an excellent opportunity to revisit one of those Article 9 revisions in greater detail and see how successful the drafters' anti-bankruptcy agenda has been.

Religion And Bankruptcy, Keith Sharfman, G. Ray Warner

Faculty Publications

(Excerpt)

From the time of its creation and throughout its evolution, bankruptcy law has affected and been affected by religion. Important aspects of current bankruptcy law, such as the discharge of debt and the exemption of personal property, originated in religious traditions before making their way into secular law. At the same time, religious individuals and institutions are themselves often parties in bankruptcy cases, and the Bankruptcy Code specifically protects religious contributions from avoidance as fraudulent transfers, excludes them from consideration in connection with the dismissal of a bankruptcy case for reasons of abuse, and allows them as a deductible …

Ask The Professor: “Omg! What Did Mf Global Do?, Ronald Filler

Articles & Chapters

This paper, written one week after MF Global, a large futures brokerage firm filed for bankruptcy, analyzes the bankruptcy, its impact on futures customers and the shortfall in customer funds that occurred on October 31, 2011. Subsequent to MF Global's bankruptcy, several customer protection rules were amended by the U.S. Commodity Futures Trading Commission and the National Futures Association.

The Chapter 13 Alternative: A Legislative Solution To Undersecured Home Mortgages, Samuel Bufford

Faculty Scholarship

This article discusses minor changes to the U.S. Bankruptcy Code that would make avoiding foreclosure possible for a homeowner who (a) is presently not able to make the mortgage service payments but (b) could make payments for a mortgage that is reduced to the market value of the property and to a fixed market mortgage rate. This article does not address the political issue of what protections Congress might decide to provide mortgage owners and servicers as a part of such legislation.

Japan's Business Revitalization Adr: An Economic Savior Or A Convenient Excuse To Avoid Bankruptcy?, Naoko Okamoto

Cardozo Journal of Conflict Resolution

This Note analyzes Japan's newly enacted "Business Revitalization Alternative Dispute Resolution" (ADR) and its effectiveness in revitalizing the Japanese economy. Due to ADR's economic and procedural ease, Business Revitalization ADR has been employed by companies undergoing revitalization processes and negotiating with creditors in extending debt payments. Nonetheless, ADR proceedings, specifically mediation between creditors and debtors, create only short-term economic value. Because of cultural characteristics of mediation and the nature of mediation in the business context in Japan, Business Revitalization ADR may be subject to abuse by companies that should have gone bankrupt. In fact, many companies may save themselves from …

Copyrights And Creditors: What Will Be Left Of The King Of Pop's Legacy?, Jessica Bozarth

Cardozo Arts & Entertainment Law Journal

No abstract provided.