postings by Melissa Jacoby

Who "Presides" over Chapter 13 Plan Confirmation Hearings?

posted by Melissa Jacoby

Shutterstock_329900393Temple Law Review will soon publish a volume honoring Bill Whitford, based on a conference from last fall. That event was particularly special for an additional reason: it turned out to be the last opportunity, for many of us, to spend time with another inspiring leader in our field, Jean Braucher

My own short contribution, on judicial oversight in chapter 13 bankruptcies, has just been posted here. We will share the word when the entire volume is available - including, I believe, a piece from Jean.

Gavel image courtesy of Shutterstock

Municipal Bankruptcy After Detroit

posted by Melissa Jacoby

ArrowsA new commentary stemming from my draft article Federalism Form and Function in the Detroit Bankruptcy is now posted on the Columbia Law School Blue Sky Blog. The post frames the current skirmishes over other municipalities' access to chapter 9 at least in part as a referendum on the procedural tools used by the court to supervise the Detroit bankruptcy. For two prior Credit Slips posts on the article, see here and here.

Arrow image courtesy of

Puerto Rico Seeks Help From the Supreme Court

posted by Melissa Jacoby

CertPetitionPuerto Rico is asking the U.S. Supreme Court to review the First Circuit decision that Puerto Rico's Recovery Act is preempted and thus unconstitutional. Here's the petition. In addition to parsing the legal issues, the petition is framed around Puerto Rico's financial emergency, the need for the Supreme Court to step in notwithstanding the lack of circuit split (or even a dissent to the First Circuit ruling). It makes sense that Puerto Rico would challenge a ruling making it harder for the Commonwealth, in a nebulous legal zone, to write laws to solve its problems. The difficulty with the financial crisis framing is that even if (1) the Supreme Court agreed to hear the matter, (2) heard the matter quickly, (3) decided the matter quickly, and (4) actually reversed the First Circuit - a chain of tough "even ifs"  - public corporations in Puerto Rico will not be able to start using the law because another formidable constitutional challenge is still alive: whether the Recovery Act can survive scrutiny under the Contracts Clause. That hotly contested fight would be fact intensive in a way that the preemption dispute was not. A fix from the federal government must come from one of the other two branches. Speaking of which, the persuasive argument against H.R. 870/S.1774 continue to be underwhelming. For example, the fact that chapter 9 would not be a complete solution for, say, PREPA, is really beside the point.

If the Supreme Court agreed to review the First Circuit's decision, then fellow Slipster Stephen Lubben's work on Puerto Rico and the Bankruptcy Clause would become even more important than it is already. While I am not on board with Stephen's conclusions regarding preemption, his research and arguments are central to this debate. So check out his article if you haven't already.

Picking a Judge to Preside over a Municipal Bankruptcy

posted by Melissa Jacoby

GavelLast week I introduced to Credit Slips readers my draft article on federal court oversight of Detroit's bankruptcy. An easily overlooked element of what I called The Detroit Blueprint is non-random judge selection, required by Congress for municipal bankruptcy cases.

Departing from the random assignment norm in the federal judiciary, section 921(b) of the Bankruptcy Code requires the chief judge of the applicable circuit court of appeals to select the judge who will preside over a municipal bankruptcy. In 1997, the National Bankruptcy Review Commission unanimously recommended eliminating section 921(b).  That Commission's Final Report observed that the fear prompting the provision - random draw of a judge unable to handle the case - was no longer salient. Congress did not take up this recommendation. What difference did section 921(b) make in Detroit?

Continue reading "Picking a Judge to Preside over a Municipal Bankruptcy" »

Consumer Financial Protection Clinic Position

posted by Melissa Jacoby

Here's an opportunity to supervise a consumer financial protection clinic that has done some great work - information on the position and how to apply here

Chapter 9 and Federal Courts: The Detroit Blueprint

posted by Melissa Jacoby

BlueprintAmong its other effects, the Puerto Rico debt crisis has dramatically increased the number of public figures and politicians whose verbal repertoire includes the term "chapter 9." Bondholders' resistance to chapter 9 access for Puerto Rico municipalities is fueled in part by an earlier public debt crisis: Detroit. As suggested in my Credit Slips posts, Detroit made some new law but its major lasting legacy is procedural. I just posted a draft article, based on original empirical research, documenting that procedural blueprint, Federalism Form and Function in the Detroit Bankruptcy. It shows the paths by which the federal court became a major institutional actor throughout Detroit's restructuring.

After reading scholarship and case law on chapter 9, one might envision that, because of the Tenth Amendment to the U.S. Constitution and federalism principles, presiding judges are essentially locked in a closet for much of the duration, released only when the parties affirmatively seek an adjudicator. That's never entirely accurate, but to say it is inaccurate regarding Detroit is the understatement of the year.

Although The Detroit Blueprint will have broader ripple effects, I am dubious that its most significant elements could or would be implemented in, say, a PREPA bankruptcy. Detroit should not be an impediment to changing the Bankruptcy Code to cure the wrongful omission of Puerto Rico municipalities. More on that, and additional perspectives from the article, in future posts.  

Image courtesy of Shutterstock

Puerto Rico Preemption Redux: Back to You, Congress

posted by Melissa Jacoby

1stCircuitCoverOn February 6, 2015, a district court held Puerto Rico's Recovery Act to be expressly preempted by section 903 of the Bankruptcy Code.

On July 6, 2015, the U.S. Court of Appeals upheld the finding: The Recovery Act is preempted, on both express preemption and conflict preemption grounds. 

Judge Torruella wrote a separate concurrence starting on page 50 of the decision. One of his points bearing special mention here is that he finds unconstitutional the 1984 Bankruptcy Code amendment that stripped Puerto Rico's right to authorize chapter 9 for its municipalities, due to the lack of a rational basis. Had he secured another vote for that view...

Credit Slips contributors surely will weigh in more, in this space or elsewhere, on the decision and  next steps. For now, Congress needs to move on H.R. 870, which now has support in the Senate. H.R. 870 simply reinstates Puerto Rico's ability to authorize its municipalities to use chapter 9, akin to states. Others advocate for bankruptcy relief for the Commonwealth of Puerto Rico itself; that proposal is separate from, and considerably more controversial than, H.R. 870.


New Chair for Bob Lawless (And I Don't Mean a Recliner)

posted by Melissa Jacoby

LawlessPictureJust saw a terrific announcement: the University of Illinois is recognizing Credit Slips' fearless founder, Bob Lawless, with the Max L. Rowe Professorship.

Bob has done so much for our field and the legal academy that attempting a quick summary is futile. And, putting aside the recliner quip, roasting is best left to others. So I'll leave it at this for now: Bob is a role model for working harder and smarter, and with modesty. To see such contributions rewarded is satisfying indeed.




Puerto Rico Preemption

posted by Melissa Jacoby

PRholdingLast summer, PREPA bondholders filed actions challenging the constitutionality of Puerto Rico's recently enacted, but as yet unused, Public Corporation Debt Enforcement and Recovery Act. Last night, the district court filed a seventy-five page opinion. It did not dispose of the actions in full (e.g., the contract clause challenges remain alive but not decided), but did hold the Recovery Act is preempted. Given that the judge's order permanently enjoins Puerto Rico from enforcing the Recovery Act, I believe it is immediately appealable under 28 USC 1292(a)(1).

Continue reading "Puerto Rico Preemption" »

Little Big Mistakes: The Second Circuit Rules on GM/JP Morgan

posted by Melissa Jacoby

PencilCulminating a two-year appeals process, the United States Court of Appeals for the Second Circuit just ruled that the statement filed to terminate a financing statement perfecting a security interest was effective. Yes, the parties intended to terminate a different financing statement, but that doesn't change the outcome under the facts of this dispute (these facts have been the subject of several prior Credit Slips posts; see here and here and here).

Today's per curiam decision cites the Restatement (Third) of Agency for the proposition that "Actual authority . . .  is created by a principal's manifestation to an agent that the agent take action on the principal's behalf."  And, says the panel, that's what happened. Again, full (and fairly brief) opinion is here.

Pencil image courtesy of Shutterstock

Waiting for Wellness

posted by Melissa Jacoby

Shutterstock_208016377To get ready for the January 14, 2015 Supreme Court oral argument on Wellness International Ltd. v. Sharif, read this National Bankruptcy Conference report.

Detroit's Bankruptcy: The Conversation

posted by Melissa Jacoby

Readers who have not otherwise received notice in the twittersphere may be interested in this commentary at The Conversation.

Detroit's Bankruptcy: End(s) and Means

posted by Melissa Jacoby

TobecontinuedOn Friday November 7, 2014, Judge Rhodes confirmed the City of Detroit's plan of adjustment. As previously noted, this judicial act permits the release of debt and clears the way for the City to forge ahead, but the future of Detroit is in the hands of many others. Although a fuller written decision is expected, the court's oral ruling already hints strongly at new bankruptcy doctrine. Two examples: unfair discrimination and professional fees.

Continue reading "Detroit's Bankruptcy: End(s) and Means" »



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