Courts Begin to Wrestle with the Impact of on a Debtor’s Ability to Recover Estate Property
In June 2019, the U.S. Supreme Court issued its unanimous decision in Taggart v. Lorenzen, through which it turned to general standards governing contempt outside of bankruptcy in holding a creditor may not be found in contempt for its failure to comply with a discharge injunction when a fair ground of doubt exists as to whether the creditor’s actions are wrongful. 139 S. Ct. 1795, 1799–1804 (2019).
On May 6, the U.S. Court of Appeals for the First Circuit reversed a district court’s decision, ruling that American tribes are not exempt from federal law barring suits against debtors once they file for bankruptcy.
Here are a couple long-standing and foundational policies for the entire bankruptcy system:
- Bankruptcy laws protect the honest but unfortunate debtor; and
- Discharge exceptions are to be strictly construed against the objecting creditor and liberally construed in favor of debtor.
So, for all my decades of practice under the Bankruptcy Code, this idea has held sway: an honest debtor is entitled to a bankruptcy discharge.
The U.S. Court of Appeals for the Fourth Circuit recently held that the “no fair ground of doubt” standard established by the Supreme Court of the United States in Taggart v. Lorenzen, a case involving alleged violation of a Chapter 7 discharge order, governed civil contempt proceedings for violation of a confirmed reorganization plan under Chapter 11.
Justice Stephen G. Breyer is set to retire from the U.S. Supreme Court in a few months.
But he’s not easing into retirement.
Instead, he’s out there swinging—fighting for his beliefs: trying to instruct / persuade current and future jurists on how the law should be applied.
Justice Breyer’s latest punch is a lone-dissent, against an eight-Justice majority, dated March 31, 2022. In this dissent, Justice Breyer explains his doctrine of statutory interpretation.
The Breyer Doctrine
Justice Breyer’s doctrine goes like this:
Practitioners will be pleased to know that the NSW Supreme Court has provided clarity on the order of priority for employee debts and secured creditor claims.
The matter, In the matter of Spitfire Corporation Limited (in liquidation) and Aspirio Pty Ltd (in liquidation), involved the liquidators of two insolvent companies (Spitfire Corporation Ltd and Aspirio Pty Ltd) seeking directions under s 90-15 of the Insolvency Practice Schedule (Corporations).
Does a rotten tree produce good fruit?
That’s the bankruptcy issue before the U.S. Supreme Court in Siegel v. Fitzgerald, where the Question is this:
“Whether the Bankruptcy Judgeship Act violates the uniformity requirement of the Bankruptcy Clause by increasing quarterly fees solely in U.S. Trustee districts.”
Note:
BUSINESS RESTRUCTURING REVIEW VOL. 21 • NO.
The Bankruptcy Protector