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Revamping the Advanced Bankruptcy Class

posted by Melissa Jacoby

Thanks, Bob, for welcoming me back. I'd like to start with a quick poll. Credit Slips readers, off the top of your head, what short writings (say 5 pages or fewer) should law students be doing that would be directly relevant to business bankruptcy practice? They can be related to business cases of any size, and can be litigation, counseling, or transactionally oriented. If you'd prefer to write me directly than to comment below, I welcome your thoughts at [email protected]. Feel free to forward my inquiry to bankruptcy listserves for which this would be appropriate. Thanks for sharing your expertise!


The first task in counseling a small business owner facing business reorganization or shutdown is figuring out which debts are those of the business alone, which the individual has liability for, and whether there are any for which both are liable.

Design a form for the client to use in getting that information, or a handout explaining personal liability and artificial entities.

I'd love to see them do a mock conflicts check. (No surprise there.)

Great suggestions, thanks! Some students are expressly interested in counseling small businesses so Cathy's suggestion has a lot of appeal. Nancy, thoughts on how to operationalize your idea?

Echoing what Cathy said, develop a schema for evaluating the decision to file, including whether to file individual vs business bankruptcy; and then preparing to file.

Issues to check might include determining whether they have primarily non-consumer debts, evaluating trust fund tax issues, determining chapter 13 eligibility for sole proprietorships or corporations where all the debt is personally guaranteed, identifying possibly fraudulent of preferential transfers, identifying aggressive creditors, checking for cross-collateralization on non-business assets such as the debtor's home, discharge risks for individuals, and determining whether there is anything worth reorganizing.

@Melissa: One of my thoughts is to have the students form smallish (4-5 people) law firms, give them a faux petition and schedule, and give each firm a different "backstory" (Firm A used to represent creditor A w/a s/i in X collateral and currently represents creditors B & C and vendor D; Firm B represents two of the debtor's directors in matters unrelated to the bankruptcy, etc.). What'cha think?

You could have them develop a checklist of the first day motions that they would need to file in a relatively large case and the documents and/or testimony necessary to support the motions. Include on the checklist any motions or applications governed by Rule 6003 and indicate whether emergency interim relief should be sought. This would have to be based on a factual scenario prepared by, well, the professor.

@nancy: now I see what you mean - thanks for clarifying! @tw: I definitely am hoping to have my students do something along these lines this year. Appreciate all the thoughtful ideas coming through comments and email!

The question concerned writings the students should be doing. How about teaching them to write a motion -- one requesting just about anything -- that is cogent and concise, that tells the court just what it needs to know (no more and no less), that can be understood immediately after a single quick reading, and that leaves the judge inclined to grant the relief sought. If your students learn to do that, they will have learned something it appears only a small minority of practitioners can do.

@Bankruptcy Judge, I was wondering when someone was going to mention a motion! Yes, this is a critical skill and I think they would be very enthusiastic about learning about how to do it. Thank you for weighing in.

1) A forbearance agreement.
2) An outline of oral argument in support of a common motion, say one based on secs 362 -65.
3) An outline for a deposition of a witness related to such a motion.
4) A script for direct examination of a witness on such a motion.
5) A memo on the pros and cons of signing an involuntary petition.

Puzzled by the conflicts check comments as they can just go on line and download a 2014 affidavit from debtors' counsel in a big case and just re-state it. Going over one may have pedagogical value but I don't think of it as a "drafting" project.

6) Give them a PoR and tell them to do a 5 page summary for the front of the disclosure statement. You'll probably want a PoR from the pre-PACER days so they don't just copy what is in the DS that is on the docket.

@mt, thanks so much, these are great and feasible too.

Wow, so many great suggestions already! Why not mock up a Chapter 11 thru plan confirmation process with a single real estate and an intransigent secured creditor? You could work on both negotiation skills and litigation skills (litigation designed to bring the creditor to the table and/or cramdown the plan). I do small Chapter 11's and two of the last three have involved this scenario. Also, I agree you should do some prebankruptcy counseling, perhaps a small business owner who is on the fence about whether to shut down or attempt reorganization and the answer isn't clear. How do you aid him in shutting it down so he doesn't create more liability, particularly non dischargeable types.

Phil, Thanks for weighing in! Colleagues at UNC currently take this approach with transition to practice classes (on non-bankruptcy subjects) and find it very rewarding. I have heard from a few people who do this in a corporate bankruptcy class in either law or business school. Even if I'm not yet ready to undertake a comprehensive fact pattern/set of assignments, I totally agree with you that some of their writing and in-class exercises must be based on the modestly sized chapter 11 cases that most lawyers around the country see, and which raise the very interesting issues that you mention.

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