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Web posted and Copyright © 1/12/98, American Bankruptcy Institute.

The following abstract summarizes the text of submissions made to the National Bankruptcy Review Commission. The abstract is organized by NBRC working group and topic.

The Final Report of the NBRC can be viewed on-line. To obtain a copy of any document shown below, contact the Center for Legislative Archives, Room 205, National Archives Building, Washington, D.C. 20408. The telephone number is 202/501-5350. Mr. R. Michael McReynolds, Deputy Director, will be able to assist with specific inquiries. (The NBRC documents will be housed at this location until June, 1999. Thereafter, the records will be transferred to the Center's archives in College Park, MD.)

Future Claims: Miscellaneous
Problem ReferencedProposed Solutions
National Bankruptcy ConferenceNational Bankruptcy Conference (NBC), Bernard Shapiro - Chair

National Bankruptcy Conference believes that the following issue merits study by the NBRC: whether the law of partnerships should be "totally reconsidered."NBC concludes that partnership law should be "reconsidered." (No additional details are provided. The NBC Report, however, which discusses this position more thoroughly, has been "refined" and will be available to the NBRC.)
Jeffrey Davis Professor of Law, University of Florida, School of Law

In this 1996 article in the American Bankruptcy Law Journal (Vol. 70, p. 329 et seq), the author addresses the isssue of "Cramming Down Future Claims in Bankruptcy: Fairness, Bankruptcy Policy, Due Process, and the Lessons of the Piper Reorganization." The fundamental issue is that "If the parties in interest in a bankruptcy are to shop for the optimal reorganization or sale of a company, they need the explicit flexibility either to bring future claims into the bankruptcy process and provide for them, or to ignore them and leave them alone." "This Article proposes a straightforward but flexible way to resolve the problem of future claims. Under this proposal, the plan will select one of two alternate cramdown methods. Either future claimants will participate in the distribution under the plan, or they will be left to pursue the surviving entity or others in the future. In addition, this proposal leaves the choice of cramdown method to market forces and the competing self-interests of present parties."
Barry E. AdlerProfessor of Law, New York University School of Law

Author submits a six-page memo discussing his comments on future claims and changes proposed by the working draft. Headings include: Introduction; Defining Future Claims; Protecting the Interests of Holders of Furute Claims; Determination of Claim; Discharge; Successor Liability; and Other Potential Corollary Modifications.The Memo discusses proposals made in a previous writing as compared to proposals in the working draft. Author "would include all pproperly defined future claims as claims [in a bankruptcy proceeding], at least in a corporation's Chapter 7..." He agrees with the principle underlying the definition of future claims, but suggests the definition might be simplified, and gives proposed language. Author suggests that, in a Chapter 11 case, the debtor's discharge of future claims would be limited to those for which a proof of claim filed or deemed filed. Author agrees with the point made in the proposal about §502(c), but suggests that the problem cna be fixed for all claims with his proposed changes to §502(c) and (d). Author feels §1141 should be amended to reflect that discharge be limited to filed future claims. Author agrees with the proposal's reasoning on successor liability, and gives proposed statutory language which he feels solves the problem. Author suggests language for §1129(a) dealing with a mechanism for distribution of future claims funds. Author feels not only §1123, but sections in other chapters, should provide for the transfer of assets to a trust, and he is not sure what sort of amendment to §1141(d)(2) the Working Group proposal had in mind.
Professor Jeffrey Davis Faculty, University of Florida College of Law

11 1. Mechanism for Determining Class Eligibility - When are cases "big" enough to justify a future claims representative; 2. Cram Down - There must be a clear way to cram down future claims, otherwise the representative will have effective veto power over all proposed plans.; 3. Two Quibbles - a. individual holders of future claims should be able to opt out and represent themselves, but watch out for someone as class representative trying to opt out a group. b. should a non-party other than the U.S. Trustee be able to move for appointment of a representative 1. It's not enough that debtor be likely to be subject to "substantial" future demands for payment, there also has to be sufficient assets to pay for a representative and to fund an effective payment device. Author gives a suggestion for a mechanism.; 2. Treating future claims in a way that is projected to be actuarially equivalent to the treatment of present claims would be ideal. Something short of that may pass the fair discrimination test.; 3. a. Make sure opt out provision applies only to the holders of a claim themselves. b. This is more trouble then its worth, because it would so rarely apply.
Walter TaggartProfessor of Law, Villanova
541, 506(a)
"A debtor's casualty policies are property of the estate because the debtor owns the policies. Thus, I do not think an amendment to § 541 works."Author suggests § 506(a) as the location for change, and gives specific text changes.
Michael H. ReedAttorney, Pepper, Hamilton & Scheetz

Author comments on the memorandum on future claims by Elizabeth Warren and Melissa B. Jacoby distributed on January 15, 1997.Author poses some questions and suggests some language changes.


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