Bankruptcy Law Commons^™

Chapter 11 Mediation, Laura N. Coordes

Emory Bankruptcy Developments Journal

Mediation has become an increasingly popular and powerful tool in chapter 11 reorganizations, especially in large cases. Despite its widespread and growing use, mediation in chapter 11 is under-studied. This Article begins to fill this gap in the literature by critically assessing mediation, a form of largely private dealmaking, in the context of a bankruptcy process that is supposed to be largely public. The Article begins by discussing mediation’s popularity within the bankruptcy process before turning to a review of issues that have arisen in recent cases, providing a critical assessment of mediation’s promise and perils. In particular, the Article …

The Walking Debt: How Zombie Pacs Threaten Federal Elections And Proposals For Reform, Ariel Bagley

Emory Bankruptcy Developments Journal

Zombie political action committees are political entities that are legally alive but whose candidate the committee is attached to has either died or functionally retired from politics. These committees form as a byproduct of skewed incentives in campaign finance law. The Federal Election Commission (“FEC”) is tasked with enforcing campaign finance laws and terminating political committees. However, it is structurally ineffective at enforcing those laws. Congress, meanwhile, has defunded the FEC and is poorly incentivized to improve its efficacy, as any Congressperson may one day benefit from having a zombie committee. When zombies do form, they are almost impossible to …

Defending "Second-Party" Releases In Mass Tort Bankruptcies, Brook E. Gotberg, Annette W. Jarvis

Emory Bankruptcy Developments Journal

The Bankruptcy Code enables corporate debtors to restructure their debts, including liability for tort damages. Recovery from an insolvent debtor poses daunting collective action problems for tort victims. By creating and funding a trust in bankruptcy, the liable company can streamline settlement and distribute available assets to give all claimants—including individuals who have been harmed by the company’s past activity but are not yet aware of the harm—an aliquot portion of available funds.

Frequently, tort damages levied against a bankrupt company implicate not only the debtor but other related parties, like the company’s insurers, directors and officers, corporate affiliates, and …

Full Discharge Ahead? An Empirical First Look At The New Student Loan Discharge Process In Bankruptcy, Belisa Pang, Dalié Jiménez, Matthew Adam Bruckner

Emory Bankruptcy Developments Journal

The legal framework for discharging student loan debt held by bankruptcy filers cases changed in November 2022 with the Biden Administration’s Department of Justice issuing its “Guidance for Department Attorneys Regarding Student Loan Bankruptcy Litigation,” fundamentally altering the legal framework for discharging student loan debt in bankruptcy cases. The Guidance aims to enhance consistency and equity by: (1) ensuring transparent and consistent expectations; (2) reducing the burden on debtors; and (3) making it easier for DOJ attorneys to recommend discharging a debtor’s student loans. The DOJ has touted the new Guidance as having “made a real difference in borrowers’ lives,” …

Introduction: A Tribute To Professor Jay L. Westbrook, Barbara Wilkie, Molly Wilson

Emory Bankruptcy Developments Journal

No abstract provided.

Scaling 'Reverse Cfius': A Comparative Review Of Outbound Foreign Investment, Hannah Pérez

Cardozo International & Comparative Law Review

The note examines the evolution of U.S. regulations on outbound foreign investments, particularly under Executive Order 14105, known as "Reverse CFIUS," aimed at mitigating national security risks by restricting investments in critical industries in countries like China. It explores the legal, economic, and geopolitical implications of these regulations and compares them with similar measures in the EU, Japan, and Australia, emphasizing the need for international cooperation to effectively address these security concerns.

Executory Contract Provisions That Provide Solely For An Equitable Remedy Are Enforceable Post-Rejection., Ashley Romeo

Bankruptcy Research Library

(Excerpt)

Under Section 365(a) of title 11 of the United States Code (the "Bankruptcy Code"), "a trustee [or debtor in possession], subject to the court’s approval, may assume, or reject an executory contract." Generally, a contract is executory if "performance remains due to some extent on both sides." In general, a debtor may decide whether its executory contract is a good deal going forward. The debtor will likely want to reject a contract that is no longer a good deal in order to repudiate any further performance of its duties. When reviewing the trustee or debtor-in-possession’s decision to assume or …

Rejection Of An Executory Contract Does Not Invalidate Rights Exercised Or Performance Rendered Prior To Rejection, Samantha B. Caraballo

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 results in a breach of contract. Courts consider non-bankruptcy contract law to determine the impact of the breach on the executory contract. In general, rejection does not undo a party’s past performance or exercise of rights under the contract. Instead, it relieves a debtor from its future obligation to perform.

Part I of this Article explains the different approaches to defining "executory contract." Part II of this Article elaborates on a trustee …

Property Of The Estate Under Section 541—Accrual Of Causes Of Action And The "Sufficiently Rooted" Test, Hayung Park

Bankruptcy Research Library

(Excerpt)

This article examines the scope of property included in a bankruptcy estate under section 541 of the Bankruptcy Code, with a focus on causes of action arising both before and after the bankruptcy petition date. Courts apply a two-part analysis to determine whether a claim is part of the estate: (1) whether it accrued as of the petition date, and (2) whether a post-petition claim is sufficiently rooted in the pre-bankruptcy past. This article explores how courts interpret and apply these components to determine estate property.

Non-Consensual Third-Party Releases From Mass-Tort Liabilities Cannot Be Part Of A Chapter 11 Plan, Seth Woodhall

Bankruptcy Research Library

(Excerpt)

Chapter 11 bankruptcy is a process that has allowed many corporations to "work with its creditors to develop a reorganization plan governing the distribution of the estate’s assets[.]" Under 11 U.S.C. §1141(a) once the bankruptcy court confirms the plan, that plan becomes legally binding on the debtor and all creditors—including those who may have not agree to it. "Some plan terms are mandatory, §1123(a); others are optional, §1123(b). [Terms permitting a third-party release] is a provision a debtor may include and a court may approve in a reorganization plan." By presenting a plan to the bankruptcy court as part …

Dismissal Of Chapter 11 Cases For Lack Of Good Faith Filing, Amanda Alongi

Bankruptcy Research Library

(Excerpt)

Section 1112 of title 11 of the United States Code (the "Bankruptcy Code") provides that a Chapter 11 case can be converted or dismissed, upon the request of an interested party, "for cause." While cause is required, the Bankruptcy Code does not provide a definition. Rather, section 1112(b)(4) provides a non-exhaustive list of examples that constitute "cause." In addition to the statutory examples, almost all courts interpret "cause" to include a lack of good faith. The Bankruptcy Code also does not define good faith, resulting in courts adopting different approaches to determine good faith. Therefore, when an interested party …

The Delaware Bankruptcy Court's Approach To The Subjective Prong Of The Ordinary Course Of Business Defense, Andrew Cardello

Bankruptcy Research Library

(Excerpt)

The ordinary course of business defense (the "OCB Defense") to preference claims under section 547(c)(2)(A) of title 11 of the United States Code (the "Bankruptcy Code") protects transfers that are consistent with previous transactions between a debtor and creditor. In evaluating this defense, the United States Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court") conducts a fact-intensive inquiry into whether the challenged transfers were consistent with the parties’ previously established business practices. Key considerations include the length and regularity of the relationship, the timing and method of the transactions, and the absence of aggressive collection tactics …

Insurers Have Standing To Object To Reorganization Plans, Haley Daniels

Bankruptcy Research Library

(Excerpt)

Section 1109 of title 11 of the United States Code (the "Bankruptcy Code") allows any "party in interest" to raise, appear, and be heard on any issue in a chapter 11 bankruptcy case. The term party in interest is not otherwise defined in the Bankruptcy Code. The United States Supreme Court has interpreted the phrase to describe a party that has a sufficient stake in the outcome of the bankruptcy reorganization. Importantly, Section 1128(b) of the Bankruptcy Code explicitly provides that a party in interest "may object to confirmation of a plan" in a chapter 11 case.

The United …

Granting A Stay For Non-Debtors, Daniel Denaroso

Bankruptcy Research Library

(Excerpt)

Under section 362 of title 11 of the United States Code (the "Bankruptcy Code"), the filing of a bankruptcy petition results in an automatic stay of actions against a debtor or its assets. While the automatic stay is primarily for the benefit of the debtor, courts have generally extended the stay to non-debtors. However, the Supreme Court disrupted this principle in Purdue by interpreting that the Bankruptcy Code does not authorize a release that effectively discharges a non-debtor’s obligations. Since then, courts have generally interpreted Purdue narrowly to avoid eliminating the ability to grant a stay for non-debtors.

This …

The Valuation Of Crypto Currency Mining Property Under 11 U.S.C. § 506(A)(1), Michael Galletti

Bankruptcy Research Library

(Excerpt)

Section 506(a)(1) of title 11 of the United States Code (the "Bankruptcy Code") provides that a secured creditor's claim is "a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property . . . and is an unsecured claim to the extent that the value of such creditor's interest . . . is less than the amount of such allowed claim." The valuation of collateral is determined "in light of the purpose of the valuation and of the proposed disposition or use of such property." However, the Bankruptcy Code is …

Reconsideration Of A Previously Allowed Or Disallowed Claim Under Section 502(J) Of The Bankruptcy Code In New York And Delaware., Kalina Mesrobian

Bankruptcy Research Library

(Excerpt)

Section 502(j) of title 11 of the United States Code (the "Bankruptcy Code") states that "[a] claim that has been allowed or disallowed may be reconsidered for cause" in a bankruptcy case. 11 U.S.C.S. §502(j). Section 502(j) further states that "a reconsidered claim may be allowed or disallowed according to the equities of the case." Id. There is no definition of "for cause" or "according to the equities of the case," but the courts have generally held that reconsideration ultimately "lies within the discretion of the court." This article will analyze the scenarios under which a bankruptcy court in …

Debtors Entitled To Only Prospective Relief For Extra Trustee Fees Paid Under Unconstitutional Amendment To Section 1930 Trustee Fee Statute, Joseph Parone

Bankruptcy Research Library

(Excerpt)

The United States Trustee Program comprises eighty-eight of the ninety-four Federal judicial districts. The U.S. Trustee Program is funded through the United States Trustee System Fund, a large portion from debtor trustee fees. U.S. Trustee districts are required to implement the trustee fee structure outlined by the Section 1930 fee statute, which is updated through congressional amendment. However, the Judicial Conference, which oversees the Bankruptcy Administrator Program, had discretion to impose trustee fees outlined in section 1930 on debtors within the remaining six Federal judicial districts under their administration.

In the backdrop of this legislative scheme is the Uniformity …

U.S. Court’S Role In Approving The Sale Of U.S. Assets In A Chapter 15 Case, Jamie Vang

Bankruptcy Research Library

(Excerpt)

Chapter 15 cases deal with cross-border insolvency and allow U.S. courts to recognize foreign bankruptcy proceedings and cooperate with foreign courts. Upon recognition of a foreign main proceeding, section 363 of title 11 of the United States Code (the "Bankruptcy Code") will apply to the transfer of U.S. assets. However, the standard for approving a sale under section 363 in a chapter 15 case is not specified.

This article analyzes the bankruptcy court decisions on whether chapter 15 requires U.S. courts to conduct their own individual analysis or to defer to the foreign court in approving the sale of …

The Objective Establishment Of A Ponzi Scheme Is Sufficient To Establish A Debtor’S "Actual Intent To Defraud" Creditors In Fraudulent Conveyance Actions, Sarah Wilkinson

Bankruptcy Research Library

(Excerpt)

A business entity that meets the objective elements of a Ponzi scheme gives rise to the presumption that a debtor possesses the requisite mens rea—the "actual intent to defraud" creditors—in fraudulent conveyance actions. Section 548 of title 11 of the United States Code (the "Bankruptcy Code") "authorizes a trustee to avoid any transfer of funds made by a debtor with (a) an 'actual intent to hinder, delay, or defraud' creditors; or (b) for less than a 'reasonably equivalent value,' among other criteria." Fraudulent conveyance actions are "often called 'clawback' actions." These actions "seek to recover the false returns received …

Adjudicatory Comity As An Alternative To Recognition Under Chapter 15 Of The Bankruptcy Code For Foreign Bankruptcy Proceedings, Janet Wong

Bankruptcy Research Library

(Excerpt)

In the absence of Chapter 15 recognition, foreign debtors may still rely on the doctrine of adjudicatory comity for recognition of a foreign order in some instances. However, because of the limitations on the applicability of adjudicatory comity alone, Chapter 15 recognition may be a safer option for foreign debtors.

In 2005, Congress enacted Chapter 15 under Title 11 of the United States Code (the "Bankruptcy Code") to "provide effective mechanisms for dealing with cases of cross-border insolvency." Under Chapter 15, a foreign representative may apply to the court for recognition of a foreign bankruptcy proceeding. Upon recognition of …

Restructuring Ruritania: Bankruptcy, Sovereign Debt, And The Equity Receivership, Nathan B. Oman

Faculty Publications

The traditional legal story of sovereign restructuring goes something like this: foreign governments cannot file for bankruptcy under domestic law. When faced with the need to restructure unsustainable debts, they must negotiate with each of their creditors. Since the late 1980s, private debt has been held by increasingly diverse and dispersed bondholders, making renegotiation more difficult. Defaulting debtors face two basic problems: first, they have no process analogous to the automatic stay in bankruptcy, which can pause litigation by creditors and buy time for an orderly reorganization; second, and more importantly, they have no process analogous to the cramdown provisions …

Seizing Welfare From The Bankrupt, Michael D. Sousa

University of Cincinnati Law Review

The earned income tax credit (EITC) is currently the largest means-tested antipoverty program in the United States that assists low-income working families surviving along the edges of poverty. A central component of the national welfare system, the EITC has lifted millions of families with children out of poverty and has produced myriad benefits for their everyday lives. But most of the poor and near-poor endure in the low-wage labor market and often lead turbulent financial lives, plagued by precarious employment along with deleterious material and psychological constraints in budgeting for daily expenses. For the segment of these families also burdened …

The 2023 Banking Turmoil: Lessons For Eu Resolution Authorities, Niccolò Cirillo, Francesco Pennesi, Sebastiano Laviola

Journal of Financial Crises

The March 2023 banking turmoil in the United States and Switzerland marked the most significant banking stress in financial markets since the 2007–2009 Global Financial Crisis, prompting a reevaluation of prudential and resolution frameworks. This paper explores whether the 2023 events offer preliminary lessons for resolution authorities within the European Union (EU).

Policymakers often struggle to restore confidence in financial systems and contain the repercussions of financial instability. While the 2023 crises in the US and Switzerland underscored this difficulty, authorities largely managed to mitigate the most severe consequences. Nonetheless, some issues in bank crisis management were identified. This paper …

Beyond The Equity Power Of Bankruptcy Courts: Toxic Tort Liabilities In Chapter 11 Cases, Kaighn Smith

Maine Law Review

In 1982, three asbestos product manufacturers filed voluntary petitions for business reorganization under Chapter 11 of the United States Bankruptcy Code. The common reason for each of these filings was that tort liabilities threatened the financial survival of the corporation. Never, in the history of United States bankruptcy law, had any business sought bankruptcy relief for such a reason. By 1985, two more firms, another asbestos product manufacturer and a pharmaceutical company, filed Chapter 11 petitions for the same reason. The torts of these "debtors" in bankruptcy are similar; they extend from the manufacture and wide-spread marketing of products that …

The Waiver Problem In Maine Real Property Foreclosure Law: A Commercial Paper Perspective, Dennis M. Patterson

Maine Law Review

When a mortgagee accepts from a mortgagor payment of part of a mortgage arrearage, does the mortgagee then waive its right to foreclose? Many bank counsel will say that the mortgagee does waive its right to foreclose, and they will point for authority to the broad holding of Savings & Loan Association of Bangor v. Tear. In that decision, the Maine Supreme Judicial Court, sitting as the Law Court, seemed to hold that a mortgagee waives its right to foreclose if it accepts tender of a late payment. This broad interpretation of the Savings & Loan decision has proven to …

Loosen Up: The Follies Of Strict Construction As Applied To A Statutory Tribal Sovereign Immunity Waiver, Joseph M. Raimondi

St. John's Law Review

(Excerpt)

On February 9, 2020, Brian Coughlin attempted suicide, leading to an eleven-day stint at the hospital. He was experiencing “overwhelming stress, anxiety and lack of hope for a better life.” He had recently filed for bankruptcy, which normally triggers a stay that prevents creditors from engaging in “any act to collect, assess, or recover a claim against the debtor . . . .” However, one of Coughlin’s creditors, associated with a Native American tribe —the Lac Du Flambeau Band of Lake Superior Chippewa Indians (“the Band”)—believed that it did not have to comply with the stay by virtue of …

Untangling Bankruptcy’S Most Complex Web: Chapter 11 Rule 1111(B) And Subchapter V, Evan Sponder

Brooklyn Journal of Corporate, Financial & Commercial Law

The United States Code Section 1111(b) provides an equitable remedy to debt restructuring for both debtors and creditors in Chapter 11 bankruptcy by allowing the debtor to retain their income-producing assets and repay their creditor(s) through a mutually approved plan. However, section 1111(b) is difficult for courts to apply due to its complex nature, and infrequent application of the section has resulted in limited development of case law interpreting the section. Courts currently interpret 1111(b) elections in Chapter 11 Subchapter V cases to exclude interest accrual; this interpretation establishes an inequitable precedent whereby debtors’ procedural advantages bypass creditor protections during …

Crypto Failure In The Shadows, Kara J. Bruce

Villanova Law Review (1956 - )

No abstract provided.

The Constitutional Meaning Of Financial Terms, Tomer Stein, Shelby Ponton

Utah Law Review

The Constitution has sixty-three financial terms. These financial terms include, for instance, “compensation,” “expenditures,” “debt,” “coin,” “revenue,” “securities,” and “bankruptcies”—all of which determine the elementary building blocks of our governmental makeup. When the Supreme Court interprets the meaning of these financial terms, it does so in isolation and without a consistent framework. This Article proposes a unified framework for the interpretation of financial terms in the Constitution which comprises two fundamental canons of construction.

First, this Article proposes that all financial terms in the Constitution should be interpreted with fiscal and monetary neutrality—interpreting financial terms in a way that does …

The Supreme Court Sack[Ler]S Third-Party Releases In Chapter 11: Should Congress Seize The Cudgel?, Lawrence Ponoroff

William & Mary Law Review Online

On June 27, 2024, the Supreme Court issued its ruling in Harrington v. Purdue Pharma L.P., holding that nonconsensual third-party releases included in a Chapter 11 plan of reorganization, other than one relating to asbestos liability claims, were impermissible under the federal Bankruptcy Code. The releases at issue would have immunized members of the Sackler family, who controlled Purdue Pharma, from liability in connection with the company’s role in the opioid crisis. The Sacklers represent the epitome of the unpopular litigant, so no tears need be shed for them. In a sense, they just received a dose of their …