Bankruptcy Law Commons^™

Private Equity & Industries In Transition: Debt, Discharge & Sam Gerdano, Edward J. Janger

Faculty Scholarship

No abstract provided.

Keeping The Lights On Through Dark Times: How Subchapter V Bankruptcy Should Protect Small Businesses Decimated By The Pandemic, Daniel Lebrun

Touro Law Review

Small to mid-market, independent businesses are at the heart of our economy and play a pivotal role in job creation. While it’s estimated by the House of Representatives that these companies account for over half of overall U.S. employment, they have been traditionally underserved in bankruptcy law. Historically, the resources necessary to complete a chapter 11 bankruptcy are not within reach for these small to mid-market businesses. Passed in 2019, the Small Business Reorganization Act has modified the Bankruptcy Code to provide new avenues for these small businesses in need. Impactful in its own right, it has emerged as a …

Providing Relief After A Natural Disaster Through Credit Reports, Katherine Wecker

Seattle University Law Review

The COVID-19 pandemic forced the world to re-think systems that have been in place for decades, quickly adapting—at least temporarily— to the new normal. Among those systems was the credit reporting system. In response to the pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act; an act that, among other things, amends the Fair Credit Reporting Act in regard to how credit reporting agencies should respond to delinquencies resulting from the pandemic.

This Note argues that to adapt to the increasing occurrence of natural disasters, the U.S. government must implement a system in which a consumer can …

Racialized Bankruptcy Federalism, Rafael I. Pardo

Scholarship@WashULaw

Notwithstanding the robust national power conferred by the U.S. Constitution’s Bankruptcy Clause, the design and administration of federal bankruptcy law entails choices about the extent to which non-bankruptcy-law entitlements will remain un-displaced. When such entitlements sound in domestic nonfederal law (i.e., state or local law), displacing them triggers federalism concerns. Considerations regarding the relationship between the federal government and the nation’s smaller political subdivisions might warrant preserving nonfederal-law entitlements even though their displacement would be authorized pursuant to the bankruptcy power. But such considerations might also suggest replacing those entitlements with bankruptcy-specific ones. Some scholarship has theorized about the principles …

Enterprise Group Restructuring: Dutch Options And United States Enforcement, G. Ray Warner, Michael Veder

Faculty Publications

On 1 January 2021 the Dutch Wet Homologatie Onderhands Akoord, also referred to as the Dutch scheme, entered into force. The Dutch scheme represents a robust restructuring framework that incorporates many of the main restructuring concepts from both the English scheme of arrangement and US chapter 11. It also adds a few new restructuring tools that will make it easier to restructure enterprise group debt by expressly providing that a restructuring plan may include the release of group guarantees and by adopting liberal jurisdictional rules that should permit proceedings to be opened in the Netherlands for all members of …

The Settlement Trap, Lindsey Simon

Scholarly Works

Mass tort victims often wait years for resolution of their personal injury claims, but many who successfully navigate this arduous process will not receive a single dollar of their settlement award. According to applicable bankruptcy and state law, settlement payments may be an asset of the estate that the trustee, exercising its significant authority, administers and distributes to creditors instead of a claimant who had filed for bankruptcy. This distribution power maximizes repayment, a critical counterbalance to the robust protections and benefits that debtors receive in bankruptcy.

Setting aside the perceived unfairness of taking desperately needed money from tort victims, …

Debt’S Emotional Encumbrances, Pamela Foohey

Scholarly Works

This chapter focuses on the role of emotions in the theory and practice of commercial and consumer credit laws, including bankruptcy, in the United States. It assesses knowledge about people’s emotions regarding personal and business financial problems, and evaluates how “money law” systems account for these emotions. This assessment finds that emotions surrounding taking on and being able to pay back debt differ between business leaders and people who shoulder household debt. These differences are traceable in large part to historical understandings of the respectability of incurring debt. This history has shaped the development of bankruptcy, commercial, and consumer credit …

Changing The Student Loan Dischargeability Framework: How The Department Of Education Can Ease The Path For Borrowers In Bankruptcy, Pamela Foohey, Aaron Ament, Daniel Zibel

Scholarly Works

Our nation’s consumer bankruptcy system supposedly gives “honest but unfortunate” individuals “a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” Access to bankruptcy’s discharge of debt is especially important in the wake of the COVID-19 pandemic, which has resulted in a once-in-a-century economic crisis that is projected to increase consumer bankruptcy filings. The people who file bankruptcy will find a system that is already difficult to navigate and has long-recognized racial and gender disparities in access and outcomes. Student loan borrowers will find a system with even more …

The Differing Standards To Obtain A Student Loan Debt Discharge, Nicholas Bonelli

Bankruptcy Research Library

(Excerpt)

Discharging student loans in a bankruptcy case is often an uphill battle. Under section 523 of title 11 of the United States Code (the “Bankruptcy Code”), student loans are presumed nondischargeable. Thus, a discharge is generally unavailable for student loans “[u]nless excepting such debt from discharge . . . would impose an undue hardship on the debtor and the debtor's dependents.” To obtain a discharge, a debtor bears the burden of showing “undue hardship” by a preponderance of the evidence. In determining “undue hardship,” a majority of courts use the Brunner Test. A minority of courts use the more …

Bankruptcy Debtors Are Ineligible For Ppp Loans, Laura Chambers

Bankruptcy Research Library

(Excerpt)

During the COVID-19 pandemic, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which established the Paycheck Protection Program (“PPP”). Under the PPP, the United States Small Business Administration (“SBA”) declared small businesses—including nonprofits, veterans’ organizations, and tribal enterprises that employ 500 people or less—as potential eligible borrowers. A borrower can use a PPP loan for a variety of purposes, such as general business costs like payroll and rent, or payments toward preexisting debts.

However, there has been some debate as to whether a debtor in a case under title 11 of the United States Code …

A Receiver Lacks Standing To Recover Fraudulent Transfers Under Ufta When Corporation Has Not Been Adequately Cleansed From Fraudulent Actions Of Ponzi Schemers, Chelsea Mcgee

Bankruptcy Research Library

(Excerpt)

A court-appointed receiver is charged with collecting the assets of an entity for the benefit of creditors. A receiver, however, only has standing to bring claims that the party in the receivership possessed. In determining whether a receiver has standing to bring a claim, it is necessary to differentiate between the types of claims that can be asserted on behalf of a corporation. First, there are actions that a receiver may bring directly against the principals of a corporation or the recipients of fraudulent transfers. Second, are common law tort claims that can be brought against a third party, …

Two Approaches For Evaluating A Debtor’S “Additional Circumstance” Under The Brunner Test To Qualify For A Hardship Discharge Of Student Loan Debt, Julie Aberasturi

Bankruptcy Research Library

(Excerpt)

Under title 11 of the United States Code (the “Bankruptcy Code”), student loan debt is typically non-dischargeable in bankruptcy, except for circumstances in which the failure to discharge “would impose an undue hardship on the debtor and the debtor’s dependents.” However, the Bankruptcy Code does not define “undue hardship.” Instead, Congress “left it up to the various Bankruptcy Courts to utilize their discretion in defining what that term means after an analysis of the statute and a review of applicable legislative history.”

In determining what constitutes an “undue hardship,” a majority of courts rely on the three-prong Brunner test …

Unqualified Student Loans Are Likely Dischargeable In Bankruptcy, Cristian Catanese

Bankruptcy Research Library

(Excepr)

As a general matter, most student loans are excepted from discharge under section 523 of title 11 of the United States Code (the “Bankruptcy Code”). The Bankruptcy Code prohibits discharge of certain student loans unless doing so “would impose undue hardship on the debtor and [their] dependents . . . .” Student debtors seeking to discharge student loan debt must file an adversary proceeding and demonstrate “undue hardship” — a difficult burden to meet. However, not all student loans may be subject to this requirement.

Jurisdictions are divided on whether unqualified student loans, i.e., loans outside the cost of …

Standing To Challenge Bankruptcy Court’S Approval Of Retiree Benefits Settlement, Inkook Choi

Bankruptcy Research Library

(Excerpt)

Section 1114 of title 11 of the United States Code (the “Bankruptcy Code”) provides in relevant part that: “the debtor in possession shall timely pay and shall not modify any retiree benefits” unless “the court, on the motion of the [debtor] or authorized representative [of the retirees,]” orders or the debtor and the authorized representative agree to the modification of such benefits. A bankruptcy court may, after notice and hearing, approve a settlement, including a settlement of retiree benefit claims, under Federal Rule of Bankruptcy Procedure 9019. Consequently, creditors and other parties in interest may voice their views on …

Bankruptcy Courts Are Divided On Reducing A Debtor’S Obligation To Pay Rent When Government Regulations Restrict A Debtor’S Ability To Generate Income, Brittany M. Clark

Bankruptcy Research Library

(Excerpt)

Many indoor retail establishments and restaurants that faced shutdowns due to the COVID-19 pandemic (the “Pandemic”) filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”), and subsequently requested rent abatement under § 365(d)(3) of the Bankruptcy Code or state law. Notwithstanding the unique and extreme circumstances caused by the Pandemic, not all bankruptcy courts agree on the extent to which judges have the discretion to grant abatement motions for rent payments that are otherwise due under § 365(d)(3). Some bankruptcy courts have granted debtors the ability to defer post-petition …

Impact Of Covid-19 On Debtor’S Obligations To Comply With Duties To Pay Rent, Joseph Diorio

Bankruptcy Research Library

(Excerpt)

Under section 365(d)(3) of title 11 of the United States Code (the “Bankruptcy Code”), a debtor-in-possession is required to “timely perform all the obligations of the debtor . . . arising from and after the order for relief under any unexpired lease of nonresidential real property until such lease is assumed or rejected, notwithstanding section 503(b)(1) of this title.” Section 365 was implemented to relieve landlords from the burden of proving the rent payments owed by the debtors prior to rejection were “actual and necessary” costs of preserving the bankruptcy estate. Section 365 has been heavily litigated since early …

Evaluating The Availability Of An Income-Driven Repayment Plan Under The Two Doctrinal Tests For Undue Hardship, Emily R. Fisher

Bankruptcy Research Library

(Excerpt)

A fundamental goal of bankruptcy is to give the debtor a “fresh start” by discharging their debts. For student loan debtors in bankruptcy, the opportunity of a “fresh start” is limited. Under title 11 of the United States Code (the “Bankruptcy Code”), student loans are not dischargeable unless excepting such debt from discharge would impose an undue hardship on the debtor and the debtor’s dependents. Without guidance from the statutory text, the definition of undue hardship is left up to judicial interpretation, giving rise to much litigation.

An issue that frequently arises when undue hardship is litigated is the …

Ability Of The Eeoc To Litigate For Compensation On Behalf Of A Specific Individual Despite Automatic Stay, Julia Guthy

Bankruptcy Research Library

(Exceprt)

Section 362 of title 11 of the United States Code (the “Bankruptcy Code”) provides for an automatic stay, i.e., a “statutory injunction against efforts outside [a] bankruptcy to collect debts from a debtor under the protections of the Bankruptcy Code.” However, pursuant to section 362(b)(4) of the Bankruptcy Code, a governmental agency may commence or continue an action against a debtor to enforce the agency’s police or regulatory power despite the automatic stay (hereinafter, the “§362(b)(4) Exception”). For the exception to apply, the action of the governmental agency must “protect the public health and safety” as opposed to “a …

A Bankruptcy Court May Temporarily Suspend Rent Obligation, Matthew Kipnis

Bankruptcy Research Library

(Excerpt)

Section 365(d)(3) of title 11 of the United States Code (the “Bankruptcy Code”) authorizes a court to “extend, for cause, the time for performance of any [rent] obligation[‘s] [on unexpired leases of nonresidential real property] that arise[] within 60 days after the date of the order for relief[.]” Historically, courts have recognized that under § 365(d)(3), there is a statutory obligation on debtors to pay rent on unexpired leases. Courts have also recognized that if a debtor’s rent obligation is deferred, lessors are entitled to adequate protection. However, courts are divided on the exact timing of when a debtor’s …

Did The Consolidated Appropriations Act Make Bankruptcy Debtors Eligible For Ppp Loans?, Mary Theresa Michalos

Bankruptcy Research Library

(Excerpt)

In response to the economic fallout of the global COVID-19 pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which makes government-guaranteed loans available to qualified small businesses through the Paycheck Protection Program (“PPP”). The PPP was not created as a standalone program but was added to the existing section 7(a) program, which subjects the PPP to existing conditions and regulations, as well as existing Small Business Administration (the “SBA”) authority. The CARES Act expressly gives the SBA “[e]mergency rulemaking authority” to “issue regulations” carrying out the PPP. And it provides that the SBA …