ABI Blog Exchange

Working Paper: Papich, Sarah- Do Employer Credit Check Bans Increase Default? (May 05, 2025)

Working Paper: Papich, Sarah- Do Employer Credit Check Bans Increase Default? (May 05, 2025) Ed Boltz Mon, 07/21/2025 - 19:47 Available at: https://ssrn.com/abstract=5242161 Abstract Employers often perform credit checks on prospective employees. Twelve states have banned this practice with the goal of improving employment prospects for individuals with poor credit histories. An unintended consequence of these bans is that they reduce the incentive to repay debt. This paper provides the first causal evidence of how pre-employment credit check bans (PECCBs) affect debt repayment. I find that PECCBs increase the probability of bankruptcy by 0.9 percentage points on average, equivalent to a 17.6% increase from the mean. The probabilities of past-due accounts and collections are unaffected on average, but heterogeneity by credit score prior to treatment shows that these probabilities increase among all consumers except those with the lowest scores. These findings show that consumers are sensitive to changes in the penalty for default, especially when they are deciding whether to file bankruptcy. Commentary: Sarah Papich’s working paper makes the bold claim that pre-employment credit check bans (PECCBs) lead to a 17.6% increase in bankruptcy filings. The suggestion is that by removing a potential employment penalty, these bans lower the "cost" of default—encouraging more strategic bankruptcy filings, particularly among consumers with mid- to high-range credit scores. But from a bankruptcy practitioner’s perspective, this analysis leaves out several crucial elements: 1. 11 U.S.C. § 525(b) Already Prohibits Certain Employment Discrimination: Papich’s premise is that PECCBs uniquely shield job applicants from negative credit information—particularly bankruptcy—being used against them in hiring decisions. But this overlooks the fact that § 525(b) of the Bankruptcy Code already prohibits private employers from terminating or discriminating against an employee solely because they filed for bankruptcy. While the statute doesn’t extend to hiring decisions, its existence undermines the idea that bankruptcy is, across the board, a signal of “irresponsibility” to employers. Congress has already taken steps to prevent such stigma in the workplace—something the paper does not acknowledge. 2. Bankruptcy Is Not Taken Lightly: Characterizing post-PECCB bankruptcies as “strategic” also feels untethered from day-to-day consumer bankruptcy practice and falls prey to flawed assumptions that debtors are merely homo economicus, making perfectly rational, self-interested decisions to consistently maximize their personal gain or utility. Most Chapter 7 and 13 filings arise from life events—job loss, illness, divorce—and a gut-wrenching decision, not clever calculations about employment incentives. Even if some consumers become slightly more willing to file because the perceived consequences are less dire, that doesn’t make those filings frivolous. It might mean the system is working: consumers finally see a clearer path to both financial and occupational recovery. 3. Bankruptcy Makes for Better Employees—Even the Military Thinks So Contrary to the stigma, employees who file bankruptcy often become more reliable workers. By shedding the stress and chaos of unmanageable debt—wage garnishments, creditor harassment, and financial stress—filers regain focus and stability. Bankruptcy offers the kind of clean slate that allows people to show up fully in their jobs. Even the Department of Defense recognizes this. Under the Uniform Code of Military Justice, unpaid debts can trigger discipline or loss of security clearance. But filing bankruptcy? That’s often seen as a responsible step toward financial recovery. In fact, DoD clearance adjudicators routinely favor bankruptcy over default. If the military trusts bankruptcy filers with national security, civilian employers should too. 4. Bankruptcy Attorneys Should Support PECCBs Far from being a problem, PECCBs help reduce the very employment stigma that keeps people trapped in cycles of debt. Consumer bankruptcy attorneys should welcome PECCBs as public policy that aligns with the core promise of bankruptcy: the fresh start. Bankruptcy isn't just about discharging debt—it’s about restoring access to opportunity. When job applicants are excluded because of credit histories that often reflect structural hardship more than personal failure, it undermines the rehabilitative function of bankruptcy itself. Banning credit checks in hiring expands economic participation and reduces the shame and fear surrounding bankruptcy—making it a more effective tool, not a more reckless one. While this paper’s quantitative rigor is valuable, its framing risks reinforcing the myth that consumer bankruptcy is driven by gamesmanship rather than necessity. More importantly, it fails to consider that PECCBs complement, rather than conflict with, the Bankruptcy Code’s protective spirit. For those of us working with debtors every day, that’s not a flaw in the policy—it’s the whole point. See the attached for States with Pre-Employment Credit Check Bans With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document do_employer_credit_check_bans_increase_default.pdf (3.63 MB) Document peccb_states_list.pdf (2.43 KB) Category Law Reviews & Studies

Marshalling Debt: Court considers the Obligations of a Secured Lender (UK)

In the recent judgment of Brooke Homes (Bicester) Ltd v Portfolio Property Partners Ltd (and others)[1], the High Court provided further clarity on how sale proceeds should be accounted for as between the first-ranking mortgagee and a second-ranking secured creditor. Background In the original court proceedings, Brooke Homes (Bicester) Ltd (“Brooke”) obtained judgment against three...... Continue Reading

What Happens if You Don’t Complete Your Emergency Bankruptcy in Pennsylvania?

Filing for bankruptcy is not exactly a pleasant experience, but it may be necessary for those facing dire financial straits. For some, there may be very little time to file […]

Weekly News – July 18

Q2 LME insights & advisor rankings out, AtHome UCC going after the double-dip?? DQ Lists, private credit & LMEs, J.Screwed part deux, and much, much more…  Creditor Corner Your weekly…

4th Cir.: Tiber Creek Partners v. Ellume USA- Bankruptcy in the Land Down Under

4th Cir.: Tiber Creek Partners v. Ellume USA- Bankruptcy in the Land Down Under Ed Boltz Fri, 07/18/2025 - 18:20 Summary: Tiber Creek Partners, a Virginia-based consulting firm, helped Ellume Ltd.—an Australian biotech company—and its U.S. subsidiary secure over $260 million in COVID testing contracts from Uncle Sam. When Ellume didn’t pay up, Tiber Creek sued in its home forum, the Eastern District of Virginia. But the district court dismissed the case on forum non conveniens grounds, and the Fourth Circuit just affirmed, sending the whole affair packing to Australia faster than you can sing “Waltzing Matilda.” Tiber Creek filed two suits: Ellume I: A breach of contract action against Ellume USA Ellume II: A fraud case alleging that Ellume and its execs improperly shifted liability to the insolvent parent The catch? Ellume Ltd. had entered voluntary administration (Australia’s version of Chapter 11 and definitely not a Kangaroo Court), and Tiber Creek had already filed a claim there. Most of the key witnesses, documents, and dirty laundry were in the land down under. Plus, several of the relevant contracts—including a Deed of Variation and a 2022 Services Agreement—were governed by Australian law and designated Australian courts as the forum of choice. The district court said, essentially, “This is an Australian matter for Australian courts,” and dismissed both suits without prejudice. The Fourth Circuit agreed: even though Tiber Creek sued in its home forum (which generally gets strong deference), the ties to Australia were just too strong to ignore. Otherwise, they reasoned, you’d have courts on two continents litigating overlapping issues. And if that’s not a logistical Foster’s-fueled headache, what is? Tiber Creek protested that it was being ousted from its own backyard and that Ellume USA was a domestic defendant. But the majority wasn’t buying it. Instead, they held that consolidating both cases in Australia was the more efficient and fair approach—even if it meant the Virginia-based plaintiff got knocked down. In dissent, Judge Richardson channeled his inner Crocodile Dundee and scoffed at the majority’s “that’s not a forum—this is a forum” analysis. He emphasized that a citizen suing in its home court should only be bounced if keeping the case would be truly oppressive to the defendants, not merely less convenient. He summed it up as “a result that defies common sense”—like drinking tea without milk or calling flip-flops “thongs.” Commentary: The court’s holding is a walkabout through some thorny terrain of international contracts, forum selection clauses, and foreign insolvency. Though unpublished, this opinion quietly broadens the power of forum non conveniens when foreign bankruptcy is lurking in the background—even without Chapter 15 recognition. The court treated the Australian voluntary administration (and later liquidation) as a meaningful factor, despite no formal recognition of it under U.S. law. Apparently, if you come from a land down under, that’s jurisdiction enough. Also notable: the panel relied heavily on the contractual terms pointing toward Australia, even though Tiber Creek tried to sue only the U.S. subsidiary. Moral of the story? If your consulting agreement is vague about who owes you money, and you’ve signed later documents governed by foreign law, don’t be shocked if the judge tells you to take your invoice walk 500 hundred miles (and then walk 500 more). Yet perhaps the real legacy of this case lies in its narrative arc. After all, Tiber Creek thought it was collecting U.S. taxpayer money from a U.S. company, in a U.S. court. So with the dismissal being without prejudice, there’s still a chance Tiber Creek reboots the fight in Australia. So don’t count them out just yet since in the immortal words of Chumbawamba they might “get knocked down, but .. get up again, you're never gonna keep me down...” With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document tiber_creek_partners_v._ellume_usa.pdf (180.11 KB) Category 4th Circuit Court of Appeals

4th Cir. : Jackson v. Bankruptcy Administrator- Dismissal of Pro See Appeal

4th Cir. : Jackson v. Bankruptcy Administrator- Dismissal of Pro See Appeal Ed Boltz Thu, 07/17/2025 - 16:31 Summary: Carlos Andre Jackson, a pro se debtor, inexplicably filed a full-blown Chapter 11 without a lawyer in March 2024. The filing was defective from the start: he failed to complete prepetition credit counseling (violating § 109(h)), filed incomplete schedules, didn’t comply with § 343 at the § 341 meeting, and missed reporting deadlines. Despite numerous continuances and leniency from the court, he never retained counsel or cured the deficiencies. On June 11, 2024, the bankruptcy court dismissed the case with prejudice and barred Jackson from refiling for 180 days from that date, citing bad faith and likely refiling. Jackson appealed, but the Fourth Circuit dismissed the appeal for lack of jurisdiction. Commentary: Here’s the catch: the 180-day bar expired on December 8, 2024. Since the court didn’t tie the bar to the outcome of appeals, the restriction appears to have lapsed—even though Jackson was still litigating in mid-2025. Takeaway: While the court aimed to curb abuse, it could have extended the bar through the conclusion of appeals. As it stands, Jackson may now be eligible to refile—though any new case would certainly face serious scrutiny. That said, any creditors that have slept on their rights (since there was no stay pending appeal) for more than a year, so perhaps Mr. Jackson could propose, with the assistance of counsel, a Chapter 13 case. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_jackson-_dismissal_with_prejudice.pdf (171.32 KB) Document jackson_v._bankruptcy_administrator_circuit.pdf (109.99 KB) Document jackson_v._bankruptcy_administrator_district.pdf (125.81 KB) Category 4th Circuit Court of Appeals

Death Penalty For Bankruptcy Crimes At U.S. Constitutional Convention (U.S. v. Duarte)

By: Donald L Swanson “Blackstone . . . observed that acts such as . . . robbery, certain thefts, fraudulent bankruptcy, forgery of coin, and forgery of a marriage license were felonies that could warrant death.” Bankruptcy Lore A bit of American lore on bankruptcy law is this: the insertion of the Bankruptcy Clause into the... Continue Reading →

Does Pennsylvania Require Credit Counseling Courses for Bankruptcy?

If you are considering filing for bankruptcy, there are steps to take before you file. You should call a lawyer early on in the process and talk to them about […]

Bankr. W.D.Va.: In re Sorrells- Modification of Chapter 13 plan following Inhertitance

Bankr. W.D.Va.: In re Sorrells- Modification of Chapter 13 plan following Inhertitance Stafford Patterson Tue, 07/15/2025 - 17:50 Summary: Steven and Christina Sorrells were near the end of their 50-month Chapter 13 plan, having made regular payments totaling a 39% dividend to unsecured creditors. After Steven Sorrells received a net $26,236 from an inherited IRA—funds he intended to use to pay off the plan early—the Chapter 13 trustee instead moved to modify the plan to require a 100% dividend to unsecured creditors, citing a substantial and unanticipated improvement in the debtors’ financial condition. The Bankruptcy Court, applying In re Murphy, 474 F.3d 143 (4th Cir. 2007), partially granted the trustee’s motion. The court found that receipt of the IRA funds was indeed a substantial and unanticipated change in financial condition, piercing the res judicata effect of the confirmed plan. However, the court rejected the trustee’s argument that the debtors’ unliquidated claim to a future inheritance also justified modification. Notably, the court did not rubber-stamp the trustee’s request for the full $30,000 lump sum. Recognizing the debtors’ modest lifestyle, deferred home maintenance, and legitimate household needs, the court limited the required modification to $14,986—deducting $11,250 for necessary repairs (truck inspection, furnace replacement, driveway repair) from the IRA funds. Commentary: In a decision that balances fidelity to the Bankruptcy Code with practical realism, Judge Connelly provides a nuanced roadmap for post-confirmation plan modifications under § 1329. While reaffirming Murphy’s substantial-and-unanticipated-change test, the court carefully distinguishes between liquid and illiquid post-confirmation assets—declining to modify the plan based on a mere inchoate expectancy in a probate estate. Of particular note is the court’s insistence that feasibility under §1325(a)(6) cannot be met through hypothetical access to assets. For example, the court noted that if the Sorrells "had the IRA remained in an illiquid form, it would not render the same effect on his financial condition". (Virginia, unlike North Carolina, does not appear to allow the exemption of inherited IRAs. See In re Hall, 559 B.R. 679 (Bankr. W.D. Va. 2016) versus N.C.G.S. § 1C-1601(a)(9) and In re Brooks.) By crediting the debtors' actual household needs—car repairs, heat in winter, and safe ingress/egress—the court offers a reminder that bankruptcy is meant to rehabilitate, not punish. The opinion does also include a caution for Chapter 13 trustees, as Judge Connelly (herself having served as a Chapter 13 Trustee before taking the bench) describes the tenor of the Chapter 13 trustee's argument as " disproportionate to the facts". While in this case that rhetoric did not cross the line, it was still evaluated for whether it violated the obligation under §1325(a)(3) that a motion to modify be brought in good faith. That expectation of good faith applies to Trustees, not just debtors. Consumer bankruptcy practitioners should also take heed of this footnote-worthy clarification: § 1327 vests property in the debtor free and clear of claims, meaning postconfirmation asset acquisition does not ipso facto trigger modification. In rejecting the trustee’s overreach, the court reaffirms the Chapter 13 bargain—creditors get their due, but debtors retain some hope of financial stability. This case offers an excellent example of how careful recordkeeping, transparency, and updated schedules (even mid-plan) can inoculate debtors from trustee accusations of bad faith or nondisclosure. Debtor’s counsel did well to preserve credibility, enabling the court to adopt a measured approach rather than imposing the draconian remedy sought by the trustee. It follows the logic from In re Adams, where the debtors were, in addition to their exemptions, entitled to keep the portion of the proceeds from the sale of their home resulting from the pay-down of the mortgage during their Chapter 13 case. It also offers a persuasive counterweight to Carroll v. Logan, 735 F.3d 147 (4th Cir. 2013), distinguishing between property-of-the-estate status and feasibility or necessity of modification. This is a valuable decision for Chapter 13 attorneys navigating the increasingly common terrain of post-confirmation inheritances and other windfalls. The court's refusal to apply a blanket rule in favor of 100% plan funding from such assets will resonate with consumer practitioners throughout the Fourth Circuit. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_sorrells.pdf (857.5 KB) Category Western District

Racing-To-The-Courthouse: A Basic Right Of Contract (Clark v. White)

By:  Donald L. Swanson Several months ago, I stumbled upon an old opinion out of the U.S. Supreme Court suggesting that the right of a creditor to race to the courthouse to collect on its claim against a debtor—and to win (or lose) that race—is a basic right of contract that cannot be abridged by... Continue Reading →

Broadway Realty Ruling Reinforces Adequate Protection Standard in Multi-Debtor Real Estate Cases

Weekly News – July 11

Holdouts make a comeback! Del Monte gets canned, Wolfspeed meme stock frenzy, Citgo getting complicated, and much, much more…  Creditor Corner Your weekly curated content from the Creditor Rights Coalition…

Bankr. E.D.N.C: In re Ross-DeSantos- Homestead Exemption Allowed for Real Property Located outside of North Carolina

Bankr. E.D.N.C: In re Ross-DeSantos- Homestead Exemption Allowed for Real Property Located outside of North Carolina Ed Boltz Fri, 07/11/2025 - 22:41 Summary: Judge Pamela McAfee overruled a Chapter 7 trustee’s objection to a North Carolina debtor’s homestead exemption claimed in real estate located not in Wake County, but in Corentyne Berbice, Guyana. The case highlights two recurring issues in exemption law: (1) whether a spouse living abroad may qualify as a “dependent” for purposes of N.C.G.S. § 1C-1601(a)(1), and (2) whether North Carolina’s homestead exemption applies extraterritorially. The debtor, Natoya Ross-DeSantos, filed Chapter 7 in the Eastern District of North Carolina, claiming a $30,000 homestead exemption in her interest in a property in Guyana, which she jointly owns with her non-filing spouse. While she lives in North Carolina as a public school teacher on a J-1 visa, her spouse and her mother (who pays the mortgage) reside in the Guyanese home, along with her minor nephew. The trustee objected, arguing (1) the spouse was not a “dependent” and (2) the exemption could not apply to property outside North Carolina. The court overruled the two bases for trustee’s objection, holding: Dependency Met – The debtor’s uncontroverted testimony that she sends financial support “when she can,” and that her husband is unemployed and living in the home due to medical issues, was sufficient to show “actual substantial dependence,” adopting the standard for a "dependent spouse" as articulated in Suggs, Preston, and under N.C.G.S. § 50-16.1A(2). Dependency was determined based on actual financial and emotional support as of the petition date, not mere technical definitions or speculative future plans. Extraterritorial Application Allowed – The court found no language in § 1C-1601 limiting the exemption to in-state property and emphasized the statutory mandate to interpret exemptions liberally in favor of the debtor. Since the debtor resides in North Carolina and is the one claiming the exemption, the location of the property abroad was not disqualifying. Notably, the court cited Crawford and Davila as examples where the location of the homestead outside North Carolina had not precluded application of the state’s exemption. Commentary: Excellent job by Phillip Sasser, particularly in the face of John Bircher's solid, but fair and respectful, objection. This decision is a well-grounded affirmation of the debtor-protective policies behind North Carolina’s exemption laws and demonstrates the flexibility bankruptcy courts maintain in evaluating real-life family and financial dynamics. In substance, Judge McAfee recognized that modern households — especially those involving immigration, work visas, and international families — may not conform neatly to the traditional “white picket fence” model. The court took a pragmatic approach: focusing not on the theoretical legal domicile or the ZIP code of the property, but on the reality of who lived there and who depended on whom. Dependency Doesn't Require Formal Support Agreements – Informal but credible testimony about support, even irregular remittances and non-monetary arrangements, may suffice to establish a spouse as a dependent for exemption purposes. Having found most easily that Mr. Ross-DeSantos met the statutory definition of a dependent spouse, the court did not directly address whether Ms. Ross-DeSantos' mother and/or minor nephew were also dependents. That notwithstanding, it would seem that the standard for other asserted dependents should be evaluated under the same standard as anyone "who is actually substantially dependent ... for his or her maintenance and support or is substantially in need of maintenance and support...." (Emphasis added.) This should not require finding that the person meets the higher IRS standard for a dependent but instead that the person is substantially dependent on support and needs that support. Allowing them to live in the house could by itself be sufficient to show the support, although the debtor would need to show the need for that support. No Territorial Limitation in § 1C-1601(a)(1) – Until the North Carolina appellate courts say otherwise, nothing in the statute prevents the homestead exemption from being claimed in property outside the state, provided the debtor resides in North Carolina. Anticipate Equity Issues – Though the court noted the trustee's uncertainty about whether the Republic Bank of Guyana held a perfected lien, the trustee wisely sought a ruling on the exemption issue first. Practitioners should similarly bifurcate legal questions where valuation or enforceability is uncertain. In re Ross-DeSantos will likely become a citation staple for North Carolina debtors and their counsel facing objections based on “residence” and “dependency,” especially in cross-border or nontraditional family situations. It serves as a reminder that bankruptcy courts, even while operating under rigid statutes, can and do account for the lived realities of their debtors. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_ross-desantos.pdf (261.27 KB) Category Eastern District

Bankruptcy & Employment Discrimination Claim (Palmer v. Union Pacific)

By: Donald L Swanson Here’s an interesting employment discrimination case that’s related to a prior bankruptcy: Palmer v. Union Pacific Railroad Co. (In re Palmer), Case No. 24-1212 (8th Cir., decided June 12, 2025).[Fn. 1] Background Debtor starts working for The Railroad in March 1998 as a Switchman/Brakeman, after disclosing a diabetes condition. Later, Debtor moves... Continue Reading →

BOLO Alert: Community Property in Unexpected Places

In law enforcement, BOLO stands for Be On the Look Out. But even outside of law enforcement, BOLO alerts operate. In this case, we as bankruptcy lawyers need to be on the look out for community property. It’s easy to think that community property is an issue only for practitioners in the 9 community property […] The post BOLO Alert: Community Property in Unexpected Places appeared first on Bankruptcy Mastery.

Clarifying s.234 Insolvency Act 1986:Lessons from Carvill-Biggs & Anor v Reading [2025] (UK)

The Court of Appeal decision in Carvill‑Biggs & Anor v Reading [2025] EWCA Civ 619, clarifies the scope and application of section 234 of the Insolvency Act 1986, which empowers an office-holder to compel the delivery up of company property or documents from third parties, in relation to mortgaged land. This blog considers the unique...... Continue Reading

Bankr. E.D.N.C.- In re JSmith- Arbitration in Bankruptcy

Bankr. E.D.N.C.- In re JSmith- Arbitration in Bankruptcy Ed Boltz Wed, 07/09/2025 - 17:10 Summary: In this post-confirmation Chapter 11 dispute, the Bankruptcy Court for the Eastern District of North Carolina granted a motion by Fourth Elm Construction, LLC to compel arbitration and stay the adversary proceeding brought by the debtor, JSmith Civil, LLC. The adversary complaint asserted state-law claims for breach of contract and quantum meruit arising from a terminated subcontracting agreement. Fourth Elm relied on the contract’s Article 24 arbitration clause, invoking Section 3 of the Federal Arbitration Act (FAA). JSmith Civil resisted arbitration, arguing first that the contract’s damage-limiting clause (Article 22) rendered the arbitration agreement void under Lischwe v. Clearone Advantage (In re Erwin), a case involving impermissible waivers of claims under North Carolina’s UDTPA. Judge Callaway distinguished Erwin, finding that no such statutory or fraud claims were actually alleged—only garden-variety breach and quasi-contract. JSmith’s second argument—that compelling arbitration would impair bankruptcy case administration—also failed, as the claims did not arise under the Bankruptcy Code and were not core proceedings. The Court compelled arbitration but explicitly warned Fourth Elm that it could not file any counterclaims or assert a §553 setoff in the arbitration without first obtaining stay relief. Fourth Elm, through counsel, disavowed any intent to seek such relief, and the Court noted it would enforce that commitment under pain of sanctions. Commentary: This decision highlights the entrenched enforceability of arbitration clauses in bankruptcy, particularly when the debtor brings state-law claims post-confirmation and the dispute lacks any core bankruptcy component. Judge Callaway’s ruling reflects a straightforward application of the Federal Arbitration Act (FAA), even in the Chapter 11 context, and follows the familiar maxim that “[a]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” But what about in the consumer Chapter 13 context, where debtors frequently interact with contracts that contain arbitration clauses—credit card agreements, auto loans, rent-to-own contracts, and debt relief services? Unlike in business cases, a unique opportunity may exist for consumer debtors to proactively address arbitration in their Chapter 13 plan. Specifically, a nonstandard Chapter 13 plan provision may be used to expressly reject or eliminate arbitration clauses in executory contracts or to declare that the debtor does not consent to arbitration of any disputes related to a given agreement. Because Chapter 13 plans function as binding contracts between the debtor, creditors, and the trustee upon confirmation, and because 11 U.S.C. § 1322(b)(2), (b)(6), and (b)(11) permit substantial flexibility in how a debtor restructures obligations and provides for treatment of claims, courts may allow debtors to include such provisions. While not all courts will enforce such plan terms (and some creditors may object), there is a growing recognition that plan provisions may alter dispute resolution rights where the arbitration clause is part of a contract the debtor is assuming, modifying, or curing under the plan. In this way, the plan operates as both shield and sword, binding creditors who fail to object and thus creating a limited window to neutralize otherwise enforceable arbitration rights. Moreover, if a creditor fails to timely object to confirmation, courts may hold it bound by the plan under §1327(a), and therefore estopped from later enforcing arbitration provisions in an attempt to derail claims administration or fair debt relief remedies under the Code. Practice Tip for Consumer Debtors: Practitioners should consider whether their standard Chapter 13 plan templates adequately address arbitration—and if not, propose a nonstandard provision rejecting arbitration clauses in applicable agreements. For example: “Any arbitration provision in any prepetition agreement between the Debtor and any creditor is expressly rejected and shall be of no force or effect with respect to any dispute arising during the pendency of this bankruptcy case or relating to any claim provided for under this Plan." This may be particularly valuable where the debtor has viable claims under state consumer protection laws (e.g., UDTPA, FDCPA) or disputes related to vehicle repossession or predatory lending. It also reduces the risk of post-confirmation motion practice or removed arbitrations that sap the estate’s resources. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_jsmith.pdf (279.94 KB) Category Eastern District

The “12 month” rule in a Members Voluntary Liquidation (MVL) means the company must pay in that period – not simply be able to pay (UK)

Judge Agnello in a recent court decision[1] concluded that a company must pay its debts within the period of 12 months from the start of an MVL, and if it does not, the liquidator is obliged to convert the MVL to a company voluntary liquidation (CVL). Depending on how you interpret the requirement that the...... Continue Reading

Law Review: Tavera, Daniel, The Benefits of Hindsight: Determining Whether a Receipt of Benefits Is a Necessary Element of the Fraud Exception to Discharge

Law Review: Tavera, Daniel, The Benefits of Hindsight: Determining Whether a Receipt of Benefits Is a Necessary Element of the Fraud Exception to Discharge Ed Boltz Tue, 07/08/2025 - 15:10 Available at: https://ssrn.com/abstract=5295095 Abstract: There is a circuit split on the meaning of the phrase “obtained by” under the Bankruptcy Code. Courts disagree on the proper interpretation of the portion of the statute relevant to this issue: whether a debtor needs to receive a benefit from the fraud to find the debt nondischargeable. Some courts have forgone a receipt of benefits test. Creditors now often argue that a debtor need not benefit from the asset obtained by fraud to except an underlying debt from discharge. But the fraud exception could include the requirement that a debtor receive a benefit from the assets “obtained” for certain frauds. This Article examines the history of the fraud exception and the split in the courts. This Article then analyzes the word “obtained” under the Code, and judicial interpretations of what it means to obtain assets. This Article summarizes the strengths and weaknesses on the different approaches of statutory construction applied to the word “obtained.” Based on the Supreme Court’s recent suggestion that a receipt of benefits is a necessary element of the fraud exception, this Article then concludes the exception for a willful and malicious injury appropriately addresses facts where nothing was “obtained.” Commentary: Tavera’s article will be of practical value to consumer bankruptcy attorneys litigating § 523(a)(2)(A) claims—especially in small business, guarantor, or insider-debtor scenarios where the money trail doesn’t end with the debtor. We’ve all seen cases where a debtor signs a loan for a struggling business, uses rosy projections, or co-signs a note to help a relative. When the creditor sues for nondischargeability, the debtor’s defense is often: “I didn’t benefit.” Under the logic that some courts have adopted, that could be enough to avoid a judgment under § 523(a)(2)(A). Tavera’s piece warns against that defense and provides an academic yet accessible explanation of why it should not be determinative. Fraud, not benefit, is the statutory touchstone. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document the_benefits_of_hindsight_determining_whether_a_receipt_of_benefits_is_a_necessary_element_of_the_fraud_exception_to_discharge.pdf (807.14 KB) Category Law Reviews & Studies

Doctrine Of Equitable Mootness Explained (In re Boy Scouts)

By: Donald L. Swanson The recent Boy Scouts opinion from the U.S. Court of Appeals for the Third Circuit (decided May 13, 2025) provides this Q & A illumination on the doctrine of equitable mootness: Question: Does the doctrine of equitable mootness preclude the requested relief on appeal? Answer: In light of the limited relief Appellants... Continue Reading →