Bankruptcy Law Commons^™

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 …

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.

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.

Dodd-Frank For Bankruptcy Lawyers, Douglas G. Baird, Edward R. Morrison

Faculty Scholarship

The Dodd-Frank financial reform legislation creates an “Orderly Liquidation Authority” (OLA) that shares many features in common with the Bankruptcy Code. This is easy to overlook because the legislation uses a language and employs a decision-maker (both borrowed from bank regulation) that will seem foreign to bankruptcy lawyers. Our task in this essay is to identify the core congruities between OLA and the Code. In doing so, we highlight important differences and assess both their constitutionality and policy objectives. We conclude with a few thoughts on the likelihood that OLA will contribute to market stability.

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 …

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 …

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 …

Orphaned Art Consignors: Confusion In The Courts And The Ucc, Michael Madigan

Cardozo Arts & Entertainment Law Journal

No abstract provided.

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 …

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

Cardozo Arts & Entertainment Law Journal

No abstract provided.

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

Scholarship@WashULaw

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 central issue 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 …