Chapter 9. The Story of Johns Manville Corporation: The Intersection of Bankruptcy and Mass Torts 38 results (showing 5 best matches)
- The Johns–Manville story is a story of the intersection of mass tort and bankruptcy law and, ultimately, a story of successful synergy between the two realms.
- The bankruptcy filing came as a surprise to many. One commentator noted that “the Manville filing was a shock to all, including many of Manville’s filing was national news, including a cover story in Time magazine.
- Johns–Manville represents a successful use of the bankruptcy system to solve a mass tort problem. Indeed, the process devised in Manville was so successful that in 1994 Congress added Section 524(g) to the Bankruptcy Code to handle the bankruptcy of companies due to asbestos liabilities. Congress crafted this provision using the terms of the Manville case as a template. To be sure, claimants have received far less than they wanted, but they have received far more than they would have had they been allowed to pick apart Manville’s assets piecemeal outside of the bankruptcy process. The settlement process has allocated scarce settlement funds across a variety of current and future claimants while minimizing litigation expenses. “The system didn’t fail, and it might have … to all those who said the filing was inappropriate, I think the $2.6 billion [trust fund] is testimony that Manville has dealt effectively with the problem,” said William F. Young of Columbia Law School.
- After UNR’s bankruptcy filing Manville stopped attending depositions and responding to discovery requests, arguing that the automatic stay of the litigation against UNR (under §362(a) of the recently enacted Bankruptcy Code) should also stay the litigation against UNR’s codefendants. The majority of courts rejected Manville’s argument and reinstated litigation against the remaining codefendants.
- The court was still faced with the problem of how to represent all of the interested parties in the bankruptcy. The Department of Justice expressed concern about how to “protect people who may not be able to file their lawsuits until the turn of the century.” The Department continued “there is the overriding question about whether such [potential future] claims are even cognizable in bankruptcy, or for instance, whether a claim on behalf of somebody who has been exposed to asbestos do not yet have or know that he or she has asbestosis or cancer, is a contingent claim within bankruptcy.”
- Open Chapter
Chapter 2. Timbers of Inwood Forest, the Economics of Rent, and the Evolving Dynamics of Chapter 11 70 results (showing 5 best matches)
- There is more to the story than this simple statement of black-letter law. If we look beyond the and study the docket in the bankruptcy court and the statistics collected by the federal government, a very different account of emerges. Instead of a story about undersecured creditors, lost investment opportunities, and delay, is a story about the economics of rent, opt-out behavior, and speed.
- On the Nature of Bankruptcy: An Essay on Bankruptcy Sharing and the Creditors’ Bargain
- Bankruptcy Research Database
- is a landmark in United States bankruptcy law. Before the Court rendered its decision, the case attracted amicus briefs from the nation’s leading practitioners and professors. Since then, the case has occupied a prominent place in nearly every bankruptcy textbook and is routinely cited for the important proposition that a debtor is not required to compensate undersecured creditors for the delay caused by a lengthy, protracted bankruptcy proceeding.
- The bank wanted out, but it’s easy to understand why. This was, as Section IV explains, a two-party dispute and the debtor had used federal bankruptcy law merely to delay foreclosure. There were, to be sure, a few other unsecured creditors (most of the unsecured debt was held by owners of the real estate venture), but the bank was willing to pay these creditors in full just to end the bankruptcy case. Nonetheless, the case dragged on. The owners, it seems, were gambling on resurrection: if they could delay the case long enough, property values might—just might—increase enough to render the venture solvent again. That was a pipedream and the bank was unwilling to subsidize the owners’ gamble. Moreover, bankruptcy is expensive; lawyers, accountants, and financial advisors must be hired to run the process. Even if it would take as long to sell the property outside bankruptcy as it would to reorganize it inside a Chapter 11—and even if an out-of-bankruptcy sale would yield the same...
- Open Chapter
Introduction: The Art of Bankruptcy 31 results (showing 5 best matches)
- The 2005 amendments to the Bankruptcy Code added a new Chapter 15. This provision is designed to facilitate cooperation with a foreign forum, and tinkered with the Code in other ways as well. Based on historical patterns, Congress will not be heavily involved in amending the Code for another fifteen or twenty years. In the interregnum, bankruptcy lawyers and judges will continue to reshape American insolvency law. They will create the bankruptcy stories for the next generation.
- Bankruptcy law presents an almost too tempting target for Foundation’s Stories Series. The motivation behind the Stories series is to provide insights into the staples of the area by extending the analysis beyond the text of judicial opinions. Analysis tends to range from uncovering the dynamics behind famous cases to exploring their effects on an area of law. Bankruptcy law would seem to be an especially fertile area for this type of an endeavor. The financial distress of corporations and individuals implies unhappy times. As Tolstoy reminds us, unhappy times are unique and make for gripping, if depressing, tales.
- In looking at these choices, perhaps the first lesson that one learns that bankruptcy law operates against a backdrop of rights established by non-bankruptcy law. When a debtor files for bankruptcy, both the debtor and the debtor’s creditors have entitlements that come largely from state law. The fundamental question that bankruptcy law faces is articulating the reasons that would justify a change in these rights. Many insist on a “bankruptcy reason” for changing these rights. In other words, they do not believe that entitlements outside of bankruptcy should be changed solely on the basis that one disagrees with the policy behind those entitlements. To change these laws, one should articulate a reason that flows from the policies that justify bankruptcy law in the first instance. The justification for this limitation is the fear that, if bankruptcy law rearranged who gets what, those who would benefit from a shift in allocation would push the company into bankruptcy. This lesson...
- We do, however, need to remember that bankruptcy law is not a closed system. It intersects with many other areas of law. One can find in this volume collisions between bankruptcy law and pension law, contract law, property law, tort law, and corporate law. Yet bankruptcy law does more than interact with other legal regimes. As Alan Schwartz reminds us in his analysis of it is would be a mistake to ignore the systemic effects of bankruptcy policy on modern credit markets. Cutting a debtor a break by reducing returns to creditors in bankruptcy may make credit more expensive for those outside of bankruptcy. To be sure, this does not imply that we should be ungenerous, especially with respect to individual debtors in financial distress. Rather, the point is that, in assessing the operation of our bankruptcy system, we need to be cognizant of the systematic effects of our policy choices.
- Corporate bankruptcy law can be an altogether different matter. To be sure, there are many small corporations that show up in bankruptcy court without any prospect of reorganization. In many cases, the bankruptcy judge will dismiss the case so that the senior lender who is owed more than the available assets can recover these assets under state debt-collection law. Federal law does little work here.
- Open Chapter
Chapter 1. The Questionable Axiom of Butner v. United States 36 results (showing 5 best matches)
- principle requires at least a single plausible story that bankruptcy law adherence to state law entitlement is mistaken. The treatment of nonconsensual claims is such a story.
- Thus, much of current bankruptcy law’s adherence to state law seems reasonable. Not all creditors are lenders, however. In a small number of bankruptcy cases, tort creditors (or other nonconsensual claimants) are owed significant sums. State law generally treats such claims as general obligations that, outside of bankruptcy, are subject first to any perfected security interest then to a creditors’ race. That is, among general creditors, the first to establish a judgment lien on any of a debtor’s unencumbered assets has priority. And if there are no or few unencumbered assets from which a nonconsensual creditor can collect, the result is that the nonconsensual creditor simply loses. In bankruptcy, this system of state law priority translates into a ratable return for nonconsensual creditors who share priority with other general creditors, all junior to any perfected security interest, which survives a bankruptcy petition.
- was not a battle between a state-law property interest and a conflicting bankruptcy property interest. Rather is a case in which the bankruptcy threatened to interfere with a state law entitlement and the courts had to decide how to address such interference. Because any outright conflict between bankruptcy law and state law would be decided, without doubt, in favor of the former, principle as applied in practice may seem little more than a method to fill in procedural details where bankruptcy law seems to affect state law entitlement but does not explicitly displace such entitlement. To see that more is at stake, one needs to look beyond the case itself.
- they believe that bankruptcy law should do little more than serve as a collectivized debt collection mechanism. For a proceduralist, the right to collect, as opposed to how, should be determined by state law. This notion of collectivization as bankruptcy law’s fundamental purpose, most closely associated with Thomas Jackson and his frequent co-author Douglas Baird, stems from the observation that creditors, left to their own devices, might race with one another to grab an insolvent debtor’s assets, wasting effort and perhaps destroying synergy as they separate assets one from the other. On this view, bankruptcy law’s key contribution is to stay individual creditor collection and impose an orderly process for the disposition of a firm’s assets. Accordingly, bankruptcy law can take nonbankruptcy entitlements as given, as nothing in bankruptcy’s collectivization function depends on any alteration of those entitlements.
- Note that, in general, a bankruptcy entitlement—such as whether a security interest should be honored fully—establishes priority among creditors, not between creditors and their debtor. Thus, with few exceptions, it would be a creditor with an incentive to exploit a special bankruptcy entitlement, if any. Under current law, however, a creditor cannot force a debtor into bankruptcy against her or its will unless the debtor fails to pay debts as they come due. If one imagines that almost every such debtor would be a good candidate for bankruptcy regardless of how assets would be distributed to creditors within bankruptcy, then the transactions cost of bankruptcy would be wasted. In this case, any costs truly attributed to forum shopping could easily be outweighed by a competing interest in favor of a special bankruptcy entitlement.
- Open Chapter
Bankruptcy Law Stories 8 results (showing 5 best matches)
- BANKRUPTCY LAW STORIES
- Chapter 3. Termination Rights in Bankruptcy The Story of Stephen Perlman v. Catapult Entertainment, Inc.
- Chapter 9. The Story of Johns Manville Corporation: The Intersection of Bankruptcy and Mass Torts
- Chapter 6. The Story of Patterson: Plainly Protecting Pensions
- Chapter 7. The Story of Case v. Los Angeles Lumber Products: Old Equity Holders and the Reorganized Corporation
- Open Chapter
Chapter 7. The Story of Case v. Los Angeles Lumber Products: Old Equity Holders and the Reorganized Corporation 36 results (showing 5 best matches)
- but those who care about bankruptcy policy have to grapple with the story of the corporation itself. Reorganization law is predicated on a number of assumptions about the business and the choices that it faces. It assumes that businesses in financial distress have going concern value, that this value is at risk outside of bankruptcy because the efforts of individual creditors threaten to tear the business apart, and that the only way to preserve this value is through a negotiated settlement. The legal machinations surrounding Los Angeles Lumber, and much of the current Bankruptcy Code, focus on the last assumption. They strive allocate control rights in such a manner as to achieve efficient outcomes.
- Behind these two principles—the first virtually unquestioned today and the second still an active area for dispute—is a story that illustrates the challenges for any law that attempts to provide a mechanism for adjusting ownership interests in a business. While Supreme Court’s opinion in remains the foundation of modern reorganization law, the situation of Los Angeles Lumber Corporation, the debtor in that case, challenges the need for many aspects of that law.
- Milton Underwood Professor of Law and Professor of Management, Vanderbilt University. This story continues work that I began with Douglas Baird. Both he and David Skeel provided helpful comments on an earlier draft.
- It was assigned to William O. Douglas. Justice Douglas was in his first full term on the Court, having been sworn in the prior April. Though new to the Court, he was no stranger to bankruptcy law. He had been highly critical of reorganization practice under the regime of equity receiverships, both as an academic and as a regulator. While a law professor at Yale, he published work on bankruptcy practice, including the leading casebook in the area. At the SEC, he published an eight-volume report on corporate reorganizations. In his
- The history of Los Angeles Lumber presents a typical story of the life cycle of a business. The enterprise has initial success, and those in charge attempt to expand the operations. The expansion does not succeed, but the core operations remain viable. The challenge becomes how to handle the effects of the failed foray. All agree that the business should remain intact and the question becomes fashioning a new capital structure. The question that the law must address is control over this process.
- Open Chapter
Chapter 10. The Maxwell Case 37 results (showing 5 best matches)
- Perhaps envisioning this potential for problems, some countries countenance multiple proceedings in different countries and permit “ancillary” bankruptcy cases. In the United States, this was covered until very recently by section 304 of the Bankruptcy Code. A section 304 proceeding is like a limited or “mini” bankruptcy, restricted to U.S.-situated assets (unlike a regular, or “plenary” bankruptcy, which covers all the debtor’s assets whenever located, per §541). Its function is to allow a foreign bankruptcy representative, who is administering a foreign debtor’s bankruptcy in a court presumably in the debtor’s home country, to come to the United States and open a limited proceeding to bring U.S.-located assets under the protection of the U.S. bankruptcy courts. For example, a section 304 proceeding could be used to stop state law attachment proceedings against U.S. assets of a foreign debtor in bankruptcy proceedings abroad. What happens to those U.S. assets, once they have been...
- These questions helped prompt an explosion of bankruptcy scholarship. Some scholars, the “universalists,” say that the best solution is to have one bankruptcy law generally govern everywhere—the law of the debtor’s home country—so that ancillary proceedings should essentially be conducted under foreign law. The reasoning is that then it will not matter, from a choice of law perspective, where the business’ assets happen to be scattered around the world on the day bankruptcy occurs. (Universalists worry that otherwise banks will have to follow all the debtor’s assets from jurisdiction to jurisdiction to figure out which bankruptcy law will apply if the debtor ever falters—an expensive undertaking.) ...not want to cede jurisdiction over assets falling under their physical control, because they will want to protect local creditors and local interests that will most likely be privileged under domestic law. Accordingly, until there is the establishment of some international supra-...
- MCC also had other considerations about where to file that were not even related to its home. The least subtle one was good old-fashioned forum shopping: that there are different rules under U.S. and U.K. bankruptcy law that apply—irrespective of where the debtor’s home is—that the case-placers wanted to arbitrage as best they could. So in watching where MCC filed its bankruptcy petition, observers were not just reading where the home country might be implied, but also looking for broader signs of which procedural laws MCC wanted to operate under in administering its bankruptcy.
- MCC’s creditors, and the bankruptcy community more generally, were surprised by what happened. MCC filed in main proceedings in both the United States (a chapter 11 petition under the 1978 Bankruptcy Code) and the United Kingdom (a scheme of arrangement under the Insolvency Act of 1986). Both petitions were filed within a day of each other in December 1991. Some cynically suggested that Kevin Maxwell wanted to file in the United States so he could stay in control of MCC, because U.S. bankruptcy law, in contrast to U.K. law, does not displace management upon filing bankruptcy. Upon this decision, however, the other British directors worried that filing chapter 11 was an admission that MCC was insolvent—which meant they had a duty under U.K. corporate law to put MCC into bankruptcy, and they were not sure a U.S. chapter 11 filing would discharge this duty, so they filed in the United Kingdom to cover themselves.
- Accordingly, after the reorganization plan/rescue scheme was confirmed and claims processing began in 1993, the QUE preference dispute could no longer be avoided. As expected, the administrators and examiner jointly initiated an adversary proceeding in the U.S. court seeking to recover the bank payments as preferences under U.S. law. (Theoretically, they could have launched such an action in the U.K. court had they desired—especially since the attempt to enjoin them from doing so failed—but they probably predicted that the odds of finding that U.S. law would govern the impugned transactions were better if that choice of law question were submitted to a U.S. court.) When bankruptcy professors talk about “the (Bankruptcy professors also get excited about the case because a bankruptcy professor, Jay Westbrook from the University of Texas, was appointed special by the Bankruptcy Court to provide an opinion on the choice of law question, and professors tend to get excited at the...
- Open Chapter
Chapter 4. The Supreme Court, The Solicitor General and Bankruptcy: BFP v. Resolution Trust Corporation 70 results (showing 5 best matches)
- This chapter tells the story behind
- Like many bankruptcy cases, presents a conflict between the powers of a bankruptcy court and rights under a separate legal regime. On the one hand, bankruptcy law generally requires that creditors suffer equally from a debtor’s financial distress. Among other things, this means that one creditor should not profit to the detriment of other creditors through transactions with a distressed debtor before formal bankruptcy proceedings begin. Thus, bankruptcy law prohibits both transfers that the debtor makes fraudulently or for inadequate consideration (both are called fraudulent transfers), and payments that the debtor makes to creditors shortly before bankruptcy (labeled preferences).
- teach us about the Supreme Court’s approach to bankruptcy law? My thesis is that reflects the Court’s resistance to expanding the bankruptcy system to interfere with other legal systems. When the bankruptcy regime threatens to transgress rights and expectations founded in other bodies of law, the Court tends toward the “use of a strong interpretive principle” to narrow the substantive reach of the Code. That is not to say, of course, that the Court has never upheld broad applications of the bankruptcy laws.
- The question is whether fraudulent transfer rules under the bankruptcy regime apply to foreclosure sales that the real property regime validates. The problem is complicated somewhat by the long history of rules banning and invalidating fraudulent transfers, which predate the first bankruptcy statute by centuries. Thus, they have been, and remain, a common feature of state law, parallel to the applicable provisions of the Bankruptcy Code. Most famously, Britain’s 1571 Statute of Elizabeth invalidated any conveyance made with the intention to hinder, delay, or defraud creditors. Many states adopted similar statutes, long before the adoption of a general federal bankruptcy law in 1898.
- should account for the role that the Solicitor General played, it is interesting to provide some details about the relatively unnoticed role that the federal government has played in the Supreme Court’s bankruptcy practice. Other writers have noticed that the Supreme Court often defers to the government in bankruptcy cases in which the government is a party, but what they have not noticed is the pervasiveness of the Solicitor General’s role as a party and amicus in bankruptcy cases. Surprisingly enough, for the person that considers bankruptcy law a “private law” topic of little general interest, the Solicitor General has appeared in about two-thirds of the Court’s cases interpreting the Bankruptcy Code
- Open Chapter
Chapter 3. Termination Rights in Bankruptcy The Story of Stephen Perlman v. Catapult Entertainment, Inc. 40 results (showing 5 best matches)
- The bankruptcy rules of assumption (and of rejection) alter ordinary contract law and even the explicit termination provisions of executory contracts, in order to address the collective concerns that are raised by the financial distress of a firm (the “nexus”). A core premise of bankruptcy policy is that financial distress prompts creditors and contract partners to exit, even if they would be collectively better off by continuing to deal with the debtor. So, the bankruptcy stay freezes the collection efforts of all creditors and the termination rights of contract partners, while the provision for the assumption of executory contracts neutralizes termination rights–in some instances even beyond the bankruptcy term. Before turning to these bankruptcy provisions, and their operation in Catapult, it helps to highlight two reasons a contract partner may wish to terminate a contract with a debtor in bankruptcy. First, a debtor in bankruptcy is typically insolvent. Second, bankruptcy often...
- The core objective of bankruptcy law is to address the collective action problem that results from the individual incentives of parties to exit when the firm is insolvent. As noted above, each party wishes to exit to avoid the loss inflicted by the exit of another party. Unless the exit is offset by new contracts, it often leads to the collapse and dissolution of the firm, and the redeployment of its assets. Dissolution can destroy synergies and other going concern value that would exist if the firm were to continue. Bankruptcy law addresses the problem of collective action by blocking exit. The Bankruptcy Code imposes a a contract despite the other party’s right to exit. Bankruptcy thereby supplants the bilateral agreements over collection and termination rights in the collective interests of all parties dealing with the same firm.
- In sum, bankruptcy can be even more coercive vis-a-vis an executory contract partner than against an ordinary lender. It bars collection effort in either case, but it can also compel the contract partner to continue to deal with the firm, provided that the debtor cures, compensates and provides adequate assurance of future performance. Bankruptcy addresses the contract partner’s concern over the debtor’s insolvency also by granting administrative expense priority for any post-petition claim and, in the case of a successful Chapter 11 reorganization, restoring the solvency and viability of the debtor. This approach bears some resemblance to the regulation of the debtor’s access to cash collateral, but it contrasts sharply with the mechanism by which bankruptcy law expands the debtor’s access to new working capital. Bankruptcy law permits the debtor to assume a nonfinancial contract instead of facilitating new contracts (the way it does with simple credit under §364).
- Section 365 purports to give the debtor enhanced right to assign and assume notwithstanding assignment prohibitions under state law. As the case law and commentary indicate, however, the Bankruptcy Code does so in an extraordinarily convoluted manner. First, section 365(f) states:
- This story is about the relationship between Stephen Perlman and Catapult Entertainment. Perlman was a cofounder of Catapult and he licensed two of his inventions to the company. A couple of years later, Catapult fell into financial distress and was subsequently reorganized under Chapter 11 of the Bankruptcy Code. Catapult prepackaged a reorganization plan, and secured the consent of almost all its creditors, before it filed for bankruptcy. The plan provided for a merger with a competitor, Mpath. Perlman and Catapult, however, parted ways. Nevertheless, Catapult sought to keep its rights to Perlman’s technology through the merger while Perlman wanted to take them with him. They litigated their dispute and Perlman prevailed at the U.S. Court of Appeals for the 9th Circuit. Catapult sought review in the Supreme Court, but the parties settled their dispute before the Supreme Court decided whether to pass on the matter. This chapter examines the issues and opinion of the 9th Circuit,...
- Open Chapter
Chapter 8. The Story of Saybrook: Defining the Limits of in Possession Financing 62 results (showing 5 best matches)
- cross-collateralization is inconsistent with bankruptcy law for two reasons. First, cross-collateralization is not authorized as a method of post-petition financing under section 364. Second, cross-collateralization is beyond the scope of the bankruptcy court’s inherent equitable power because it is directly contrary to the fundamental priority scheme of the Bankruptcy Code.
- , because this Sero affiliate was the first to file for bankruptcy–was a microcosm of the bankruptcy world of its time. Many of the large corporate bankruptcy filings of the late 1980s came in the wake of leveraged buyouts that did not quite work out. These cases provided the first great test of the Bankruptcy Act of 1978, or Bankruptcy Code, which had completely overhauled the American bankruptcy laws for the first time in forty years. The drafters of Chapter 11, the corporate reorganization chapter that had combined the two reorganization chapters of the former Bankruptcy Act, wanted to provide a flexible framework that let the parties themselves negotiate the terms of a restructuring that preserved the going concern value of viable companies. to the LBO bankruptcies, because a large number were perfectly viable businesses that simply had too much debt. Their distress was financial but not economic, as economists like to say.
- In November 1974, Texlon Corporation filed for bankruptcy in the Southern District of New York under Chapter XI of the Bankruptcy Act of 1898. On the same day as the filing, the bankruptcy judge signed orders authorizing the debtor’s managers to continue running the company, as well as an order authorizing Texlon to enter into a series of financing agreements with Manufacturers Hanover. (Manufacturers Hanover will be referred to as “Bank” for simplicity, but “Bank’s” precise identity will be of interest once again later in our story). Prior to Texlon’s bankruptcy, Bank had lent $1 million to Texlon to finance Texlon’s acquisition of equipment, and had also financed Texlon’s operations by purchasing its accounts receivable under a “factoring” arrangement. Under the new loan, Bank would continue to factor Texlon’s accounts, and would also make advances in amounts up to $100,000. Both the old obligations and the new would be secured under certificates of indebtedness that gave Bank a...
- Friendly exerted an outsized influence on many of the key jurisprudential issues of the twentieth century. Less well known than his writings on courts and Constitutional law is his importance in bankruptcy law. After equity receivership was first codified in the 1930s, Friendly wrote a seminal article explaining the need for a statutory reorganization framework. During his decades on the bench, the most important bankruptcy issues seemed to find their way to his chambers, both because of the Second Circuit’s location and because of Judge Friendly’s bankruptcy expertise.
- As he surveyed the existing case law, Judge Fitzpatrick seemed especially impressed by a Ninth Circuit decision that had rejected the contention that a lender who insisted on cross-collateralization could never satisfy the good faith standard because “cross-collateralization violated the fundamental tenet that like creditors must be treated alike.” “This argument failed because the tenet relied upon by the creditors conflicted with another, superior, tenet of bankruptcy law—the rehabilitation of debtors.” Judge Fitzpatrick acknowledged that several bankruptcy courts had refused to allow cross-collateralization provisions. But he concluded that cross-collateralization is nevertheless protected. Even if “this practice may violate some principles of bankruptcy law,” he wrote, echoing the Ninth Circuit, “it is in keeping with the overall purpose of a Chapter 11 reorganization, which is ‘to enable a business to rehabilitate itself and become a profitable going concern.’ ”
- Open Chapter
Chapter 5. Valuation of Collateral 33 results (showing 5 best matches)
- Congress’s inattention increases the importance of the Federal courts’ role in interpreting a bankruptcy law that is composed largely of standards, and in harmonizing differing statutory constructions. The two cases analyzed here, as well as the very limited number of cases of every type that the Supreme Court hears, suggest that the interpretive and harmonizing functions are better performed by the lower Federal courts. This conclusion gives rise to a thought that is only expressed here but should be developed further elsewhere. If a unitary and competent high court had ultimate charge of the bankruptcy law, then each Federal circuit should develop those interpretations of the law that seem best to it. The highest court would then have the advantage of observing the likely full set of thoughtful positions when specifying what the bankruptcy law says. The Supreme Court’s limited jurisdiction implies that the Court can have only a partial charge of the bankruptcy law, and the...
- Congress also regulates incoherently. The new Bankruptcy Code requires higher income debtors to use Chapter 13 but Congress codified the result, which discourages the use of Chapter 13 by debtors who continue to have a choice. In addition, a legislature coherently can prefer Chapter 13 only if the legislature dislikes the insurance against income shocks that a bankruptcy law can provide; for under Chapter 13 the debtor must pay much of her income to her creditors rather than have that income freed up by a discharge. The new Code, however, failed to overrule , which requires the bankruptcy court to use an interest rate standard, in Chapter 13, that ; and Part 4 is a Conclusion that also comments briefly on how the lower Federal Courts should interpret the Bankruptcy Code when the Supreme Court will hear few bankruptcy cases and has only a limited competence in the bankruptcy field.
- Without data it is difficult to know whether the insurance and incentive effects of these decisions fully offset. Both cases, however, needlessly increase the administrative costs of consumer bankruptcy: by increasing the number of interest rate hearings. The cases thus may reflect a retreat from the courts bankruptcy decisions of the 80s and much of the 90s. These decisions sought to reduce the discretion of the bankruptcy courts.
- In two stunningly stupid opinions, the Supreme Court chose the criteria to guide bankruptcy courts in resolving valuation and interest rate issues. held that the bankruptcy court should use a replacement cost standard to value liened property. Under this standard, the bankruptcy court must ask how much the debtor would have to pay to replace the collateral. held that the bankruptcy court should choose an interest rate by beginning with the prime rate and then adjusting that rate to reflect the risk profile that the particular Chapter 13 debtor poses. This short Essay will consider the reasoning—charitably put—of these cases and their effect.
- This view is consistent with Rasmussen’s claim that bankruptcy policy is better made by these courts.
- Open Chapter
Chapter 6. The Story of Patterson: Plainly Protecting Pensions 59 results (showing 5 best matches)
- Section 541 of the Bankruptcy Code (the “Code”) provides that an individual’s bankruptcy estate is comprised of all legal or equitable interest the debtor has in property as of the time the case is filed. However, Section 541(c)(2) allows debtors to exclude from their estates any interest they have in a trust that contains a “restriction on the transfer of a beneficial interest” if that restriction is “enforceable under
- Although ERISA was designed to protect the security of workers’ retirement accounts, neither this law—nor any other state or federal law—protected the workers who saw the value of their pensions plummet (or disappear) because of the financial accounting scandals involving Enron, WorldCom, and other major corporations at the end of the 20th Century. Moreover, one of the largest risks to retirees’ retirement security has little to do with who controls the actual pension plan. Employees now face an additional risk that their employer will either file for bankruptcy, or freeze or terminate a DB plan to avoid a bankruptcy filing. A number of large corporations have frozen their DB plans outside of bankruptcy in order to shift to 401(k) or other types of DC plans like cash-balance plans. ...their pension benefits because of their employers’ bankruptcy filings. Thus, in the first quarter 2006, over 100 US companies terminated, froze, or announced plans to terminate or freeze their DB plans...
- The district court relied on a Fourth Circuit opinion that had found that the term “nonbankruptcy law”—as used in Section 541(c)(2)—meant “state” law. Given the Fourth Circuit’s interpretation of the term “nonbankruptcy law”, the district court quickly concluded that it could disregard the Plan’s anti-assignment restrictions because that restriction was mandated by federal (ERISA) nonbankruptcy law, not state law. Having characterized ERISA as a federal law, but not an “applicable nonbankruptcy law,” the district court then considered whether Shumate could exclude his retirement funds from his bankruptcy estate on the theory that the Plan was a valid spendthrift trust under Virginia state ( , an applicable nonbankruptcy) law.
- to resolve the Circuit conflict concerning whether an anti-alienation provision in an ERISA-qualified plan constituted a restriction on transfer under “applicable nonbankruptcy law” such that the debtor could exclude the property from his bankruptcy estate.
- , the Circuit Courts of Appeals were split over whether a debtor could exclude from his bankruptcy estate an interest he had in a pension plan that contained an anti-assignment clause. Five Circuits (including the Fourth Circuit) had found that the term “
- Open Chapter
Contributors 11 results (showing 5 best matches)
- is the Ben H. & Kitty King Powell Chair in Business and Commercial Law and Co–Director of the Center for Law, Business and Economics at the University of Texas School of Law.
- is the Milton Underwood Chair in Law and Director of the Program in Law and Human Behavior at the Vanderbilt Law School and Professor of Management at the Owen Graduate School of Management.
- is the Charles Seligson Professor of Law at the New York University School of Law.
- is Professor of Law, Helen L. Crocker Faculty Scholar and Associate Dean for Curriculum at the Standard Law School.
- is the Associate Dean for Academic Affairs and the Fulbright and Jaworski Professor in Law at the University of Texas School of Law.
- Open Chapter
Copyright Page 1 result
- This publication was created to provide you with accurate and authoritative information concerning the subject matter covered; however, this publication was not necessarily prepared by persons licensed to practice law in a particular jurisdiction. The publisher is not engaged in rendering legal or other professional advice and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional.
- Open Chapter
- Publication Date: April 25th, 2007
- ISBN: 9781599410180
- Subject: Bankruptcy/Creditors' Rights
- Series: Law Stories
- Type: Overviews
- Description: In this text leading scholars explore the landmark decisions that shape modern bankruptcy law and practice. Ten short and accessible chapters provide students with an understanding of the institutional, economic, and social forces that shape our bankruptcy system. The cases cover corporate, individual, and transnational bankruptcy and illustrate the role that the Solicitor General plays in shaping bankruptcy law. The book focuses on the ways lawyers have operated within the parameters set by the bankruptcy code, such as establishing the Manville Asbestos Trust.