Random Thoughts for the Week

Sounds like  oral argument in the Zachary case did not exactly go the way debtor counsel wanted.  The issue is whether the absolute priority rule still applies in individual chapter 11s.  It doesn’t in chapter 13s!  The world has not ended with that result.  Section 1129(b)(2)(B)(ii) says “in a case in which the debtor is an individual, the debtor may retain property included in the estate under section 1115.”  Section 1115 says that property of the estate is everything the debtor had and everything he acquires during the case.  Seems pretty clear to me.

Issue of the week in our office:  How does the statute of limitations fit into the non-dischargeability analysis?  Can the creditor bring a 523 action in bankruptcy court for fraud when the statute for fraud has run under state law?  It seems pretty obvious they can’t but why not?  I think the analysis goes that there is no claim under 502(b) because the claim would not be allowed under state law and therefore it cannot be non-dischargeable.

How does the analysis go when the creditor got a judgment for breach of contract only?  The judgment is good for ten years and in Brown v. Felson, the Supreme Court says the creditor can bring a 523 action in bankruptcy court to determine whether the claim arose from fraud

What about a settlement resulting in release of everything and everybody in sight except the amount of the debt?   Read Archer v. Warner.  The Supremes say the creditor can still bring a 523 action.

Had lunch with David Gould at the Sagebrush Cantina on Friday.  What a great guy.  I’m kind of a history buff and I love hearing about the old days.  He goes back to the days of the referees and reminded me that the referees used to conduct the creditors meeting.  There you go!

I had a district court appellate brief due last Friday.  I had stipulated to give the appellant an extension.  When it came to my turn, she refused.  I filed a quick motion for extension which was immediately denied.  Luckily I anticipated that and had the brief basically done anyway.  As I’m licking my wounds planning my revenge, I’m hoping that the district judge saw that the appeal is so frivolous he doesn’t care whether I file a brief or not.

Been grading my terms for the past several days.  The longer I teach the more I realize that we teach people to think like lawyers.  Students have little trouble remembering the few rules we go over – but applying them Ms. Jones is a different problem.  I tell them our typical client says “the foreclosure sale is next Tuesday, what do I do?”  They don’t walk in and say “explain to me the automatic stay.”

 

One Reply to Random Thoughts for the Week

  1. Michael says:

    The way I see the absolute priority rule wording is a bit different. Equity class always comes last, that is the absolute priority rule. Congress recognized that it did not have the power to withhold income from postpetition services against the debtor’s will so it created an exception to the absolute priority rule. The exception is limited to income from postpetition services.

    My analysis is the following.

    Property of the Estate is delineated in section 541. The effect of 1115 is to expand property of the estate to include, generally, postpetition earnings from services.

    1129 then creates an exception to the property that was included in the estate as a result of 1115.

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