Exploring New Approaches to Unsettled Legal Questions

Tag: Duberstein Bankruptcy Competition Page 1 of 2

The Odd Man Out: How The Oddities of The Debtor-in-Possession Mechanism Suggest That § 547(c)(4)(B)’s Otherwise Unavoidable Transfers Must Be Pre-Petition

by August Meny*

In Chap­ters 7, 13, and some Chap­ter 11 bank­rupt­cies, an admin­is­tra­tive pay­ment under § 503(b)(9) made by a trustee would not con­sti­tute an “oth­er­wise unavoid­able trans­fer” under § 547(c)(4)(B), mean­ing that cred­i­tors can use both § 503(b)(9) and a § 547(c)(4) defense to pro­tect their trans­fers. How­ev­er, the unique role of debtors-in-pos­ses­sion in some Chap­ter 11 bank­rupt­cies has led some courts to inter­pret § 503(b)(9) as fore­clos­ing the § 547(c)(4) defense under (c)(4)(B) when a debtor-in-pos­ses­sion makes the trans­fer. This Con­tri­bu­tion argues that this dif­fer­en­tial treat­ment of § 547(c)(4)(B) in Chap­ter 11 bank­rupt­cies involv­ing debtors-in-pos­ses­sion erro­neous­ly strays from the prin­ci­ple that debtors-in-pos­ses­sion should be treat­ed the same as trustees, and that § 547(c)(4)(B) should be read to apply only to pre-peti­tion trans­fers across all major forms of bankruptcy.

“All Obligations”: The Consequences of Rejecting a Commercial Lease in Bankruptcy

by Kevin Lis­se­more*

11 U.S.C. § 365 grants a bank­rupt­cy trustee or debtor in pos-ses­sion the pow­er to reject execu­to­ry con­tracts and unex­pired com­mer­cial leas­es. Sub­sec­tion (d)(3) spec­i­fies that, while the bank­rupt par­ty is decid­ing to assume or reject a lease, the trustee must “time­ly per­form all the oblig­a­tions of the debtor” under the lease. This sub­sec­tion has giv­en rise to sig­nif­i­cant lit­i­ga­tion when a debtor opts to reject their lease in the mid­dle of a rental peri­od, par­tic­u­lar­ly where the lease makes the entire period’s rent due in advance on the first day of the peri­od. The land­lord and bank­rupt par­ties in this sit­u­a­tion dis­agree about what a bank­rupt par­ty is oblig­at­ed to pay: the entire rent for the final rental peri­od or a pro­rat­ed cost that cov­ers the peri­od pri­or to the rejec­tion. How­ev­er, the plain text of the statute only embraces the for­mer inter­pre­ta­tion. Beyond the clear tex­tu­al basis, addi­tion­al inter­pre­tive resources like the statu­to­ry pur­pose and prefer­able pol­i­cy out­comes also align with this inter­pre­ta­tion, result­ing in an unde­ni­able inter­pre­ta­tion in favor of landlords.

Automatic Repeal? The Automatic Stay and the Federal Arbitration Act in Bankruptcy Proceedings

by Loren­zo Anto­nio Hoppe Vil­le­gas*

While the Bank­rupt­cy Code’s auto­mat­ic stay halts actions against debtors who have declared bank­rupt­cy, the Fed­er­al Arbi­tra­tion Act (“FAA”) may nonethe­less require debtors to resolve dis­putes with their cred­i­tors in arbi­tra­tion. In this Con­tri­bu­tion, Loren­zo Vil­le­gas (’22) argues that the pas­sage of 11 U.S.C. § 362 and relat­ed judi­cial code pro­vi­sions does not implied­ly repeal the Fed­er­al Arbi­tra­tion Act (“FAA”). There­fore, arbi­tra­tion agree­ments between cred­i­tors and debtors who have filed a Chap­ter 11 bank­rupt­cy peti­tion are valid and enforce­able in the face of the Bank­rupt­cy Code’s auto­mat­ic stay in some circumstances.

Lost at (c): Making Sense of § 362(c)(3)(A)’s Ambiguous “With Respect to Debtor” Language

by Lucas Knoll*

The auto­mat­ic stay, which pre­vents col­lec­tions against debtors, is per­haps the most impor­tant part of bank­rupt­cy law. In 2005, Con­gress cre­at­ed a lim­i­ta­tion on the auto­mat­ic stay: 11 U.S.C. § 362(c)(3)(A). The text of the new pro­vi­sion is not clear, and can lead to two inter­pre­ta­tions. The text relies on odd phras­ing: “with respect to the debtor.” The minor­i­ty view is that the auto­mat­ic stay should ter­mi­nate for both the debtor and the debtor’s estate. The major­i­ty view is that the statute ter­mi­nates the auto­mat­ic stay only for the estate. In this Con­tri­bu­tion, Lucas Knoll (’22) argues that the minor­i­ty view’s under­stand­ing of “with respect to the debtor” should be adopted.

One Means One: The “Per Plan” Approach to Section 1129(a)(10)

by Elaine M. Ander­sen*

Nego­ti­at­ing a plan of reor­ga­ni­za­tion is the most con­se­quen­tial aspect of a Chap­ter 11 bank­rupt­cy process for both debtors and cred­i­tors. The bal­ance of pow­er in that nego­ti­a­tion process is prin­ci­pal­ly defined by the require­ments for vot­ing and plan approval which are laid out in sec­tion 1129(a) of the Bank­rupt­cy Code. Courts are divid­ed as to whether, in a case where a class of claims is pro­posed to be impaired under a joint, mul­ti­debtor plan, sec­tion 1129(a)(10) of the Bank­rupt­cy Code re-quires accep­tance from at least one impaired class of claims of any one debtor (the “per plan” approach) or, alter­na­tive­ly, accep­tance from one impaired class of claims of each debtor (the “per debtor” approach). In this Con­tri­bu­tion, Elaine Ander­sen (’21) argues that the “per plan” approach bet­ter com­ports with the text, con­text, and pur­pose of the section.

Two Swords for Bankruptcy’s Gordian Knot: Making Sense of Section 365

by Ben­jamin S. Win­ter*

Observers gen­er­al­ly agree that the assump­tion of execu­to­ry con­tracts by debtors in pos­ses­sion in Chap­ter 11 pro­ceed­ings pro­motes the pur­pos­es of the Bank­rupt­cy Code and accords with Con­gress’ intent. Yet courts have been riv­en by the ques­tion of whether the plain text of sec­tion 365 allows the prac­tice. This Con­tri­bu­tion argues that courts for­bid­ding assump­tion of execu­to­ry con­tracts by debtors in pos­ses­sion have mis­di­rect­ed the focus of their tex­tu­al analy­sis. Close exam­i­na­tion of an over­looked phrase with­in sec­tion 365 and of the inter­ac­tions between sec­tions 365 and 1107 pro­vides two inde­pen­dent tex­tu­al bases for courts to read the Code in keep­ing with con­gres­sion­al intent.

Striking a Balance: Resolving the Conflicts Between Sections 363 and 365 of the Bankruptcy Code

by Gavin Mack­ie*

The bal­anc­ing act that is the Unit­ed States Bank­rupt­cy Code some­times leads to a ten­sion between sec­tions of the Code that grant rights to debtors and those that pro­vide pro­tec­tions for par­ties with an inter­est in the debtor’s prop­er­ty. In this Con­tri­bu­tion, Gavin Mack­ie (’19) explores the con­flict between Sec­tions 363(f) and 363(h) and how courts have approached sit­u­a­tions where this con­flict aris­es. Ulti­mate­ly, this Con­tri­bu­tion will argue that the pos­ses­so­ry rights guar­an­teed by sec­tion 365(h) should be pro­tect­ed in any sale, and that a sale under 363(f) can­not elim­i­nate the lessee’s interest.

The Applicability of the Absolute Priority Rule in the Context of Pre-Plan Settlement Agreements

by Nathan Gen­car­el­la*

Can a bank­rupt­cy court may approve a pri­or­i­ty-skip­ping “gift” set­tle­ment in a Chap­ter 11 pro­ceed­ing pri­or to the approval of a final plan over the objec­tion of a dis­ad­van­taged class of cred­i­tors? In this Con­tri­bu­tion, Nathan Gen­car­el­la (’19) argues that the prin­ci­ples of the recent Supreme Court deci­sion Czyzews­ki v. Jevic Hold­ing Corp. neces­si­tate the appli­ca­tion of the absolute pri­or­i­ty rule to pre-plan set­tle­ments in order to pre­serve the integri­ty of the Bank­rupt­cy Code’s care­ful­ly cal­i­brat­ed pri­or­i­ty scheme. Ulti­mate­ly, this Con­tri­bu­tion estab­lish­es that this exten­sion of Jevic is re-affirmed by both the dic­tates of pub­lic pol­i­cy and the under­ly­ing text of the statute itself.

Discharging the Debt of a Third-Party Non-Debtor is Within the Authority of the Bankruptcy Courts

by Chelsea Ire­land*

Is dis­charg­ing the lia­bil­i­ty of a third-par­ty non-debtor with­in the author­i­ty of the bank­rupt­cy courts? In this Con­tri­bu­tion, Chelsea Ire­land (’18) address­es the cir­cuit split as to whether bank­rupt­cy courts can con­firm reor­ga­ni­za­tion plans that dis­charge the acquir­ing com­pa­ny’s lia­bil­i­ty to a class of cred­i­tors. This Con­tri­bu­tion will argue that the dis­cre­tion to dis­charge the lia­bil­i­ty of a third-par­ty non-debtor is with­in the author­i­ty bank­rupt­cy courts.

The Prudence of Finality: Equitable Mootness and Involuntary Creditors

by Cyrus B. Korn­feld*

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