Bankruptcy Law Commons^™

Do Foreign Representatives Need To Satisfy The Recognition Requirement?, Parm Partik Singh

Bankruptcy Research Library

(Excerpt)

A foreign representative must obtain recognition of a foreign proceeding pursuant to section 1517 of title 11 of the United States Code (the “Bankruptcy Code”) prior to applying directly to a court in the United States for any relief such as operating the debtor’s business operations in the U.S. or seeking assets and discovery from U.S. entities. However, under section 1509(f), a foreign representative may sue in a United States court to collect or recover a claim which is the property of the debtor without first obtaining recognition. The scope of this exception, though, remains unclear.

This memorandum explores …

Courts Override Underlying Contractual Obligations In The Chapter 11 Surrender And Abandon Of Aircraft Equipment And Vessels, Lisa Strejlau

Bankruptcy Research Library

(Exceprt)

When chapter 11 airline debtors seek to abandon and surrender collateral under a financing agreement, they are not required to do so in any particular condition under the Bankruptcy Code. This leaves the question of who bears the burden of associated costs unresolved. This memo will discuss how courts interpret the issue of costs associated with the surrender and return of aircraft and related equipment.

Financers of aircraft and related equipment receive special privileges under section 1110 of the Bankruptcy Code (“the Code”). Section 1110 permits a party to take possession of an aircraft in the custody of a …

Creditor’S Failure To File A Proof Of Claim Is Inexcusable Where Potential Danger Of Prejudice To Debtor Exists, Meghan Lombardo

Bankruptcy Research Library

(Excerpt)

The Federal Rules of Bankruptcy Procedure provide that when an act is required … to be done at or within a specified period … the court for cause shown may at any time in its discretion… on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect. Rule 9006 grants a pardon for late filings that were caused by neglect. The Supreme Court has defined neglect as “‘giv[ing] little attention or respect’ to a matter or… ‘to leave undone or unattended to especially …

Forum Non Conveniens And Chapter 15 Bankruptcy, Tyler Levine

Bankruptcy Research Library

(Exceprt)

When pursuing a case under Chapter 15 of Title 11 in the United States, Code (the “Bankruptcy Code”) a plaintiff can litigate all claims in a single forum or in certain cases they may be able to pursue additional claims stemming from the same case in a foreign forum. Many parties will want to litigate all of the claims in a single forum and will file a forum non conveniens motion when their adversary tries to pursue claims in multiple forums. Forum non conveniens is a discretionary power that allows courts to dismiss a case where another court, or …

Application Of Safe Harbor Provisions To Early Termination Of Swap Agreement, William Accordino Jr.

Bankruptcy Research Library

(Excerpt)

Credit default swap agreements (“swaps”) are contracts between two entities in which the counterparties are effectively taking opposing positions on the credit worthiness of a debt instrument that acts as the collateral underlying the swap. For example, counterparty A makes payments to counterparty B in the hopes that the debtor defaults or a counterparty commits an event of default specified in the agreement, such as filing for bankruptcy. Swaps are generally executory contracts and thus may generally be rejected by a trustee or a debtor in bankruptcy pursuant to section 365 of the United States Bankruptcy Code (“the Code”). …

Property Of The Estate And Creditors Rights To Bring Individual Suits, Ryan Dolan

Bankruptcy Research Library

(Excerpt)

Once bankruptcy proceedings begin, section 541 of the United States Bankruptcy Code (the “Bankruptcy Code”) defines the scope of a debtor’s property as including all legal and equitable interests of the debtor. Courts have adopted an expansive interpretation of this section, noting that “every conceivable interest of the debtor, future, nonpossessory, contingent, speculative, and derivative, is within reach of the bankruptcy estate.” As a result, a trustee of the debtor’s estate, or a debtor-in-possession, obtains standing to assert general claims which are common to the creditors, and creditors are thus bound by the outcome of the trustee’s actions.

If …

Non-Dischargeability Of Foreign Student Loans, Andrew Brown

Bankruptcy Research Library

(Excerpt)

Educational loans made, insured, or guaranteed by a governmental unit are not dischargeable in a bankruptcy case, unless the debtor obtains a hardship determination. This is true even if the loan is made, insured, or guaranteed by a foreign governmental unit. The rationale behind making it difficult to discharge student loans via the United States Bankruptcy Code (the “Code”) is to prevent abuses of the educational loan system, specifically students filing for bankruptcy shortly after graduation to discharge their loans.

Various circuit courts have adopted two tests when applying the undue hardship provision of section 532(a)(8). In 1987, the …

Bankruptcy Courts May Alter Final Sale Orders And Findings Of Good Faith Purchasers, Louis Calabro

Bankruptcy Research Library

(Excerpt)

For many years, a policy of finality has existed in the legal sphere to protect purchasers after a sale has been completed. This policy serves to create stability and predictability for investors and incentivizes activity in the marketplace. In bankruptcy cases, issues of finality are implicated when a debtor engages in an asset sale, and the court grants a final sale order. The purchasing party wants the sale to be final, so courts have promoted the policy of finality to enhance the efficiency and effectiveness of bankruptcy plans. Sometimes, however, an adverse party claims to have an interest in …

Chapter 11 Liquidation And Its Effect On Collective Bargaining Agreements, Dylan Coyne

Bankruptcy Research Library

(Excerpt)

Sections 1113 and 1114 of title 11 of the United States Code (the “Bankruptcy Code”) allow a debtor to reject its collective bargaining agreements and payment of retiree benefits, subject to certain statutory conditions being met. These provisions apply to companies that employ unionized workers who receive compensation and benefits pursuant to a collective bargaining agreement. Both sections, however, only apply to a debtor that is “reorganizing.” Moreover, courts have held that section 1114, which governs the payment of insurance benefits to retirees, permits modification of obligations under a statute, such as the Coal Industry Retiree Health Benefit Act …

Effects Of Veil Piercing, Alter Ego And Substantive Consolidation On Bankruptcy, Lauren Gross

Bankruptcy Research Library

(Excerpt)

At times, bankruptcy can seem like a game of cat and mouse between debtors and creditors. By filing for bankruptcy in the first place, debtors change the rules of the game with various bankruptcy mechanisms, such as the automatic stay provision set forth in section 361 of the United States Bankruptcy Code (the “Bankruptcy Code”). An important inquiry exists in what creditors can to do promote their interests in bankruptcy. An even more important inquiry lies in determining what doctrines may satisfy generally recognized principles of equity for all.

One option for creditors who deal with corporate entities is …

Creditors Cannot Contract Around Their Fiduciary Duties And Withhold Their Consent From A Debtor To File For Bankruptcy, Samantha Guido

Bankruptcy Research Library

(Excerpt)

Many courts have found that a debtor may not contract away their right to voluntarily file for bankruptcy. However, debtors and creditors have implemented creative measures to avoid this principle. For example, a creditor may seek the appointment of a so-called “blocking director” on a company’s board of directors, who would control the company’s bankruptcy filing. Additionally, some creditors seek a “golden share” in order to have veto power over changes to the company’s charter, including veto power over whether the company can file for bankruptcy. In determining whether these mechanisms are void under public policy, courts will consider …

A Dragnet Clause And A Future Advances Clause Can Reach The Collateral Of A Loan That Has Already Been Repaid, Stephanie Hung

Bankruptcy Research Library

(Excerpt)

This memorandum will explore the secured transactions issues that arose in In re Omni Enterprises. In that case, the Bankruptcy Court in Alaska held that a bank may enforce the security interest of a prior loan that has already been repaid to cure a new loan that was in default. The prior loan was secured by the debtor’s deposit accounts, and contained a cross-collateralization clause and future advances clause; however, the new loan did not mention the deposit accounts at all. When the debtor defaulted on the new loan, the bank argued, among other things, that it continued …

When Are Debtors And Creditors Bound To The Provisions Of Confirmed Reorganization Plans?, Gabriella Labita

Bankruptcy Research Library

(Excerpt)

Generally, when a debtor files for protection under chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”), a plan of reorganization is filed at some point with the bankruptcy court. The court then holds a hearing to determine whether the judge will confirm the reorganization plan. The judge will confirm the plan if it meets the criteria of Section 1129 of the Bankruptcy Code, which requires, among other things, that any payments made in connection with the plan are reasonable. A plan of reorganization is a significant component of a debtor’s emergence from bankruptcy, as it affects …

Federal Preemption And The Bankruptcy Code: At What Point Does State Law Cease To Apply During The Claims Allowance Process?, Dylan Lackowitz

Bankruptcy Research Library

(Excerpt)

Anything you do in bankruptcy can and will be used against you in bankruptcy. Prior to the commencement of a bankruptcy case, perhaps courts should issue this Miranda-esque warning to the parties. At least, if the bankruptcy court had, Plymouth LLC (“Plymouth”) might have saved approximately $800,000 that it spent acquiring a lien against Princeton LP’s (“Princeton”) vacant office park in the Township of Lawrence, New Jersey. Recently, the United States Court of Appeals for the Third Circuit held that Plymouth’s claim against Princeton in Princeton’s bankruptcy case was disallowed for violating New Jersey’s tax sale law pursuant to …

All Talk, But No Action Leads To The Loss Of Ground Breaking Cancer Research, Nicholas Marcello

Bankruptcy Research Library

(Excerpt)

Each year, the government awards millions of dollars in federal grants to fund scientific research. Despite this huge allocation of resources, the government’s claim in such funded research may be limited should the receiving institution become a debtor in bankruptcy. Last year, the United States Bankruptcy Court for the District of Massachusetts allowed the destruction of government funded research to benefit the debtor estate.

The Inconsistent Application Of Section 1113 To Expired Collective Bargaining Agreements, Courtney Creighton Sokol

Bankruptcy Research Library

(Excerpt)

The United States Bankruptcy Code (the “Bankruptcy Code”) allows a trustee a debtor-in-possession (“DIP”) to assume or reject a collective bargaining agreement (“CBA”). Courts are split on whether a trustee or DIP may reject an expired collective bargaining agreement under section 1113 of the Bankruptcy Code. In general, a collective bargaining agreement may be rejected notwithstanding the labor standards afforded to employees by the National Labor Relations Act (“NLRA”). In particular, under the NLRA, an employer that is party to a CBA is obligated to bargain with its employees until the employer either enters into a new contract or …

The Fresh Start Canon, Jonathon S. Byington

Faculty Law Review Articles

A primary policy of bankruptcy law is to give consumer debtors a “fresh start” by discharging their debt. A rival policy is that the discharge of debt is a selectively conferred privilege that is not granted in some situations. For example, society is unwilling to pardon debt related to embezzlement or a domestic-support obligation. This “discharge restrictions” policy is manifested in part by the Bankruptcy Code’s exceptions to discharge. The U.S. Supreme Court has repeatedly recognized the tension between the fresh start and discharge restriction policies. It has sought to achieve a fair balance between these policies by applying a …

Cracking The Code: An Empirical Analysis Of Consumer Bankruptcy Outcomes, Sara Sternberg Greene, Parina Patel, Katherine M. Porter

Faculty Scholarship

Chapter 13 is a cornerstone of the bankruptcy system. Its legal requirements strike a balance between the rehabilitation of debtors through keeping assets and reducing debt, and the repayment of creditors over a period of years. Despite the accolades from policymakers, the hard truth is that the majority of the half-million families each year that seek refuge in chapter 13 bankruptcy will not achieve the debt relief of a discharge. Prior research found that those who drop out of bankruptcy quickly endure the serious financial struggles that they had before bankruptcy—now even worse off for having spent thousands of dollars …

Easy Credit And The Erosion Of Dischargeable Debt In Bankruptcy: Advocating For A Broad Interpretation Of 11 U.S.C. § 523(A)(2)(A) & (B)'S "Statement Respecting.. . Financial Condition", Tyler Sandifer

Georgia Law Review

The Bankruptcy Code largely exists to provide a
"fresh start" to debtors. But not everyone gets a free
pass. If a debtor has intentionally lied in order to
obtain money, property, services, or an extension,
renewal, or refinancing of credit, he receives no
protection. However, there is an exception built into the
code to protect debtors from predatory lenders intent on
gaming the system in an effort to eliminate insolvency
risk. The size of this exception has become a matter of
judicial debate over the past thirty-eight years as a
circuit split has slowly developed over the
interpretation of 11 …

Tripping The Light Fantastic: A Comparative Analysis Of The European Commission's Proposals For New And Interim Financing Of Insolvent Businesses, Jennifer Payne, Janis P. Sarra

All Faculty Publications

The European Commission published a draft Directive in November 2016, with the aim of ensuring that all Member States have in place an effective mechanism for dealing with viable, but financially distressed, businesses. The draft Directive includes provisions designed to encourage financing for the debtor company, both interim financing to “keep the lights on” for a brief period while the debtor negotiates with its creditors for a resolution to its financial distress, and where possible, to finance implementation of a restructuring plan, called “new financing” in the draft Directive. Creating such a financing regime is a complex and difficult issue, …