« Arbitration Agreements | Main | Mortgage Market 2011 - Not a Pretty Picture »

In Defense of Bankruptcy Courts (or, Is Bankruptcy Really That Exceptional?)

posted by Melissa Jacoby

Although not always acknowledged expressly, exceptionalism is pervasive in bankruptcy scholarship. Some work makes no attempt to contexualize bankruptcy within the federal courts, apparently assuming its unique qualities (for example, the disinterest in most bankruptcy venue scholarship about venue laws applicable to other multi-party federal litigation). But other projects are more deliberate in their exceptionalist pursuits.

Rafael Pardo and Kathryn Watts have a forthcoming article falling into the latter category. It is over 70 pages and even a long post can't describe it in full detail. The article calls bankruptcy highly anomalous because, they say, it is one of the few major civil statutory regimes administered almost entirely through court adjudication rather than a federal agency. In addition to raising structural and constitutional questions, they argue that, on balance, an agency would bring more "expertise, accountability, uniformity, accessibility, transparency, prospective clarity, and flexibility" to what they call "bankruptcy policymaking." One of their main examples of bankruptcy policymaking is setting the discount rate for repayment and restructuring plans. Another is the "undue hardship" standard for student loan dischargeability. But they also extend the concept to activities such as judicial case management. Their article ends with alternative suggestions for further exploration: Congress could substantially expand the rulemaking powers of the Executive Office for United States Trustees (and eliminate the Bankruptcy Administrators in North Carolina and Alabama). Alternatively, the article suggests eliminating the bankruptcy court system altogether and creating a bankruptcy agency with both rulemaking and adjudicative functions. As the article explains, the latter proposal emerges for bankruptcy with some frequency, especially for consumer bankruptcy. But as I understand this piece, it is referring to the whole system, chapter 11 and all.

The article did not persuade me of its arguments, but it helps open the door to a broader set of theories and ideas that might improve the bankruptcy system in more modest ways. As Bob Lawless noted in a 2005 American Bankruptcy Law Journal piece, bankruptcy scholarship can be somewhat insular. The Pardo and Watts article escapes the traditional box of debates even though it includes a proposal that has appeared many times before. It also is great to have an administrative law scholar looking closely at the bankruptcy system and, in particular, at the United States Trustee Program. 

My overarching question, though, is whether this piece ultimately trades one flavor of acontextuality for another.

To start, the article does not resolve what I see as a significant issue: the fact that its claims apply to nontrivial swaths of U.S. district court workload as well as to the bankruptcy court. Sure, the bankruptcy court system isn't a purely forensic adjudicative system; it probably isn't even dominantly so. It contends with forward-looking projections. But this is true in the district courts as well, and has been for decades (even centuries, some scholars would say). The introduction to the article recognizes - with what might be a whiff of disapproval - that district courts, like bankruptcy courts, fill statutory gaps and thus, engage in what the authors call policymaking. Then why send bankruptcy, and not those matters, to an agency? If Article III makes all the difference, might we revisit Article III status for bankruptcy judges? (I'm guessing the authors would agree that their proposals are, at this time, no more politically plausible than this one).

As a consequence, the article does not really address innovations in district courts (and suggestions from the academy) designed to address some of the institutional design concerns the authors raise. Institutional reform litigation, class actions, and other disputes thought to strain the traditional conception of a court have produced procedures and structures that could be quite useful in bankruptcy, including structured ways to draw more "experts" and stakeholders into the process outside of an adversarial framework. Given the controversy inherent in some of these examples, I'm not arguing that these cases all work perfectly - just that it is possible to preserve the benefits of courts while overcoming some of their limits without sacrificing legitimacy. As for ad hoc case management and pushing for settlement (which the article includes within policymaking), decades of federal courts scholarship have ruminated on the rise of managerial judging and its substantive impact, but many proposed improvements lie within the judiciary, and, in this context, more detailed Federal Rules of Bankruptcy Procedure. With respect to district courts, Judith Resnik, Robert Bone, and surely others have argued in favor of using the mechanisms of the Judicial Conference of the U.S. to achieve narrower case management discretion.

Flipping the problem around the other way, the article does explore some limits of agencies, but I read it as adopting a fairly rosy and traditional conception of top-down agency expertise and uniformity. Some prominent scholarship - particularly writings falling into the category of new governance - calls that model and its efficacy into question. That scholarship also is arguably more open to courts, and not just agencies, serving as problem-solving institutions. If I haven't already given it away, my current research on the bankruptcy system incorporates the insights of Susan Sturm and Charles Sabel and William Simon, so perhaps I should be relieved that Pardo and Watts did not go this direction.

So, to wrap this back into the broader frame with which I began, it is time to challenge many exceptionalist assumptions and beliefs about bankruptcy. This is not to say that bankruptcy is devoid of unique features. It has many. More could and should be done to alleviate burdens on bankruptcy judges (especially when instructed they have a duty to investigate in the absence of a dispute, as John Ayer flagged back in the 1980's) and to correct misperceptions about how the system operates. Indeed, to address some of Pardo's and Watts' more discrete concerns, perhaps Bankruptcy Code should delegate particular issues to various existing agencies (as the Code already does, for better or worse, with respect to the IRS and the means test for consumer debtors). 

In the quest to stake out an allegedly better bankruptcy system, though, we should not miss the many ways the bankruptcy system is surprisingly at home in the courts.


Of course, bankruptcy is already entrusted to administrative agencies--if the bankrupt is a bank or a broker or an insurer. I'm not sure what to make of this fun fact, however, except to point out that remarkably few bankruptcy scholars have examined these regimes.

Your post was very interesting. (Actually more interesting than the abstract you link to).

Bankruptcy is entirely an exception - an exception to the general law that contracts and judgments are to be enforced in accordance with their terms.

A significant reason why it goes through courts is that novel Fifth and Seventh Amendment issues would be implicated by a wholly non-judicial method of eliminating private contract rights and state court judgments.

I question the authors' premise in other ways, at least the premise as I understand it from your post. Is there any non-judicial agency that limits the enforcement of private contracts or duly obtained judgments against individuals, without going to court to do so? I suppose one could consider the securities laws, antitrust laws or employment discrimination laws, but then note how substantially all enforcement of those laws with respect to individual actors requires the agency to go to district court. The agencies make rules or reach decisions to enforce the law, yes, but they have to go to court to get a result applicable to a specific person. So that agency operation doesn't seem very different from bankruptcy, really. So maybe the agency model they describe is not as all-encompassing as they presume.

It seems that the agency model they are positing is more applicable in the context of tort prevention and remediation or entitlement determinations, keeping in mind that entitlements are generally considered to be outside of the Fifth and Seventh Amendments.

Ebenezer Scrooge - Great point, and I don't think the paper talks about those regimes. Dodd-Frank has raised the profile of administrative responses to insolvency in the academy, but I agree with you that the others haven't gotten as much attention.

mt: Agreed that bankruptcy law is substantively exceptional. The question I was pushing on is whether the system is procedurally exceptional, although your comment suggests the linkage between the two. In the paper, the authors' proposal to eliminate the bankruptcy court envisions an agency like that suggested in the Brookings Report from the 1970s. Administrative Law Judge, Central Appeals Board, and then to a circuit court. But the authors would also give the agency rulemaking powers. So it is different from the district court enforcement regimes that your comment mentions.

We appreciate the attention that Professor Jacoby has brought to our forthcoming article, and we are glad that she agrees with us that bankruptcy scholarship could benefit from being less insular and more connected to other fields, such as administrative law. However, because many readers of this blog may not have had the opportunity to read our forthcoming article, we wanted to make the following comments about Professor Jacoby’s post and to respond to what we see as some mischaracterizations or misunderstandings about the arguments set forth in the article:

(1) To begin with, our article is focused on bankruptcy policymaking—that is, the process of filling gaps and ambiguities in the Bankruptcy Code. Currently, bankruptcy policymaking falls to courts, not to a specialized agency with rulemaking authority. The main point of our article is that an agency, rather than courts, might be better equipped as an institutional matter to set bankruptcy policy. Thus, the focus of our proposal is on the regulatory/rulemaking side of bankruptcy administration rather than the adjudicatory side.

Professor Jacoby seems to miss this. Specifically, she seems to think that our article aims to tackle the ministerial “case management” side of bankruptcy administration. But we do not. We do note—in a single sentence of our draft paper—the possibility that policy may be set in the context of settlements—specifically, that settlement outcomes produced through managerial judging may constitute “a form of privatized policymaking.” But our focus is clearly on the policymaking that occurs in nonsettled matters. We write that “the combination of non-settled adversary proceedings and contested matters constitutes a substantial number of instances for judicial resolution and its concomitant policy making.” Moreover, nowhere in the article do we claim that case management (which we refer to as ministerial administration) constitutes policymaking. We clearly distinguish the two concepts in Part III.A of the article, and we specifically note how prior bankruptcy scholars have focused almost exclusively on the ministerial side of bankruptcy administration (and whether it should be located with courts or with an agency) and thus have generally failed to consider where bankruptcy administration that involves policymaking should reside. In this sense, Professor Jacoby—like many other bankruptcy scholars—overlooks (or at least seems to misunderstand) the discrete question of bankruptcy policymaking that our article aims to tackle, focusing instead on the adjudicatory and case management side of bankruptcy administration. Regardless, Professor Jacoby’s extensive comments regarding managerial judging respond to arguments that we have never made in the first instance.

(2) Professor Jacoby states that our proposal to eliminate “the bankruptcy court system altogether and creat[e] a bankruptcy agency with both rulemaking and adjudicative functions” has been made with some frequency in the past, especially in the consumer bankruptcy context. As such, Professor Jacoby suggests that our proposal is not novel. We disagree. First, we do acknowledge and discuss at length in our article prior proposals for bankruptcy reform, including those set forth in the 1970s, which suggested the creation of a bankruptcy agency. In that descriptive account in our article, we demonstrate that such prior proposals for reform have generally focused on reforming ministerial administration within the bankruptcy system and have ignored bankruptcy policymaking and the need for an agency with rulemaking powers. We believe that our article is indeed novel in this respect: Unlike prior reform proposals, our article separates the concepts of policymaking from ministerial administration and expressly addresses the idea of giving an administrative agency rulemaking authority to fill the statutory gaps that have inhered in federal bankruptcy law.

(3) Professor Jacoby states that “[t]he introduction to [our] article recognizes – with what might be a whiff of disapproval – that district courts, like bankruptcy courts, fill statutory gaps and thus[] engage in what the authors call policymaking.” She proceeds to ask, “Then why send bankruptcy, and not those matters, to an agency?” We start from the premise that statutory gaps are generally better filled by agencies than courts when complex regulatory schemes are involved. So it is not just a mere “whiff of disapproval.” We make our position quite clear.

Further along these lines, Professor Jacoby characterizes our critique as one lodged at bankruptcy courts (see the title to her post). But our concern is with the entire court-centered structure, which includes district courts, bankruptcy appellate panels, and courts of appeals. Moreover, while district courts may be engaged in policymaking in other substantive areas of federal law (i.e., “nontrivial swaths of U.S. district court workload” in Professor Jacoby’s words), they are generally doing so in areas where a federal agency with rulemaking authority could step in and fill the gaps (e.g., securities law or tax law). That opportunity does not exist in the bankruptcy context, and that’s one of the things that makes the structure exceptional. Should the few other exceptional areas that have some similarity to bankruptcy—such as patent law and antitrust law—also be subject to the same reforms we have suggested? Perhaps. But our project was not to answer that question; that question has recently begun to receive attention from other scholars, including Margaret Lemos. Moreover, we note in our article that, for some other exceptional areas (e.g., the patent system), commentators have made similar calls for reform as we do in our article.

(4) Apparently drawing (at least in part ) on “new governance” literature, Professor Jacoby states that the “article does not really address innovations in district courts (and suggestions from the academy) designed to address some of the institutional design concerns the authors raise. Institutional reform litigation, class actions, and other disputes thought to strain the traditional conception of a court have produced procedures and structures that could be quite useful in bankruptcy, including structured ways to draw more ‘experts’ and stakeholders into the process outside of an adversarial framework.”

In making these comments, Professor Jacoby again seems focused on the adjudicatory and case management side of bankruptcy administration and fails to address the political accountability issue we raise in the article with respect to bankruptcy policymaking. Specifically, is it appropriate for an unaccountable body—namely, the courts—to be filling gaps in the Bankruptcy Code and thereby setting bankruptcy policy? Bringing stakeholders and experts into the courts, as Jacoby suggests, might enable greater participation but ultimately would do little to address political accountability concerns given that courts would still be politically unaccountable bodies setting policy. Moreover, Professor Jacoby fails to acknowledge the lack of uniformity that has pervaded the bankruptcy system. Does Professor Jacoby conceive of the two-tiered system of intermediate appeals in bankruptcy as an optimal structure? Does she think it is appropriate to have the U.S. Trustee and Bankruptcy Administrator programs operating simultaneously in different geographic regions? These are pretty exceptional problems, and they are part and parcel of the problems we identify in our forthcoming article. Finally, Professor Jacoby fails to acknowledge the constitutional problems that inhere in the system and the fact that, with a proper administrative retooling, one might be able to fit bankruptcy into the public rights exception.

(5) In her concluding statements, Professor Jacoby further demonstrates that she has not paid close attention to what we mean by policymaking. She writes: “Indeed, to address some of Pardo’s and Watts’s more discrete concerns, perhaps [the] Bankruptcy Code should delegate particular issues to various existing agencies (as the Code already does, for better or worse, with respect to the IRS and the means test for consumer debtors).” This statement is descriptively incorrect. The Bankruptcy Code merely incorporates by reference the IRS standards into the means test, but the ultimate policymaking authority to interpret those standards resides with the courts. As we observe in a footnote in our article, Justice Kagan (a former administrative law scholar) has made this point clearly: “The IRS creates the National and Local Standards referenced in the statute, revises them as it deems necessary, and uses them every day. The agency might, therefore, have something insightful and persuasive (albeit not controlling) to say about them.” Ransom v. FIA Card Servs., N.A., 131 S. Ct. 716, 726 n.7 (2011).

Again, we appreciate Professor Jacoby’s comments and the attention she has called to our article. We have written this response to emphasize that it is the policymaking side of bankruptcy administration that we address in our article. We certainly look forward to reading Professor Jacoby’s future work in this area, which we expect will argue that bankruptcy policymaking should be set in the courts via a cooperative, flexible, new governance model—rather than through a more traditional regulatory mold.

-- Rafael Pardo and Kathryn Watts

I'm a bit at a loss how "filling statutory gaps" is unlike giving meaning to general statutory precepts in the context of discrete disputes, or discerning (or attempting to discern) the meaning of ambiguous statutory language. Isn't that what courts do? And, by decision and precedent, the meanings become less opaque. Ultimately the legislature has an opportunity to revise, limit, or correct the courts' work. I'm also a little amazed that one would posit that agencies generally, or a bankruptcy-specific agency in particular, would be so expert, so articulate, and so comprehensive as to eliminate the necessity for definition, interpretation, and application of law (or rule) in individual cases.

Thanks for bringing Pardo/Watts article to our attention. Their article brings into focus the question of where the details of bankruptcy law and policy should be made, Congress, the courts, or an administrative agency. Their discussion of the current role of the bankruptcy courts as policy makers is timely in light of the recent Stern v Marshall opinion.

In my opinion, Congress repeatedly has been unwilling to provide details on critical bankruptcy law issues ranging from cram-down interest rates and “new value” plans to “undue hardship” discharges, resulting in much wasteful litigation. On the other hand, as a practitioner, I am skeptical of the wisdom of placing those policy decisions in an expanded US Trustee type agency, at least as currently configured. That leaves the federal courts to do the work. Notably the federal courts have exercised “interstitial lawmaking” by interpreting statues, but on occasion have created their own federal rule of decision, such as the substantive consolidation doctrine.

In Substantive Consolidation: The Cacophony Continues, 18 Am Bankr. Inst. L. Rev. 89 (Spring 2010) at pages 153-157, I commented on the notion of “bankruptcy exceptionalism”. I argued that U.S. Supreme Court precedents do not support the lower federal courts engaging in bankruptcy law making, other than their traditional role of interpreting statutes. Responding to several judicial opinions, I argued that bankruptcy courts are not “different in kind” from other federal courts, and thus lack power to establish non-statutory doctrines such as substantive consolidation.

I tend to agree with Pardo/Watts that it now merits consideration moving bankruptcy policy decisions to a rule making agency if Congress cannot deal with them. At present, as a practical matter the courts of appeal are the final arbiters of bankruptcy policy, but often they are responding to legal briefs and relatively short oral arguments that may (or may not) fully develop the competing policy considerations.

If bankruptcy policy is to be assigned to an administrative agency, one would expect that as is the situation with other administrative agencies, parties could comment on a propose rule of substantive law well before it is promulgated. Perhaps with an opportunity for more input on the pros and cons of a proposed rule (than is the current situation with judicial rulemaking), better rules can be formulated.

Rafael and Kathryn - Wow, appreciate the close read of the blog post - will definitely send longer scholarly work when it is ready in the hopes that it too can get such detailed comments. Agreed that main point relates to the substantive bulk of what the article calls bankruptcy policymaking. The specific reference to case management was meant to be secondary, only to give a flavor of the breadth of the policymaking concept as I was trying to grasp it from the article. References to the other complex litigation was meant to shorthand questions about substantive policymaking. Alas, the risks of blogging. Anyway, I'm sure readers appreciate your clarifications.

Noah Kidder: you have put more succinctly a question lurking in the original post. Judge Brock Hornby wrote a brief piece in Green Bag a few years ago in which he discussed how a big part of his district court role was writing opinions that fill statutory gaps that exist for all sorts of reasons. As noted in a comment above, scholarly work echoes that.

Max Tucker: I'm glad you mentioned your article - I look forward to reading it. The question that warrants wrestling, it seems to me, is whether it has to be a single new agency (or the UST with considerably expanded powers) that does the regulatory work for specific questions that arise from the Bankruptcy Code. For example, if discrete matters in consumer finance come up in bankruptcy that an agency setting would handle better through writing rules, why not have the Bureau of Consumer Financial Protection do it? The same agency need not handle that as deals with the substantive consolidation question. (This kind of thing was what was shoehorned in the end of the original post in shorthand terms; on a different day, perhaps I would have said it first!). In any event, this seems different from asking whether the entire bankruptcy system is so fundamentally a fish out of water in the federal courts that serious structural change for all kinds of bankruptcy is necessary. Or, putting aside the article III question, is there a meaningful difference between the gap filling around the Bankruptcy Code, and the gap filling around the many other statutes that confront district courts.

First, I would note that Ad Law is no less insular a field than BK. Second, given that the main, practice problem with BK is the "secret handshake/Captain Midnight decoder ring" element of proceedings, would handing the field over to an agency cure or exacerbate matters? Third, given that the main, legal problems in BK are the hash appellate courts regularly make of things, and given further that Ad Law has the same problem, do we really think that handing BK over to an agency will fix the policy/legal interpretation snarls?

Presumably transitioning to a bankruptcy administrative agency disposes of the need for Article III status for bankruptcy court judges in response to Stern v Marshall.
Another Stern type ruling by the Supremes and the bankruptcy court will be ready for administrative status.
Once the Supreme Court broadens the reach of Stern v Marshall to remove third party fraudulent conveyance litigation and successor liability injunctions from bankruptcy court jurisdiction and authority then half of the rest of bankruptcy court subject matter jurisdiction will become suspect.
The House Sub-committee on the Courts canceled its July 20th hearing scheduled to explore potential legislative responses to Stern v Marshall; however two bench and bar “Conferences” did submit “Statements” to the Sub-committee recommending Article III status for bankruptcy judges.
If you had to chose administrative or Article III status for bankruptcy courts then administrative status would probably win.
I read the whole article by Professors Pardo and Watts and did not see a cost analysis in support of administrative status.
While Justice Roberts discounted “efficiency” as a reason to preserve bankruptcy court jurisdiction that conflicts with constitutional authority, Congress might be persuaded to balance the budget by transitioning the bankruptcy court into an agency if it proved cost effective.

Having now read the authors' and Prof Jacoby's comments, I think there is a confusion between rule making, law enforcement, and private adjudication. While admin agencies are sources of rule making generally, they lack powers to enjoin private parties from acting on their legal rights. Only courts issue injunctions. If administrative agencies want to stop private parties from acting on their contrctual rights, they have to go get a judge to issue an injunction. They can't just issue one on their own. And injunctions are necessary for bankruptcy law to function - stays, discharges, etc. I do not see how one could eliminate a judicial method of enforcement of the bankruptcy laws. And as I said before, to do so would raise Constitutional questions considering the common law nature,and property right status, of the rights being enjoined.

I suppose Congress could set up an agency to develop policies for bankruptcy cases, and advocate them to the judge, as the UST does and a softer version of what the SEC once did. For example, the agency could specify a ratio as to what debt to cash flow ratio would be the most that a plan could propose and still be feasible and advise the judge that the ratio is or is not satisfied in a particular case. But I think you would still need the courts to consider other parties' positions before ruling on a specific bankrupt's situation.

At the expense of criticizing an article I've never read - but isn't the sole purpose of the internet ill informed criticism - the authors seem to be making a distinction without a difference when it comes to consumer debtors and small businesses. The authors appear to be arguing over what is principally an issue of labeling. If you change the descriptive labels applied to most bankruptcy cases, then bankruptcy sounds much more like what we think of as an "administrative proceeding" than it sounds like what we think of as a "court proceeding." Most bankruptcies are purely administrative matters flowing through what is effectively an federal administrative agency that happens to be be called a court.

Most bankruptcies already function like administrative cases. When most laypeople, and even most lawyers, think of a "court case," they think of contested litigation in front of a judge exercising various measures of judicial discretion and fact finding authority. By contrast, an administrative proceeding is largely viewed as process for the review and granting of applications, with the process overseen by a federal agency that makes the decision to grant or deny an application based upon a relatively inflexible set of predetermined criteria.

An example of an administrative process is a social security disability application. Most disability applications are either granted or denied by an agency employee tasked with reviewing whether the applicant has met the various eligibility criteria. Like any administrative agency, the SSA has an internal review process to address 5th Amendment Due Process rights, and applicants ultimately have recourse to the Article III court system outside of the statutory administrative review process.

A no-asset chapter 7 functions in virtually the same manner. A petition is electronically filed with the government. Each applicant goes to a non-judicial review hearing in front of a person - and not necessarily an attorney - employed to determine if there are any irregularities in the application and whether the applicant has met the various criteria for a discharge. If no irregularities are found and the various criteria are met, then a discharge certificate is automatically generated after a statutory waiting period.

Even your ordinary asset chapter 7 works more like an administrative proceeding. Many, if not most, asset Debtors are aware that they are losing assets and have been counseled that they cannot stop the asset loss, don't care about the asset loss, or can't afford to take the issue further. The review officer collects and liquidates the property. At various stages, court approval may be required. This differs from the typical administrative process, where courts typically only enter the process to resolve an appeal; however, most of these turnover orders, sale orders, and compensation orders are entered without oral argument or opposition. In effect, the bankruptcy judge acts like another administrative review officer and simply determines whether the trustee has met the predetermined criteria for the relief requested; and, there is no actual exercise of judicial discretion or fact finding.

Arguably, this falls part with chapter 13. But even then, most objections are based on a failure to meet objective criteria, i.e. feasibility, cure payments, etc; however, these are frequently, though nowhere near universally, resolved by negotiation with the review officer. Indeed, in our district, the chapter 13 trustee submits recommendations for confirmation that have, in every case I've ever handled, universally resulted in an confirmation order. This administrative framework breaks down whenever there is a major change in the practice - most recently Lanning for chapter 13 - but after the courts have ruled a few times, the practice settles back into a routine of the attorney and the non-judicial review officer negotiating for a confirmation recommendation.

Even in the weakest example - chapter 13 cases - the bankruptcy courts already function like an administrative agency. This is even more apparent in the vast majority of chapter 7 cases, where the case never leaves the level of non-judicial review or judicial review is limited to often unopposed motions that simply match facts to statutory requirements. In my experience as both a chambers clerk and a practitioner, the mine run of contested matters that proceed to argument arise in matters where the judge has little or no discretion to deviate from narrowly defined statutory criteria or to make findings of fact that allow any deviation from those criteria; and indeed, findings of fact are often based on objective questions of whether the right evidence was submitted and whether the math works.

The most obvious counterargument is that bankruptcy judge's exercise classically judicial functions in classic examples of "court proceedings" in adversary proceedings. Clearly that is the case; however, the adversary proceeding only arises in the minority of cases and is outside the experience of virtually every debtor. In the same vein, the adversary proceeding exists for those cases where the more administrative functions of the main case do not offer sufficient due process protections for situations where one party is attempting to either force or avoid the transfer of an interest in property or where the question of the debtor's entitlement to the discharge is at issue. The adversary proceeding thus functions as the transition from agency to court that is available in any other federal or state administrative setting.

My bone to pick - besides that this is more interesting than reviewing a stack of chapter 7 petitions - is that this article comes from a place of detachment from the reality of bankruptcy law. The reality of bankruptcy law lies in the nature of the largely anonymous stream of chapter 7 and chapter 13 cases running through the courts on a day in and day out basis. Bankruptcy is administrative when it needs to be - which is most of the time - and classically judicial when the administrative functions cannot resolve ambiguity or inequitable results.

Trying to "fix" bankruptcy with administrative law or believing that bankruptcy law belongs to any one body of academic law reveals an actual ignorance of how bankruptcy law actually works. You cannot legitimately practice bankruptcy law - and ideally academia should enhance and engage with the practice of law - as a discrete body of law. Bankruptcy is a net that catches every other area of law that floats along with a person's insolvency. Even if a bankruptcy lawyer never actually practices outside of the bankruptcy court - which I don't at this point - that lawyer must be able to address issues of family law, LGBT law, land use, contracts, Indian law, criminal law, personal injury, real estate transactions, all of the UCC, evidence, environmental law, state insolvency law, and whatever other areas of law that a debtor has brushed against on their way into insolvency. You cannot speak of bankruptcy law in isolation or claim it as one area of law, because you cannot practice bankruptcy law that way either.

I read the entire article and I teach both Corporate Reorganizations and Administrative Law. I think that Professors Pardo and Watts have made an interesting proposal that was not fully captured by Professor Jacoby's critique.

There could be a real value in administrative rule-making for bankruptcy law. One result of our current system is that we do not really have a uniform system of bankruptcy laws. Administrative rule-making could increase uniformity but might do so at the expense of individual justice in particular cases. I read Professors Pardo and Watts to suggest that we can get the benefit of uniformity without such expenses. I'm not sure that I'm convinced, but it is an interesting proposal nontheless.

The comments to this entry are closed.


Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.



  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless ([email protected]) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.