BANKRUPTCY LAW
AND PRACTICE
Second Edition
A Casebook Designed to
Train Lawyers for the
Practice of Bankruptcy Law
______
Gregory Germain
Professor of Law
Syracuse University College of Law
CALI eLangdell Press 2017
About the Author
Gregory Germain is a professor at Syracuse University College of Law where he teaches courses in Contracts, Commercial Transactions, Corporations, Taxation and of course Bankruptcy Law. He also runs a pro bono bankruptcy program for first year law students, and a bankruptcy clinic for upper division students. The clinic represents indigent individuals in bankruptcy cases.
Professor Germain received his JD Degree Magna Cum Laude from the University of California Hastings College of Law, practiced law for 15 years in Los Angeles and San Francisco, and then obtained his LLM in Tax from the University of Florida. Following tax school, he worked as an attorney advisor for the Honorable Renato Beghe of the United States Tax Court before beginning his teaching career at Syracuse University College of Law.
Notices
This is the second edition of this casebook, updated June 2017. Visit for the latest version and for revision history.
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Forward
This book is intended for a three credit law school course covering the fundamentals of bankruptcy law and practice.Students should recognize that this is a “Code” class, and that the starting place for solving most bankruptcy problems is the Bankruptcy Code itself. Students should read the materials and work through the problems by direct reference to the provisions of the Bankruptcy Code. Bankruptcy lawyers simply must be comfortable with the Code in order to be effective.
The book contains many cases interpreting the Bankruptcy Code. The cases have been stripped to the essentials to minimize reading. Most cross-citations have been deleted. Issues discussed in the cases that are not relevant to the point for which the case is included in the materials have been stricken. Bolding has been added to important language the students should focus on. The practitioner, of course, should always read full cases and not rely on the edited versions in this book or on headnotes or other secondary sources. This book contains the bones of the case, with flesh left only where essential to understanding the court’s reasoning on the particular issue of relevance to the material in the book.
Much of the learning will come through working with the problems. Many students have developed the bad practice of reading the questions without trying to solve them. Don’t do that. You need to try to solve the problems by reading and working through the statute. The best way to learn and be comfortable with using the statutory language is to work through the statute to solve the problems.
Some of the problems contain case references. I do not expect my students to read the cases that are merely cited in the problems, and not reprinted in the book. I discuss some of these cases with the class when covering the problems. Students interested in the problems are always free to read the cases for greater understanding, as time permits.
Table of Contents
About the Author
Notices
Forward
Chapter 1: A World without Bankruptcy
1.1.A Wee Bit of History
1.2.Enforcing Claims
1.3.The Self-Help System for Collecting Unsecured Claims
1.4.Practice Problems: Fair Debt Collection Practices Act (FDCPA)
1.4.1.1.Henson v. Santander Consumer USA Inc., 582 U.S. ___ (June 12, 2017)
1.5.The Judicial System for Collecting Unsecured Claims: Obtaining and Enforcing a Judgment
1.6.Provisional Remedies.
1.7.CASES: The Sheriff’s Duty to Enforce Writs
1.7.1.1.DAVID J. VITALE v. HOTEL CALIFORNIA, INC., 184 N.J. Super 512, 446 A.2d 880 (1982)
1.8.Property Garnishments
1.9.Wage Garnishments
1.10.State Wage Garnishment Exemptions
1.11.Exceptions to Wage Garnishment Limits
1.12.Practice Problems: Calculating Wage Garnishment Limits
1.13.State Law Execution Exemptions
1.14.Practice Problems: Enforcement of Judgments
1.15.Other Federal and State Exemptions
1.16.Federal Tax Collection
1.17.State Law Avoiding Powers
1.18.Practice Problems: Fraudulent Transfers
1.19.The Race to the Courthouse and the Concept of Bankruptcy
Chapter 2: Secured Claims
2.1.Liens and Priority
2.2.Attachment of Consensual Liens
2.3.Attachment of Consensual Liens on Real Property.
2.4.Attachment of Consensual Liens on Personal Property
2.5.Attachment of Judicial Liens
2.6.Attachment of Statutory Liens.
2.7.The Concept of Perfecting Liens
2.8.Perfection of Consensual Personal Property Liens
2.9.Priority of Consensual Liens.
2.10.Practice Problems: UCC Article 9.
2.11.Purchase Money Security Interests
2.12.Practice Problems: Purchase Money Security Interests
2.13.Perfection and Priority of Real Property Liens
2.14.Practice Problems: Real Estate Priority
2.15.Foreclosing the Right of Redemption
2.16.Cases on Enforcement of Liens
2.16.1.1.CHAPA v. TRACIERS & ASSOCIATES, 267 S.W.3d 386 (Ct. App. Tex. 2008)
2.16.1.2.JORDAN v. CITIZENS & SOUTHERN NAT’L BANK OF SOUTH CAROLINA, 278 S.C. 449 (1982)
2.16.1.3.CHERNO v. BANK OF BABYLON, 54 Misc.2d 277 (NY 1967)
2.16.1.4.BIG THREE MOTORS, INC., v. RUTHERFORD, 432 So.2d 483 (Ala. 1983)
2.16.1.5.WALTER KOUBA v. EAST JOLIET BANK, 135 Ill. App. 3d 264 (1985)
2.17.Practice Problems: Enforcement of Liens and Claims
Chapter 3: The Bankruptcy System
3.1.Purposes of Bankruptcy
3.2.Structure of the Bankruptcy Code
3.3.Jurisdiction and Venue of Bankruptcy Cases
3.4.Cases on the Constitutional Limits of Bankruptcy Jurisdiction
3.4.1.1.NORTHERN PIPELINE CO. v. MARATHON PIPE LINE CO., 458 U.S. 50 (1982)
3.5.The Aftermath of Northern Pipeline
3.6.Cases on the Constitutional Limits of Bankruptcy Jurisdiction after Marathon
3.6.1.1.STERN v. MARSHALL, 564 U.S. 2, 131 S. Ct. 2594 (2011)
3.6.1.2.WELLNESS INTERNATIONAL NETWORK, LTD., v. SHARF, 135 S. Ct. 1932 (2015)
3.7.Practice Problems: Bankruptcy Court Jurisdiction
3.8.Venue of Bankruptcy Cases
3.9.Cases on Bankruptcy Venue
3.9.1.1.IN ENRON CORP., 274 B.R. 327 (2002)
3.10.Practice Problems: Filing Voluntary Petitions
3.11.Voluntary Bankruptcy Petitions
3.12.Involuntary Bankruptcy Petitions
3.13.Practice Problems – Involuntary Petitions
3.14.Dismissal of Properly Filed Bankruptcy Petitions for “Cause.”
3.15.Bad Faith Dismissals after the 2005 Amendments
3.16.Dismissal of Cases Properly Filed under Other Chapters
3.17.Cases on Bad Faith Dismissals
3.17.1.1.IN RE JOHNS-MANVILLE CORPORATION, 36 B.R. 727 (Bankr. S.D.N.Y. 1984)
3.17.1.2.IN RE SGL CARBON, 200 F.3d 154 (3d Cir. 1999)
3.18.Voluntary and Involuntary Conversion and Dismissal.
3.19.Dismissal of Consumer Chapter 7 Cases for “Abuse” – The Means Test
3.20.Practice Problems: Dismissal for Abuse – The Means Test, Part One
3.21.Dismissal for “Abuse” - The Means Test, Part Two
3.22.Rebutting the Presumption of Abuse under the Means Test
3.23.Attorney Sanctions for Means Test Violations
3.24.Eligibility after Prior Bankruptcy Cases
Chapter 4: The Bankruptcy Estate
4.1.The Estate
4.2.Cases on Property of the Estate
4.2.1.1.BOARD OF TRADE OF CHICAGO v. JOHNSON, 264 U.S. 1 (1924)
4.2.1.2.BUTNER v. UNITED STATES, 440 U.S. 48 (1979)
4.3.Aftermath: Application to the Bankruptcy Code
4.4.Practice Problems. Property of the Estate
4.5.Cases on Mixed Prepetition and Post-Petition Earnings as Property of the Estate
4.5.1.1.IN RE BAGEN, 186 B.R. 824 (Bankr S.D.N.Y. 1995)
4.5.1.2.TOWERS v. WU, 173 B.R. 411 (9th Cir. BAP 1994)
4.5.1.3.SHARP v. DERY, 253 B.R. 204 (E.D. Mich. 2000)
Chapter 5: Exemptions
5.1.Exemptions
5.2.Practice Problems: Which State’s Exemptions Apply?
5.3.Electing the State or Federal Exemption Scheme
5.4.Practice Problems: The Federal Exemptions.
5.5.Cases on the Allowance of Exemptions
5.5.1.1.TAYLOR v. FREELAND & KOONZ, 503 U.S. 638 (1992)
5.5.1.2.SCHWAB v. REILLY, 30 S. Ct. 2652 (2010)
5.6.Exemption Planning
5.7.Cases on Exemption Planning
5.7.1.1.NORWEST BANK NEBRASKA v. OMAR A. TVETEN, 848 F.2d 871 (8th Cir. 1988)
5.8.Notes on Tveten
5.9.Avoiding Liens that Impair Exemptions
5.10.Practice Problems: Avoiding Liens that Impair Exemptions
5.11.Cases on Avoiding Liens that Impair Exemptions
5.11.1.1.FARREY v. SANDERFOOT, 500 U.S. 291 (1991)
Chapter 6: The Automatic Stay
6.1.What is the automatic stay?
6.2.Practice Problems: The Automatic Stay
6.3.Cases on Using the Automatic Stay as a Sword
6.3.1.1.SPORTFRAME OF OHIO V. WILSON SPORTING GOODS, 40 B.R. 47 (Bankr. N.D. Ohio 1984)
Chapter 7: Operating the Estate
7.1.The United States Trustee.
7.2.The Case Trustee
7.3.The Section 341 Meeting
7.4.No Asset Cases
7.5.Use, Sale and Lease of Property
7.6.Practice Problems: Sale of Property
7.7.Cases on the Sale of Property
7.7.1.1.MARATHON PETROLEUM v. COHEN, 599 F.3d 1255 (11th Cir. 2010)
7.8.Post-Bankruptcy Financing
7.9.Practice Problems: Post Petition Financing
7.10.Cases on Post Petition Financing
7.10.1.1.IN RE SAYBROOK MANUFACTURING CO., INC., 963 F.2d 1490 (11th Cir. 1992)
7.10.1.2.READING v. BROWN, 391 U.S. 471 (1968)
7.10.1.3.IN RE RESOURCES TECHNOLOGY CORP., 662 F.3d 472, 474 (7th Cir. 2011)
7.11.Executory Contracts and Unexpired Leases – Assumption and Rejection
7.12.Practice Problems: Executory Contracts - Assumption and Rejection
7.13.Cases on Executory Contracts
7.13.1.1.IN RE JAMESWAY CORPORATION, 201 B.R. 73 (Bankr. S.D.N.Y. 1996)
7.13.1.2.IN RE GARDINIER, INC., 831 F.2d 974 (11th Cir. 1987)
7.13.1.3.IN RE COMPUTER COMMUNICATIONS, INC., 824 F.2d 725 (9th Cir. 1987)
7.13.1.4.RIESER v. DAYTON COUNTRY CLUB CO., 972 F.2d 689 (6th Cir 1992)
Chapter 8: Enhancing the Estate
8.1.Fraudulent Transfers (11 U.S.C. § 548)
8.2.The Trustee’s State Law Powers (11 U.S.C. § 544(b))
8.3.Practice Problems – Fraudulent Transfers
8.4.Cases on Fraudulent Transfers
8.4.1.1.BFP v. RESOLUTION TRUST CORPORATION, 511 U.S. 531 (1994)
8.4.1.2.ALLARD v. FLAMINGO HILTON, 69 F.3d 769 (6th Cir. 1995)
8.5.Introduction to Bakersfield Westar
8.6.Cases on “Property” and Fraudulent transfers
8.6.1.1.IN RE BAKERSFIELD WESTAR, INC., 226 B.R. 227 (9th Cir. BAP 1998)
8.7.The Strong Arm Power (11 U.S.C. § 544(a))
8.8.Practice Problems: The Strong Arm Power
8.9.Cases on the Strong Arm Power
8.9.1.1.IN RE PROJECT HOMESTEAD, INC., 374 B.R. 193 (Bankr. MD NC 2007)
8.9.1.2.IN RE LOUISE CARY MORENO, 293 B.R. 777 (Bankr. D. Col. 2003)
8.10.Preferences (11 U.S.C. § 547)
8.11.Practice Problems: The Preference Law
8.12.Cases on Preferences
8.12.1.1.BEIGIER v. IRS, 496 U.S. 53 (1990)
8.12.1.2.IN RE CASTILLO, 39 B.R. 45 (Bankr. D. Col. 1984)
8.12.1.3.PARKS v. FIA CREDIT SERVICES, N.A., 550 F.3d 1251 (10th Cir. 2008)
8.12.1.4.IN RE UNICOM COMPUTER CORPORATION, 13 F.3d 321 (9th Cir. 1994)
8.13.Preference Defenses – 11 U.S.C. § 547(c)
8.14.Cases on Preference Defenses
8.14.1.1.UNION BANK v. WOLAS, 502 U.S. 151 (1991)
8.14.1.2.IN RE TOLANA PIZZA, 3 F.3d 1029 (7th Cir. 1993)
8.15.Practice Problems: Preference Exceptions
8.16.Statutory Liens. 11 U.S.C. § 545
8.17.Setoffs. 11 U.S.C. § 553
8.18.Practice Problems: Setoff Preferences
8.19.Cases on Setoffs
8.19.1.1.DURHAM v. SMI INDUSTRIES, INC., 882 F.2d 881 (4th Cir. 1989)
8.20.Statute of Limitations on Avoiding Powers. 11 U.S.C. § 546(a).
8.21.Relation-back Perfection Rules. 11 U.S.C. § 546(b)
8.22.Reclamation Rights. 11 U.S.C. § 546(c)
8.23.Cases on Reclamation Rights
8.23.1.1.IN RE ARLCO, INC., 239 B.R. 261 (Bankr. S.D.N.Y. 1999)
8.23.1.2.PHAR-MOR v. McKESSON CORPORATION, 534 F.3d 502 (6th Cir. 2008)
8.24.Recovering Avoided Transfers. 11 U.S.C. § 550
8.25.Practice Problems: Recovering Avoided Transfers
8.26.Cases on Recovering Avoided Transfers
8.26.1.1.BONDED FIN. SERV., INC., v. EUROPEAN AMERICAN BANK, 838 F.2d 890 (7th Cir. 1988)
8.26.1.2.KELLOGG v. BLUE QUAIL ENERGY, 831 F.2d 586 (5th Cir. 1987)
8.27.Practice Problems: The Debtor’s Avoiding Powers
Chapter 9: Secured Claims in Bankruptcy
9.1.The Section 506(a) Split
9.2.Cases on Valuation and the Section 506(a) Split
9.2.1.1.ASSOCIATES COMMERCIAL v. RASH, 520 U.S. 953 (1997)
9.2.1.2.IN RE BROWN, 746 F.3d 1236 (11th Cir. 2014)
9.3.Practice Problems: The 506(a) Split
9.4.Practice Problems: Post-Petition Interest, Fees, Costs and Charges (11 U.S.C. § 506(b))
9.5.Cases on Post-Petition Interest under § 506(b)
9.5.1.1.IN RE RESIDENTIAL CAPITAL, INC., 508 B.R. 851 (Bankr. S.D.N.Y. 2014)
9.6.The Section 506(c) Surcharge
9.7.Section 506(d) and Striping-down or Striping-Off Liens
9.8.Cases on Stripping Liens under Section 506(d)
9.8.1.1.DEWSNUP v. TIMM, 502 U.S. 410 (1992)
9.9.Stripping Wholly Unsecured Liens in Chapter 7
9.10.Redemption. 11 U.S.C. § 722.
9.11.Debtor’s Treatment of Secured Claims in Chapter 7: Surrender, Redeem or Reinstate – or Maybe “Ride Through.”
9.12.Post-Petition Effect of Security Interests: Section 552
9.13.Practice Problems: Floating Liens in Bankruptcy
9.14.Relief from Stay and Adequate Protection
9.15.Cases on Relief from Stay
9.15.1.1.UNITED SAVINGS v. TIMBERS OF INWOOD FOREST, 484 U.S. 365 (1988)
9.15.1.2.BANKERS LIFE INS. CO., v. ALYUCAN INTERSTATE CORP., 12 B.R. 803 (Bankr. D. Utah 1981)
9.15.1.3.FORD MOTOR CREDIT COMPANY v. DOBBINS, 35 F.3d 860 (4th Cir. 1994)
9.16.Practice Problems: Relief from Stay
Chapter 10: Unsecured Claims in Bankruptcy
10.1.What is a “Claim”?
10.2.Cases on Claims and Due Process
10.2.1.1.MULLANE v. CENTRAL HANOVER BANK & TRUST CO., 339 U.S. 306 (1950)
10.2.1.2.A.H. ROBINS CO. v. GRADY, 839 F.2d 198 (4th Cir. 1988)
10.2.1.3.IN RE JOHNS-MANVILLE CORP., 36 B.R. 743 (Bankr. S.D.N.Y. 1984)
10.2.1.4.KANE v. MANVILLE, 843 F.2d 636 (2d Cir. 1988)
10.2.1.5.EPSTEIN v. PIPER AIRCRAFT, 58 F.3d 1573 (11th Cir. 1995)
10.2.1.6.IN RE FAIRCHILD AIRCRAFT CORP., 184 B.R. 910 (Bankr. W.D. Tex. 1995)
10.2.1.7.IN RE GROSSMAN’S INC., 607 F.3d 114 (3d Cir. 2010)
10.2.1.8.MAIDS INTERNATIONAL, INC., v. Ward, 194 B.R. 703 (Bankr. D. Mass. 1996)
10.3.Claim Procedures
10.4.Practice Problems: Landlord, Employer and Certain Contingent Claims
10.5.Cases on Claim Estimation and Limitations
10.5.1.1.IN RE RADIO-KEITH-ORPHEUM CORPORATION, 106 F.2d 22 (2d Cir. 1939)
10.5.1.2.IN RE EL TORO MATERIALS COMPANY, INC., 504 F.3d 978 (9th Cir. 2007)
10.6.Priority Claims – 11 U.S.C. § 507
10.7.Practice Problems: Priority Claims.
10.8.Subordination: 11 U.S.C. § 510
10.9.Abandonment: 11 U.S.C. § 554
10.10.Cases on Abandonment of Property in Bankruptcy
10.10.1.1.MIDLANTIC NAT’L BANK v. NJDEP, 474 U.S. 494 (1986)
10.11.Distribution to Creditors: 11 U.S.C. § 726
Chapter 11: The Discharge
11.1.The Discharge Order
11.2.Cases on Violation of the Discharge Order
11.2.1.1.IN RE ANDRUS, 189 B.R. 413 (N.D. Ill. 1995)
11.3.Denial of Discharge
11.4.Cases on Denial of Discharge
11.4.1.1.DAVIS v. DAVIS, 911 F.2d 560 (11th Cir. 1990)
11.4.1.2.IN RE BAJGAR, 104 F.3d 495 (1st Cir. 1997)
11.5.Exceptions to Discharge: 11 U.S.C. § 523
11.5.1.1.Automatically Non-Dischargeable Debts
11.5.1.2.Debts Non-Dischargeable Only On Timely Request of the Creditor
11.6.Cases on Exceptions to Discharge
11.6.1.1.FAHEY v. MASS. DEP’T OF REVENUE, 2015 BL 41157 (1st Cir. 2015)
11.6.1.2.BRUNNER v. NEW YORK STATE HIGHER EDUC. SERV. CORP., 831 F.2d 395 (2d Cir. 1987)
11.6.1.3.ELLINGSWORTH v. AT&T UNIVERSAL CARD SERV., 212 B.R. 326 (Bankr. W.D. Mo. 1997)
11.6.1.4.IN RE SHARPE, 351 B.R. 409 (Bankr. N.D. Tex. 2006)
11.6.1.5.ARCHER v. WARNER, 538 U.S. 314 (2003)
11.6.1.6.KAWAAUHAU v. GEIGER, 523 U.S. 57 (1998)
11.6.1.7.BULLOCK V. BANKCHAMPAIGN, 133 S. Ct. 1754 (2013)
11.7.Reaffirmation: 11 U.S.C. § 524(c)
11.8.Practice Problems: Protecting the Discharge.
Chapter 12: Wage Earner Reorganizations under Chapter 13
12.1.Introduction
12.2.Reasons for Filing under Chapter 13
12.3.The Chapter 13 Process
12.4.The Chapter 13 Plan Term (and “Commitment Period”).
12.5.Restructuring Secured Claims in a Chapter 13 Plan
12.6.Cases on Restructuring Secured Claims in Chapter 13
12.6.1.1.TILL v. SCS CREDIT CORP., 541 U.S. 465 (2004)
12.6.1.2.NOBELMAN v. AMERICAN SAVINGS BANK, 508 U.S. 324 (1993)
12.6.1.3.IN RE POND, 252F.3d122(2d Cir. 2001)
12.7.Question: Is In re Pond Still Good Law?
12.8.Unsecured Claims in Chapter 13
12.9.Cases on Unsecured Claims in Chapter 13
12.9.1.1.HAMILTON v. LANNING, 560 U.S. 505 (2010)
12.9.1.2.IN RE GAMBOA, 538 B.R. 53 (Bankr. S.D. Cal. 2013)
12.10.Modification.
12.11.Practice Problems: Developing a Chapter 13 Plan
Chapter 13: Business Reorganizations under Chapter 11
13.1.Introduction to Chapter 11 of the Bankruptcy Code
13.2.The Chapter 11 Process
13.3.The Exclusivity Period
13.4.Negotiating a Plan and the Disclosure Statement
13.5.Classification
13.6.Voting and Impairment
13.7.Non-Recourse Debt and the 1111(b) Election
13.8.Cases on Classifying Claims in Chapter 11 Reorganizations
13.8.1.1.IN RE US TRUCK CO., 800 F.2d 581 (6th Cir. 1986)
13.8.1.2.IN RE BERNHARD STEINER PIANOS USA, INC., 292 B.R. 109 (Bankr. N.D. Tex. 2002)
13.8.1.3.PHOENIX MUT. LIFE v. GREYSTONE III JOINT VENTURE, 995 F.2d 1274 (5th Cir. 1991)
13.8.1.4.IN RE SM 104 LIMITED, 160 B.R. 202 (Bankr. S.D. Fla. 1993)
13.9.Practice Problems: Classification, Voting and Impairment
13.10.Confirmation Requirements under 11 U.S.C. § 1129(a)
13.11.The Cramdown: 11 U.S.C. §1129(b).
13.11.1.1.Cramdown of Secured Claims.
13.11.1.2.Cramdown of Unsecured Claims.
13.12.Cases on Cramming Down Secured Claims in a Chapter 11 Plan of Reorganization
13.12.1.1.IN RE ARNOLD & BAKER FARMS, 85 F.3d 1415 (9th Cir. 1996)
13.12.1.2.BANK OF AMERICA v. 203 N. LaSALLE STREET P’SHIP, 526 U.S. 434 (1999)
13.13.Practice Problems: Confirmation and Cramdown under Chapter 11 (11 U.S.C. § 1129)
13.14.The Chapter 11 Discharge - 11 U.S.C. § 1141
13.15.Protecting the Integrity of the Bankruptcy Process
13.16.Cases on Protecting the Integrity of the Bankruptcy Process
13.16.1.1.IN RE LIONEL CORPORATION, 722 F.2d 1063 (2d Cir. 1983)
13.16.1.2.IN RE CHRYSLER, 576 F.3d 108 (2d Cir. 2009)
13.16.1.3.IN THE MATTER OF KMART CORPORATION, 359 F.3d 866 (7th Cir. 2004)
APPENDIX A:The Fair Debt Collection Practices Act
APPENDIX B: Federal Wage Garnishment Limits
APPENDIX C: New York Exemptions
C.1.CPLR § 5205. Personal property exempt from application to the satisfaction of money judgments.
C.2.CPLR § 5206. Real property exempt from application to the satisfaction of money judgments.
C.3.New York Debtor Creditor Law, Art. 10A, § 282.
C.4.New York Debtor Creditor Law, Art. 10A, § 283.
C.5.New York Debtor Creditor Law, Art. 10A, § 284 [OLD].
C.6.New York Debtor Creditor Law, Art. 10A, § 285 [NEW].
APPENDIX D: Social Security Act § 207, 42 U.S.C. § 407
APPENDIX E: Uniform Fraudulent Transfer Act, 740 ILCS 160/1 (Illinois)
APPENDIX F: Article 9 of the New York Uniform Commercial Code
F.1.Index
F.2.Statutory Provisions
APPENDIX G: Example of Promissory Note
APPENDIX H: Example of Security Agreement
APPENDIX I: Example of UCC-1 Financing Statement
1
Chapter 1: A World without Bankruptcy
1.1.A Wee Bit of History
We begin the study of bankruptcy law by imagining a world in which bankruptcy does not exist. That was in fact the state of affairs during most of the 18th and 19th centuries. While the Constitution gave Congress the power to “establish uniform laws on the subject of bankruptcies,” it did not require Congress to enact bankruptcy laws. U.S. Constitution, Article I, Section 8, Clause 4. There were short-lived federal bankruptcy laws in effect from 1800-1803, 1841-1843, and 1867-1878. Federal bankruptcy law only became a permanent with the passage of the 1898 act, which remained in effect (with substantial revisions) until the passage of the current bankruptcy code in 1978. The 1898 Act, as amended, remains known as the “Bankruptcy Act,” and the 1978 law is known as the “Bankruptcy Code.”