Bankruptcy Law Commons^™

Claim Preclusion And The Problem Of Fictional Consent, Lindsey Simon

Scholarly Works

The doctrine of claim preclusion promotes fairness and finality by preventing parties from raising claims that already were (or could have been) raised in a prior proceeding. This strict consequence can be imposed only when the litigant received minimal due process protections in the initial proceeding, including notice and direct or indirect participation.

Modern litigation has caused a new problem. In some cases, a party may be precluded from ever raising a claim on the grounds of “fictional consent” to a prior court’s decisionmaking authority. Litigation devices have expanded the potential reach of judgments through aggregation and broad jurisdictional grants, …

Fines, Fees, And Filing Bankruptcy, Pamela Foohey

Scholarly Works

This essay was written in conjunction with the “Court Debt”: Fines, Fees, and Bail, Circa 2020 symposium held during the Association of American Law Schools' 2019 annual meeting. The essay details the extent to which "court debt" -- civil and criminal fines, fees, and interest -- can be dealt with by filing bankruptcy. In short, although filing bankruptcy on balance may help people deal with court debt and other debts, the barriers that people face to filing raise questions about the accessibility of civil courts and suggest that the consumer bankruptcy system itself is yet another place in which race …

The Guardian Trustee In Bankruptcy Courts And Beyond, Lindsey Simon

Scholarly Works

Litigation systems create dangers of unfairness. Citizens worry, and should worry, about exploitive settlements in aggregate litigation, potential biases in administrative proceedings, and troubling power imbalances in criminal trials. Public confidence in adjudicative processes has eroded to an all-time low. This Article explores the untapped potential of adding independent watchdog entities to address systemic threats to the integrity of government decisionmaking. These entities, which I call “guardian trustees,” do not fit within the traditional framework of our adversary system. Though guardian trustees already operate in bankruptcy proceedings, they have thus far received little attention in scholarly literature. This Article begins …

The Debt Collection Pandemic, Pamela Foohey, Dalie Jimenez, Christopher K. Odinet

Scholarly Works

As of May 2020, the United States' reaction to the unique and alarming threat of COVID-19 has partially succeeded in slowing the virus’s spread. Saving people’s lives, however, came at a severe economic cost. Americans’ economic anxiety understandably spiked. In addition to worrying about meeting basic expenses, people’s anxieties about money necessarily included what might happen if they could not cover already outstanding debts. The nearly 70 million Americans with debts already in collection faced heightened anxiety about their inability to pay.

The coronavirus pandemic is set to metastasize into a debt collection pandemic. The federal government can and should …

Consumer Bankruptcy Should Be Increasingly Irrelevant--Why Isn't It?, Pamela Foohey

Scholarly Works

This symposium piece is a response to Professor Nathalie Martin's Bringing Relevance Back to Consumer Bankruptcy. This response overviews the place consumer bankruptcy presently occupies in the United States. In doing so, it details why consumer bankruptcy remains relevant in the face of a socio-economic structure and of laws that suggest that bankruptcy may not be a particularly useful place for struggling Americans to turn to for help. The response ends by calling for a bolder vision for consumer bankruptcy in light of the shifting place of the bankruptcy system in America’s increasingly thread-bare social safety net.

Financial Freedom Suits: Bankruptcy, Race, And Citizenship In Antebellum America, Rafael I. Pardo

Scholarship@WashULaw

This Article presents a new frame of reference for thinking about how the federal government facilitated citizenship claims by free people of color in the antebellum United States. While scholars have accounted for various ways in which free black litigants may have made such claims, they have not considered how the Bankruptcy Act of 1841 enabled overindebted free people of color to reconstruct their economic lives, thereby restoring the financial freedom that was and continues to be an essential component of American citizenship. Relying on a variety of primary sources, including manuscript court records, this Article shows how six free …

Bringing Rule Of Law And Fairness To The Dysfunctional World Of Sovereign Debt: A Role For Canada?, Maziar Peihani, Mark Jewett Qc

All Faculty Publications

Restructuring sovereign debt has long proved challenging: There is no formal regime for sovereign insolvencies similar to those that that govern domestic bankruptcy and insolvency and attempts to create one by international treaty have been met with political resistance. Currently, sovereign debt restructuring is governed by the debt contracts themselves along with the background law in the jurisdiction in which the debt is issued. Sovereign immunity also protects most state assets from seizure. These ad hoc restructuring processes are plagued by unpredictability, however, and there are incentives for individual creditors to “hold out,” demanding full repayment of their claims and …

Transfer Of Real Estate Title May Be Avoided As A Preference In Certain Jurisdictions, Aleksandra Adamska

Bankruptcy Research Library

(Exceprt)

This article addresses whether a transfer of real estate title may be avoided as a preference under section 547(b) of title 11 of the United States Code (the “Bankruptcy Code”). Section 547 permits avoidance of preferential transfers. “A preference is a ‘transfer that enables a creditor to receive payment of a greater percentage of his claim against the debtor than he would have received if the transfer had not been made and he had participated in the distribution of assets of the bankrupt estate.’” Essentially, a preference allows one creditor to receive more value than other creditors. Preferential transfers …

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 …