The Oyez Project: Economic Activity Issues - Bankruptcy Decisions

Archer v. Warner

Does the Bankruptcy Code cover a debt embodied in a settlement agreement that settled a creditor's earlier claim "for money...obtained by...fraud?"

Yes. In a 7-2 opinion delivered by Justice Stephen G. Breyer, the Court held that a debt for money promised in a settlement agreement accompanied by the release of underlying tort claims can amount to a debt for money obtained by fraud, within the nondischargeability statute's terms. "We conclude that the Archers' settlement agreement and releases may have worked a kind of novation, but that fact does not bar the Archers from showing that the settlement debt arose out of 'false pretences, a false representation, or actual fraud,' and consequently is nondischargeable," wrote Justice Breyer. Justice Clarence Thomas, with whom Justice John Paul Stevens joined, dissented.

Associates Commercial Corp. v. Rash

Is the value of collateral, under the "cram-down" provision of the Bankruptcy Code, section 1325(a)(5)(B), determined by the "foreclosure-value" standard, or what a secured creditor could obtain through a foreclosure sale of the property?

No. In an 8-1 opinion delivered by Justice Ruth Bader Ginsburg, the Court held that section 506(a) of the Bankruptcy Code, which governs the value of a secured claim, directs the application of the replacement-value standard when debtor, in a repayment plan under Chapter 13, has exercised the cram-down provision. Justice Ginsburg wrote that, "under [section 506(a)], the value of property retained because the debtor has exercised the [section 1325(a)(5)(B)] 'cram down' option is the cost the debtor would incur to obtain a like asset for the same 'proposed... use.'" Dissenting, Justice John Paul Stevens expressed the view that the text of 506(a) pointed to foreclosure as the proper method of valuation in the case at hand.

Baker v. Gold Seal Liquors

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Bank of America v. 203 North LaSalle Partnership

May a debtor's prebankruptcy equity holders contribute new capital and receive ownership in a reorganized entity when the creditor objected to the reorganization plan?

No. In an 8-1 decision, announced by Justice David H. Souter, the Court ruled a debtor's prebankruptcy equity holders may not, over the objections of creditors, contribute new capital and receive ownership in the debtor's reorganized entity if no one else has been given a chance to come up with an alternative reorganization plan.

Bank Of Marin v. England

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Barnhill v. Johnson, Trustee

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BFP v. Resolution Trust Corporation, As Receiver Of Imperial Federal Savings Association

Does a property's fair market value determine whether the amount of debt settled by a foreclosure sale is "reasonably equivalent" to the property's worth, as required by U.S.C. Section 548(a)(2)(A)?

No. In an opinion by Justice Antonin Scalia, The Court ruled 5-4 that the value received for a property at a foreclosure sale can be reasonable even if it is different from the "fair market value." A foreclosure sale alters market conditions and can lower a property's selling price. If a foreclosure sale is necessary to settle a debt, the price at which the property is sold is reasonable so long as "all the requirements of the State's foreclosure law have been complied with."

Brown v. Felsen

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Bruning v. United States

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Butner v. United States

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Caplin v. Marine Midland Grace Trust Co.

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Citizens Bank Of Maryland v. Strumpf

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Cohen v. De La Cruz

May individuals who commit fraud discharge their debts, including damages awarded to those who were defrauded, under the Bankruptcy Code?

No. In a unanimous decision authored by Justice Sandra Day O'Connor, The Court ruled that because Section 523(a)(2)(A) of the Bankruptcy Code excepts from discharge all liability arising from fraud, treble damages (plus attorney's fees and costs) awarded on account of the debtor's fraud fall within the scope of the exception. Justice O'Connor wrote, "The bankruptcy code has long prohibited debtors from discharging liabilities incurred on account of their fraud, embodying a basic policy...of affording relief only to an honest but unfortunate debtor."

Commodity Futures Trading Comm'n v. Weintraub

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Dewsnup v. Timm

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FCC v. Nextwave Communications, Inc.

Does section 525 of the Bankruptcy Code prohibit the Federal Communications Commission from revoking licenses held by a debtor in bankruptcy upon the debtor's failure to make timely payments owed to the FCC for purchase of the licenses?

Yes. In an 8-1 opinion delivered by Justice Antonin Scalia, the Court held that the FCC's cancellations of the licenses violated section 525(a) as revocations of government licenses solely for nonpayment of the debtors' dischargeable debts. The Court rejected the FCC's argument that it did not revoke NextWave's licenses solely because of nonpayment and noted that the fact that the FCC had a valid regulatory motive for its action was irrelevant. Justice Scalia reasoned that, because the statute refers to failure to pay a debt as the sole cause of cancellation, it cannot reasonably be understood to include the governmental unit's motive in effecting the cancellation, since such a reading would deprive section 525 of force. Justice John Paul Stevens filed an opinion concurring in part and concurring in the judgment. Justice Stephen G. Breyer authored a dissenting opinion.

Fidelity Financial Services, Inc. v. Fink

May a creditor invoke 11 USC section 547(c)(3)(B)'s "enabling loan" exception if it performs the acts necessary to perfect its security interest more than 20 days after the debtor receives the property, but within a grace period provided by the otherwise applicable state law?

No. In a unanimous opinion delivered by Justice David H. Souter, the Court held that a transfer of a security interest is perfected under section 547(c)(3)(B) on the date that the secured party has completed the steps necessary to perfect its interest, so that a creditor may invoke the enabling loan exception only by satisfying state law perfection requirements within the 20-day period provided by the federal statute. The Court turned to the text, structure, and history of the preference provisions to determine that the federal enabling loan exception of twenty-days controlled over otherwise applicable state law.

Field v. Mans

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General Stores Corp. v. Shlensky

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Grogan v. Garner

What standard of evidence should bankruptcy courts apply in considering whether a debt was the result of "actual fraud" under section 523(a) of the Bankruptcy Code?

Courts should apply the "preponderance of the evidence" standard. Justice John Paul Stevens, for a unanimous Supreme Court, wrote that the lack of a specified standard of evidence in section 523(a) implied that Congress had intended the preponderance of the evidence standard to be used. That lower standard was generally used in civil actions between private parties (including bankruptcy filings) unless particularly important interests were at stake. Protecting a bankruptcy filer who had previously been convicted of fraud was not sufficiently important to demand a higher level of evidence.

Stevens also wrote that the "fresh start" intention of the bankruptcy laws did not suggest a higher standard of evidence. "In the same breath that we have invoked this 'fresh start policy," he wrote, "we have been careful to explain that the Act limits the opportunity for a completely unencumbered new beginning to the 'honest but unfortunate debtor.'" A debtor previously convicted of fraud did not fit this description.

Hartford Underwriters v. Union Planters Bank NA

Does 11 USC Section 506(c) allow an administrative claimant in a bankruptcy case to seek payment of its administrative claim from the property of a bankrupt estate encumbered by a secured creditor's lien?

No. In a unanimous opinion delivered by Justice Antonin Scalia, the Court held that "Section 506(c) does not provide an administrative claimant of a bankruptcy estate an independent right to seek payment of its claim from property encumbered by a secured creditor's lien, or subject to secured claims. Justice Scalia noted that plain meaning of the language in Section 506(c) and the "most natural reading" of the section persuaded the court that no one other than the trustee has an independent right to seek payment of administrative claim, like premiums from property secured by a creditor's lien, under the section.

Hoffman v. Connecticut Income Maint. Dept.

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Howard Delivery Service v. Zurich American Insurance Company

May a creditor seek priority status in a bankruptcy case to recover unpaid premiums owed for legally-required workers' compensation insurance?

No. In a 6-to-3 decision authored by Justice Ruth Bader Ginsburg, the Supreme Court held that the workers' compensation insurance was different from the sort of employee benefit programs for which creditors could be given priority under Chapter 11. The programs for which preferred status was authorized were those whose main beneficiaries were the employees, and which could be offered as an alternative to wage increases. The workers' compensation insurance mandated in this case, however, benefited the employer as much as the employees (because it protected them from liability) and were legally required, not given as part of employment negotiations. Justice Ginsburg wrote that, though the question was a close one, "we are guided in reaching our decision by the equal distribution objective underlying the Bankruptcy Code, and the corollary principle that provisions allowing preferences must be tightly construed."

Johnson v. Home State Bank

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Katchen v. Landy

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Kawaauhau v. Geiger

Does a debt arising from a medical malpractice judgment, attributable to negligent or reckless conduct, fall within section 523(a)(6) of the Bankruptcy Code, which provides that a debt "for willful and malicious injury by the debtor to another" is not dischargeable?

No. In a unanimous opinion delivered by Justice Ruth Bader Ginsburg, the Court held that "debts arising from recklessly or negligently inflicted injuries do not fall within the compass of [section 523(a)(6)]." Therefore, the debt is dischargeable. Justice Ginsburg wore for the Court that "[t]he word 'willful' in [section 523(a)(6)] modifies the word 'injury,' indicating that nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury. Had Congress meant to exempt debts resulting from unintentionally inflicted injuries, it might have described instead 'willful acts that cause injury.' Or, Congress might have selected an additional word or words, i.e., 'reckless' or 'negligent,' to modify 'injury.'"

Kelly v. Robinson

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Kesler v. Dept. Of Public Safety

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King v. United States

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Kokoszka v. Belford

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Kontrick v. Ryan

Are the deadlines established by Bankruptcy Rule 4004 "jurisdictional" - that is, do they trump other considerations no matter when they are raised?

No. In a unanimous opinion delivered by Justice Ruth Bader Ginsburg, the Court held that Kontrick lost the right to invoke Rule 4004's time limitation because he did so after the bankruptcy court reached the merits of Ryan's objection. The Court rejected Kontrick's claim that Rule 4004 is "jurisdictional" and that it trumps other considerations whenever raised in proceedings.

Lewis v. Manufacturers Nat. Bank

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Midlantic Nat. Bank v. N. J. Dept. Of E. P.

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Nobelman Et Ux. v. American Savings Bank

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Norwest Bank Worthington v. Ahlers

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Ohio v. Kovacs

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Owen v. Owen

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Patterson, Trustee v. Shumate

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Pearlman v. Reliance Ins. Co.

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Pennsylvania Public Welfare Dept. v. Davenport

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Perez v. Campbell

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Perry v. Commerce Loan Co.

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Pioneer Investment Services Co. v. Brunswick Associates Limited Partnership

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Protective Committee v. Anderson

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Railway Labor Executives' Assn. v. Gibbons

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Rake v. Wade, Trustee

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Raleigh v. Illinois Dept. of Revenue

Does the burden of proof on a tax claim in bankruptcy court remain with the trustee in a bankruptcy?

Yes. In a unanimous opinion delivered by Justice David H. Souter, the Court held that "[w]hen the substantive law creating a tax obligation puts the burden of proof on a taxpayer, the burden of proof on the tax claim in bankruptcy court remains where the substantive law put it (in this case, on the trustee in bankruptcy)." The Court concluded that the bankruptcy estate's obligation to the Department was established by the state's tax code and that the Bankruptcy Code made no provision for altering the burden on a tax claim, and its silence said that no change was intended.

Reading Co. v. Brown

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Rousey v. Jacoway

Are individual retirement accounts (IRAs) exempt from bankruptcy estates?

Yes. In a unanimous decision delivered by Justice Clarence Thomas, the Court held that the Rouseys could exempt IRA assets from their bankruptcy estate. IRAs met both federal requirements dealing with exemptions from bankruptcy: They were "similar plans or contracts" to the exemptions enumerated and they "conferred a right to receive payment on account of age."

Sec v. American Trailer Rentals

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Segal v. Rochelle

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Simonson v. Granquist

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St. Joe Paper Co. v. Atlantic Coast Line Railroad Co.

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Taylor v. Freeland & Kranz

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Till v. SCS Credit Corp.

What is the proper interest rate when a bankruptcy filer seeks to reschedule his payments on a loan so that they are equal to the "total present value" of the loan?

In a decision that had no majority opinion, four justices held that the proper rate was the 9.5 percent one arrived at by modifying the average national loan rate to make up for the increased risk of non-payment. While this would not give the creditors the same amount of money that they might have gotten had they seized the collateral for the loan, it nevertheless met the statutory requirement that the repayments equal the "total present value." Justice Clarence Thomas, in a separate opinion that provided the fifth vote needed for judgment, found that the 9.5 percent rate was acceptable, but that it could be even lower because the Bankruptcy Code did not require the judge to accommodate for the risk of non-payment.

Toibb v. Radloff

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U.S. v. Embassy Restaurant

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Union Bank v. Walas, Chapter 7 Trustee For The Estate Of Zzzz Best Co., Inc.

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United Savings Assn. v. Timbers Of Inwood Forest

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United States v. Energy Resource Co.

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United States v. Nordic Village, Inc.

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United States v. Security Industrial Bank

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United States v. Whiting Pools, Inc.

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Wolf v. Weinstein

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Young v. United States

Is the Bankruptcy Code's "three-year lookback period," under which a discharge does not extinguish certain tax liabilities for which a return was due within three years before the filing of an individual debtor's petition, tolled during the pendency of a prior bankruptcy petition?

Yes. In a unanimous opinion delivered by Justice Antonin Scalia, the Court held section 507(a)(8)(A)(i)'s lookback period is tolled during the pendency of a prior bankruptcy petition. The Court reasoned that the three-year lookback period is a limitations period subject to traditional principles of equitable tolling and that nothing in the Bankruptcy Code precluded the equitable tolling of the lookback period. The Court reject the Youngs' argument that the Bankruptcy Code permitted the filing of a Chapter 13 petition and the subsequent filing of a Chapter 7 petition after the lookback period has expired. Under such a loophole, certain unpaid taxes would be dischargeable.