H.R. 764: Bankruptcy Amendments of
1997
| ID | Name | Group | Other | Code
Sec |
Cross
Ref | Problem
Referenced | Proposed
Solutions |
NBRC-
0017 | Professor Cynthia A. Baker, "Other People's Money: The
Problem of Professional Fees in Bankruptcy," (Working
Draft) | Professor of Law; Emory
University |
| 330 |
| The recent amendments to the Code that were designed to
effectively control fees and reign in costs are an attempt "to cure
a broken leg with a Band-Aid." Efforts to control costs through
after-the-fact judicial review of fees don't work. The problem is that
the bankruptcy system of priorities enables the parties to treat
professional fees and costs as externalities, costs ignored by the
parties to a transaction because they are incurred by other members of
society. | The system for compensating
professionals should be changed. The fees and expenses incurred by an
official committee should be charged against distributions to the class
or classes that the committee represents; fees incurred by the
debtor-in-possession's professionals should be allocated among all
classes of unsecured claims and equity interests in proportion to the
value of hte property distributed to each class under the plan of
reorganization; judicial review of professional fees should be
eliminated except where a party in interest objects |
NBRC-
0041 | Billy R. McCoy | Ex-Husband of Ch. 7
debtor. |
| 523(a)(15) |
| Confusion over non-dischargeability provisions permitted wife to
avoid "hold harmless" provisions in divorce. Judge stated
that confusion over section precluded non-dischargeability becaiuse
ex-wife benefitted from divorce. | Make
Provision clear and give rights to former non-bankruptcy filing spouses.
Now left holding the bag and completely victimized by bankruptcy
proceedings. |
NBRC-
0123 | Henry J. Sommer | National Bankruptcy
Conference | Submitted report entitled
"Reforming the Bankruptcy Code" |
|
| The Code does not waive filings fees for debtors who cannot
them. | Filing fees whould be waived for
individual who cannot afford them. |
NBRC-
0123 | Henry J. Sommer | National Bankruptcy
Conference | Submitted report entitled
"Reforming the Bankruptcy Code" | 522(b) |
| Federal bankruptcy exemptions are not available in all
states. | The language in § 522(b)
permitting a state to make the federal bankruptcy exemptions unavailable
to its resident should be repealed. |
NBRC-
0123 | Henry J. Sommer | National Bankruptcy
Conference | Submitted report entitled
"Reforming the Bankruptcy Code" | 522(b)(2) |
| The law regarding exemption of entirities property in bankruptcy
is confused and variable amount circuits and
districts. | Amend § 522(b)(2) to resolve
the confusion over exemption of entirities property in a way that does
not cause the liquidation of all entirities property in the bankruptcy
case and protects a modest amount of entirities property as
exempt. |
NBRC-
0123 | Henry J. Sommer | National Bankruptcy
Conference | Submitted report entitled
"Reforming the Bankruptcy Code" | 522 |
| The law regarding whether, and to what extent, consumer debtors
may convert nonexempt property to exempt property prepetition is
confusing and unpredictable. | Clarify that
the conversion of nonexempt to exempt property should be grounds to bar
a discharge. |
NBRC-
0123 | Henry J. Sommer | National Bankruptcy
Conference | Submitted report entitled
"Reforming the Bankruptcy Code" | 547 |
| Case law varies sharply regarding whether wages garnished within
90 days prepetition may be recovered under §
547. | Clarify that garnishment of monies
earned by debtor during 90 days prepetition should be subject to
preference recovery notwithstanding any nonbankruptcy law that would
divest the debtor of an interest in property at an earlier point in
time. |
NBRC-
0123 | Henry J. Sommer | National Bankruptcy
Conference | Submitted report entitled
"Reforming the Bankruptcy Code" | 506 |
| Lien stripping law in Chapters 7 and 13 is not
uniform. | Permit a Chapter 7 debtor to use
§ 506 to strip down a lien on any collateral and, for loans secured
by a lien on consumer goods or on the debtor's principal residence, the
bankruptcy court should be empowered to determine the resulting terms of
the lending agreement with respect to the time and amount of payments by
the debtor to satisfy the lien indebtedeness. |
NBRC-
0123 | Henry J. Sommer | National Bankruptcy
Conference | Submitted report entitled
"Reforming the Bankruptcy Code" |
|
| The area of consumer rent-to-own contracts is rife with
litigation and should be clarified. | Treat
consumer "rent-to-own" contracts as credit sales for all
purposes in bankruptcy. |
NBRC-
0123 | Henry J. Sommer | National Bankruptcy
Conference | Submitted report entitled
"Reforming the Bankruptcy Code" | 525 |
| There is confusion in the case law as to how far to extend the
language in § 525(a) prohibiting discrimination with respect to a
"license, permit, charter, franchise, or other similar
grant." | Broaden and clarify § 525
(a) to encompass any benefit program administered or controlled by a
governmental unit. |
NBRC-
0123 | Henry J. Sommer | National Bankruptcy
Conference | Submitted report entitled
"Reforming the Bankruptcy Code" | 707(b) |
| 707(b) is applied arbitrarily. | Repeal
§ 707(b). Alternatively, § 707(b) should not be interpreted
to deny access to Chapter 7 debtors who can make only partial repayment
on their debt. |
NBRC-
0123 | Henry J. Sommer | National Bankruptcy
Conference | Submitted report entitled
"Reforming the Bankruptcy Code" | 524 |
| Reaffirmation laws are disparately applied, and allow creditors
to threaten debtors and subject them to groundless dischargeability
complaints. | The provisions of § 524
which premit reaffirmation of consumer debt should be
repealed. |
NBRC-
0123 | Henry J. Sommer | National Bankruptcy
Conference | Submitted report entitled
"Reforming the Bankruptcy Code" |
|
| The 1994 amendments only partially overrruled Rake v. Wade. This
decision cost almost every Chapter 13 debtor desiring to save a home
from foreclosure thousands of dollars of additional interests on
interest, and interest on other fees and charges. | Amend the Code to clarify that when a default on a long-term
obligation is cured under a chapter 12 or 13 plan, interest and other
costs shall be payable only if, under the contract and applicable
nonbankruptcy law, such interests and costs would have been paid in a
nonbankruptcy cure of the default. |
NBRC-
0123 | Henry J. Sommer | National Bankruptcy
Conference |
| 1325 | 722 | Case law is confused regarding valuation of property and interest
rates in chapter 13. | Clairfy the Code to
provide that, for purposes of giving creditors present value under
§ 1325(a)(5)(B), the appropriate interest rate is one which
approximates the creditor's cost of funds, and should be, presumptively,
the prime rate of interest. The Code should be clarified to provide
that collateral should be valued for purposes of sections 1325(a) and
722 based upon the amount the secured creditor would realize if it were
permitted to liquidate the property, taking into account costs of sale,
i.e. at wholesale value. |
NBRC-
0148 | Judge Robert Martin | Chief Bankruptcy
Judge; District Wisconsin |
| 1104 |
| Lack of a viable threat that the
DIP may lose control of the reorganization process has continued what
was known under the old chapter XI as "the arrogance of the Chapter
XI debtor." Unresponsiveness, delay, looting of the estate, and
"uneconomic decisions" are all potential products of
inappropriate DIP control. | Proposed statute
would provide that at any time after the commencment of the case and
prior to the filing of a plan, any party in interest (but not the court
or the US Trustee) may move for the appointment of a trustee. In the
absence of a hearing on an objection to the motion within 30 days of its
service, the motion would be deemed granted. Any objecting party would
have to prove that: debtor is operating business consistent with DIP
duties; DIP is maintaining books & records; wages, taxes and
insurance payments are up to date; plan negotiations have begun; appt of
trustee would not be in best interest of general creditors. |
NBRC-
0148 | Judge Robert Martin | Chief Bankruptcy
Judge; District Wisconsin |
|
|
| Need for more rapid confirmation
of plans. | Disclosure statements should be
done away with, regaining the 30-45 days back in the confirmation
process would be far superior to the other expediting
proposals. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
|
|
| US Trustee program does not receive sufficient funding for fraud
investigation. | US Trustee's Office should be
given greater resources for funding fraud investigation. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
| 28 USC § 1930 |
| Recent legislation requiring
debtors to pay US Trustees a fee after a plan is confirmed and until the
case is closed could have a tremendous negative impact on the
feasibility of small debtors' plans. | Legislation requiring debtors to pay US Trustees a fee after a
plan is confirmed and until the case is closed should be
repealed. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
| 327(a) | 101(5) | When determining whether a professional is
"disinterested" under 11 USC § 327(a), every member of a
firm should not be disqualified because one of its members is not
"disinterested." Enlightened courts have held in a number of
instances that a member of a firm may be retained under such
circumstances where a "Chinese Wall" was created to screen out
nondisinterested members. | In recognition of
the realities of modern practice, the definition of
"disinterested" in 11 USC § 327(a) should be amended to
recognize that a professional firm is not disqualified solely based on
the disqualification of one of its members as long as a proper screening
mechanism is applied. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
| 327(a) | 101(14) | Definition of a "disinterested person" in 11 USC §
327(a) should not necessarily disqualify professionals who have a claim
against the estate. Often, the attorney who has been counseling the
debtor prior to the bankruptcy filing, or an accountant who is most
familiar with the debtor's books and records, has not been paid all of
her or his pre-petition fees. Where the professional is unwilling to
waive the claim for fees, most courts have held that he or she is
prohibited from representing the DIP post-petition. However, the
existence of this claim does not necessarily affect the professional's
judgment, and the court should be allowed to evaluate whether a
professional is "disinterested" on a case by case
basis. | 11 USC § 327(a) should be
amended to delete the requirement that professionals not be creditors,
but professionals should still be required to disclose their status to
the court when making application for employment. In order to screen
out non-disinterested creditor professionals, this section could be
amended to prohibit professionals from participating in the case as a
creditors, other than to file proof of claim, and from voting on any
proposed plans. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
| 547(c)(2)(C) |
| In interpreting the ordinary
course defense to preference claims, courts have held that §
547(c)(2)(C), which specifies that tranfers must be made "according
to ordinary business terms," requires that the transfers be made in
a manner that is "ordinary in the industry in general." This
standard is ambiguous, difficult to prove and
unnecessary. | Requirement under 11 USC §
547(c)(2)(C) that the transfer was "ordinary in the industry in
general" is unnecessary. The requirements under subsections (A)
(that the debt was incurred in the ordinary course of the debtor's
business) and (B) (that the transfer was made in the ordinary course of
affairs of the particular debtor and creditor) are sufficient for
establishing that the subject of the claim was an ordinary course
transfer and not a preference. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
| 522 | F.R.B.P.
4003(b) | Thirty day time period under Rule
4003(b) during which objections to a debtor's claimed exemptions can be
made is too short, unnecessarily restrictive, and sometimes results in
debtors being entitled to unwarranted exemptions. | Time period for objecting to a debtor's claimed exemptions should
be extended, possibly to 60 days from the first meeting of creditors, in
order to coincide with the deadline under Rule 4004 for objecting to the
debtor's discharge in Chapter 7 cases. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
|
|
| Under current practice, an individual doing business as a sole
proprietorship may seek relief under Chapter 13 if his debts meet
Chapter 13's requirements. However, if the same individual has
incorporated his business, he is effectively prevented from reorganizing
because of the prohibitive costs, complexities and time consuming
requirements of Chapter 11. Small, closely-held corporations should
qualify for relief under Chapter 13, which provides an expeditious and
inexpensive method for the small business person to reorganize his or
her debts. | Small businesses that meet the
aggregate debt limitations of Chapter 13 should be allowed to seek
relief under that Chapter. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
|
|
| Limitations on the dischargeability of taxes are too restrictive.
In many cases, taxes are the largest debts owed and often the reason
for a bankruptcy filing. Denying debtors the ability to discharge taxes
frustrates the objective of providing a fresh start, and sometimes
forecloses the possibility of meaningful rehabilitation. Taxes are
essentially no different from any other debt and no rationale exists for
according taxes nondischargeability status. | In order to provide debtors a true fresh start and opportunity
for rehabilitation, a much broader range of taxes should be
dischargeable. This dischargeability need not extend to tax obligations
resulting from tax fraud. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
| 26 USC § 6012(a)(2), Reg. §
1.6012-2(a)(2) |
| Requirement for filing corporate tax returns in Chapter 7
bankruptcy cases is too burdensome and costly in situations where the
estate has little income and no taxable income. Currently, Chapter 7
bankruptcy trustees are required to file tax returns in all corporate
cases. 26 USC § 6012(a)(2); Reg. § 1.6012-2(a)(2); Reg.
§ 1.6012-3(b)(4). A Revenue Ruling permits trustees to present
facts to the IRS to relieve the filing requirement in cases with no
assets or income. Rev. Rul. 84-123 1984-2 CB 244. This procedure may
not be applicable in limited income cases because corporations typically
have some assets, even if they are fully encumbered. While the IRS
appears to apply the Revenue Ruling liberally, administrative practice
is subject to change at any time and trustees using the procedure must
employ the cumbersome and costly procedure of presenting facts to the
District Director and awaiting a response. Trustees often have
difficulty obtaining prior tax returns and other financial information
necessary for preparation of returns. Moreover, trustees in no-asset
cases frequently do not have the funds to pay for tax return
preparation, and the estates infrequently have any tax
liability. | Requirement for filing corporate
tax returns in Chapter 7 bankruptcy cases should be eliminated in
situations where estate income falls below a certain amount and the
estate has no taxable income. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
| 101(5) |
| Bankputcy trustees of estates containing contaminated property
should not have to risk being held directly liable for the property's
clean-up costs. The Bankruptcy Code fails to accomodate several
problems associated with the environmental liability of trustees, and
the result has been conflicting and sometimes "poor" case law.
One factor contributing to this problem is that the definition of
"claim" in § 101(5) is difficult to apply in certain
situations, such as where a government agency is seeking to compel the
debtor to clean-up contaminated property. | Definition of "claim" in § 101(5) should be
amended to clarify what types of environmental liabilities and
responsibilities fall within its scope. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
| 362 |
| Bankputcy trustees of estates containing contaminated property
should not have to risk being held directly liable for the property's
clean-up costs. The Bankruptcy Code fails to accomodate several
problems associated with the environmental liability of trustees, and
the result has been conflicting and sometimes "poor" case law.
One factor contributing to this problem is that § 362 does not
clearly specify those types of environmental litigation that are
prohibited by the automatic stay. Some courts have held that actions to
recover clean-up costs constitute an exercise of police or regulatory
powers and are therefore not stayed. Other courts have held that
actions to correct the dollar amount of an environmental claim are not
actions to collect a debt and therefore are not stayed. Litigating
these actions is unnecessarily burdensome and can be expensive for the
debtor. | Disputes as to whether a particular
litigation is prohibited by an automatic stay are related to
administration of the estate, and thus should be resolved within the
bankruptcy proceeding and not in separate litigation. 11 USC § 362
should be amended to clarify which types of environmental litigation are
prohibited by the stay. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
|
|
| Standard is needed for determining whether an environmental claim
arose pre- or post-petition, or pre- or post-confirmation. Problems
arise when a debtor has contaminated property in the past, but the
government has taken no action to compel a clean-up. In these
circumstances, it is not clear when the claim arising from the clean-up
costs arose. | Standard should be developed
for determining whether a claim is pre- or post-petition, or pre- or
post-confirmation. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
|
|
| Bankruptcy Code fails to deal adequately with various
environmental issues. | Comprehensive review
of the interaction between the Bankruptcy Code and environmental laws
should be undertaken. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
| 547, 550 |
| Recent amendment to 11 USC § 550 does not fulfill its
intended purpose of overruling Levit v. Ingersoll Rand (DePrizio). In
DePrizio, the court held that payment to a creditor on a debt guaranteed
by an insider constitutes a transfer for the benefit of the insider, and
thus the one-year extended preference period applies. Rather than
precluding DePrizio type preference claims, the amendment simply places
a limit on the trustee's ability to recover a voided preference (i.e.,
the trustee may not recover from a non-insider transferee a voided
transfer that occured between 90 days and one year prior to the
petition). The trustee's ability to void the transfer is still
"left open." With some types of transfers, such as the
granting of a security interest, avoidance will effectively result in
defeating the non-insider transferee's interest and for all practical
purposes result in recovery. | 11 USC
§§ 547 and 550 should be rewritten to provide that all
transfers to a non-insider occuring between 90 days and one year prior
to a bankruptcy petition may not be avoided by a trustee. |
NBRC-
0175 | Kenneth P. Childs, on behalf of the Bankruptcy Review Committee
of the Oregon State Bar Debtor-Creditor Section | Attorney |
| 727(d)(1) | 727(e)(1) | One year time period in
which trustees, creditors and US Trustees may seek revocation of a
debtor's discharge where the discharge was obtained through fraud is too
short. The fraud often involves concealment of assets and/or false
statements, and is frequently discovered more than one year after the
discharge was granted. | Extend the time
period for filing a revocation action based on fraud to five years,
making this period consistent with the five year criminal statute of
limitations for bankruptcy fraud. Otherwise, it would be possible for a
debtor to be criminally prosecuted for bankruptcy fraud but retain his
bankruptcy discharge. If a five year time period is not adopted, the
period should at least be consistent with the period allowed for
revocation actions where acquired property is not reported (§
727(d)(2)) and for refusals to obey a court order to testify (§ 727
(d)(3))--up to one year after discharge or one year after the case is
closed, whichever occurs later. |
NBRC-
0183 | William E. Cumberland | Senior Staff
VP, Mortgage Bankers Assoc. of America | Submission of Robert P. Vestewig to Single Asset R.E. working
group |
|
| Author provides written
submission of Robert P. Vestewig, Senior Vice President of L. J. Melody
& Co. Houston, TX, a commercial mortgage banking company, for
consideration at the 12/17/96 meeting of the Working Group on
Partnerships, Small Business and Single Asset Realty. Mr. Vestewig also
serves as Chair of the Bankruptcy Working Group of the Mortgage Bankers
Association of America. In his statement, he defines and discusses the
"single asset debtor," and provides the following
observations:
1) The preservation of jobs is not usually a consideration in
reorganizing single asset debtors because these debtors normally have
few employees, if any. Also, when a lender forecloses on a single asset
property, jobs are not often lost because the lender usually retains the
debtor's employees to manage the property.
2) Contrary to some critics' opinions, large land developers and hotel
chains who own single asset properties are not automatically put out of
business where a lender forecloses on the ownership of a single asset
entity. Typically, these companies do not legally own the property, but
rather ownership rests in a legal entity such as a corporation or
limited partnership in which they own an interest or have a management
contract.
3) Often, the creditor has far more capital investment in the asset
that does the single asset debtor. Consequently, commercial mortgage
lenders are understandably concerned about delays in bankruptcy
proceedings and threats of cramdowns.
4) History has demonstrated that reorganization is not always possible
with single asset debtor-owners. According to a MBAA survey of life
insurance companies, single asset debtors often use Chapter 11 and
reorganization provisions for delay rather than legitimate
reorganization purposes.
5) Delaying a bankruptcy allows these debtors to avoid or defer income
tax liability for recapture of depreciation, to divert rents to the
owner, and to induce lenders to pay cash or to forego prepayment
penalties. Delay is costly, resulting in higher mortgage interest
rates, less investment in commercial mortages, and a decline in property
values and corresponding tax bases. During this delay, tenants in
commercial and residential property and nearby communites also suffer
when single asset properties are not maintained.
6) Congress has begun to recognize that unwarranted delay by single
asset debtors is "inappropriate," and has implied in recent
amendments that single asset cases should not be entitled to "the
presumption that reorganization is possible." The 1994 provision
lifting the automatic stay in cases where reorganization is not
reasonably likely to succeed may be "quite helpful" if ever
applied to all single asset cases. | Single
asset debtors are often incapable of reorganization because they have no
"business" to reorganize. The NBRC should approach the issue
of single asset debtors with the assumption that these debtors are not
always capable of successful reorganization, but may be using the
reorganization provisions simply to delay and take advantage of the
bankruptcy system. Many issues, such as cramdowns, creditor classes,
and the new value exception to the absolute priority rule, are more
easily resolved if "there is no pervasive presumption that
reorganization of a single asset debtor-owner is the goal." The
Bankruptcy Code should be amended to reflect this
"reality." |
NBRC-
0199 | Heidi Heitkamp, on behalf of the Natl. Assoc. of Attys. General,
Bankruptcy & Taxation Working Group | Chair of Bankruptcy & Taxation Working Group of Natl. Assoc.
of Attorneys General; Attorney General of ND |
| 362 | 105 | "Strongly supports" the
positions set forth in the letter dated 12/12/96 by J. Christopher Kohn,
Director, United States Department of Justice, Civil Division,
Commercial Litigation Branch, regarding the bankruptcy court's
injunctive powers. The author states that the Bankruptcy Code fails to
prevent defendants who file bankruptcy from using the automatic stay to
shield themselves from state enforcement of police and regulatory
powers. She acknowledges that collection of purely monetary judgments,
even those entered in police and regulatory actions, should be deferred
to the normal bankruptcy process. However, the exercise of state
police and regulatory power often requires the state to act against
items such as licenses or permits that may be property of the estate,
and in cases such as civil or criminal forfeitures, that the state seize
assets where the goods have been manufactured in violation of the law.
In these instances, the Code should clearly prohibit the defendant from
using the automatic stay as a defense to state
enforcement. | Section 362 should be clarified
to prevent defendants who file bankruptcy from using the automatic stay
as a defense to state police and regulatory enforcement that occurring
outside the normal bankruptcy process. Additionally, § 105 should
be limited and clarified with regard to police and regulatory actions so
that defendants cannot use this section as a "back-door way"
for overruling the exemption from the automatic stay. The author
concludes that "it would be a very rare situation where it would be
appropriate to exempt a debtor from the operation of laws applicable to
other parties." |
NBRC-
0207 | J. Christopher Kohn | Director,
Commercial Litigation Branch (DOJ) |
| 362 |
| This nine-page memorandum is a
follow-up to the government Round Table discussions in Santa Fe and San
Diego. Those discussions focused in part on clarifying the automatic
stay to enable police and regulatory actions to impact estate property.
The Code's automatic stay provisions currently treats police and
regulatory actions in two exceptions, §§ 362(b)(4) and (b)(5).
The principle behind these exceptions is that bankruptcy should not
prevent police and regulatory actions and judgment enforcement so long
as government is not enforcing monetary judgments. This intent can be
frustrated by the Code's failure to exempt police and regulatory actions
from § 362(a)(3), which stays acts to seize or control state
property, and from § 362(a)(6), which stays acts to seize claims.
Working Group Proposal #7, which was intended to address these concerns
by adding language to § 362(b)(4) enabling governments to exercise
control over estate property, is too limited and technically
flawed. | Section 362(a)(3) should be added to
the police power provisions excepted by §§ 362(b)(4) and
(b)(5). |
NBRC-
0207 | J. Christopher Kohn | Director,
Commercial Litigation Branch (DOJ) |
| 362 | 105 | This nine-page memorandum is a
follow-up to the government Round Table discussions in Santa Fe and San
Diego. Those discussions focused in part on limiting overly expansive
notions of a bankruptcy court's injunctive power, especially with regard
to police and regulatory activities. In response to the NBRC's request,
the author provides case citations that illustrate the Branch's concerns
relating to overly expansive use of a bankruptcy court injunctive power.
Viewed as a whole, the Branch believes that these cases demonstrate
several points: (1) the cases are neither limited in number nor
aberrational in character; (2) governmental actions are often enjoined
even where the action is conceded to be exempt under the police and
regulatory exception; (3) the court decisions generally focus on the
perceived "harm" to the estate or its chances of
reorganization without identification of a substantive right held by the
debtor which the injunction, in theory, should protect; and (4) unless
expressly limited, debtors will continue to challenege, on a
case-by-case basis, whether a given police or regulatory law is really
"necessary," and courts, viewing the issue through the lens of
the debtor's reorganization effort, will often decide that it is
not. | Commercial Litigation Division proposes
two amendments to § 105 to address these concerns:
"(e) In issuing an injunction, the court shall apply the standards
and procedures applicable to a district court under nonbankruptcy law,
except to the extent procedures are modified by the Federal Rules of
Bankruptcy Procedure.
(2) A police or regulatory act of a governmental unit that is not
stayed or proscribed by a specific provision of this title may be
enjoined only to the extent authorized by nonbankruptcy
law." |
NBRC-
0211 | Robert A. Greenfield | Conferee,
National Bankruptcy Conference | Proposed
amendment to the definition of "single asset real
estate" | 101(51B) |
| National Bankruptcy Conference
(NBC) opposes the so-called technical amendments bill that passed in the
Senate, but not the House, seeking the elimination the $4 million cap
from the § 101(51B) definition of single asset real estate. The
NBC is on record as opposing different treatment for single asset real
esate cases, any change in the definition of "single asset real
estate," and eliminating the $4 million cap. | If the $4 million cap were eliminated, the NBC is considering
additional amendments to the definition which would limit "single
asset real estate" to the smaller cases and those not likely to
involve an operating business. The author encloses a copy of the
proposed amendment which is presently being considered by the
NBC. |
