Emory Bankruptcy Developments Journal

Volume 36Issue 1
A Tribute to James H.M. Sprayregen

11 U.S.C. § 541 and D&O Insurance: An Analysis of the “Insured Versus Insured” Exclusion in a Bankruptcy Context Following Indian Harbor

Emil Kranz | 36 Emory Bankr. Dev. J. 143 (2020)

Directors and Officers insurance policies have long contained “insured versus insured” exclusions which prohibit directors and officers covered under the same policy from filing suit against one another. These provisions can be problematic in the bankruptcy context, specifically when courts must determine whether claims filed by or on behalf of a post-petition debtor should be covered by a policy that includes an insured versus insured provision. The author focuses on the majority and dissenting opinions in Indian Harbor Insurance Company v. Zucker to illustrate the dichotomy in approaches to insured versus insured provisions in the bankruptcy context. The author ultimately proposes that courts implement a four-step approach to determine an insured versus insured provision’s applicability when a debtor or trustee brings a claim against an insured on behalf of the estate.

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Are Undocumented Workers Entitled to a Fresh Start? An Analysis of the Ellis Standard and Potential Criminal Consequences under 18 U.S.C. § 152

Anthony Rivera | 36 Emory Bankr. Dev. J. 179 (2020)

There are over eight million undocumented immigrants in the United States who obtain employment by using false social security numbers. Although undocumented persons are eligible to file for bankruptcy under the Bankruptcy Code, undocumented immigrants file for bankruptcy at much lower rates than documented citizens. This is partly out of a fear that the use of a false social security number to obtain employment constitutes bankruptcy fraud under 18 U.S.C. § 152 and exposes the debtor to criminal liability. The author draws inspiration and builds on the work of Chrystin Ondersma and tells the story of a hypothetical undocumented debtor, “Christina,” to ultimately make the argument that the debtor’s use of a false social security number for employment purposes does not meet the elements needed for bankruptcy fraud. The author then closes by looking at the practical issues in encouraging undocumented immigrants to seek the benefits afforded to them under the Bankruptcy Code and how policy may be changed to better accommodate undocumented debtors.

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Is “Policing for Profit” Really a Police Power Exception? Civil Asset Forfeiture as an Excessive Fine and the Police Power Exception to the Automatic Stay

Brittany Temple | 36 Emory Bankr. Dev. J. 215 (2020)

Courts have long held that civil asset forfeiture falls under the police power exception to the automatic stay because of its goal to deter crime and the government’s presumed lack of monetary incentive. However, civil forfeiture has increasingly been criticized as excessive and unrestrained, while municipalities have been accused of utilizing it as a fundraising tool for law enforcement agencies. The author argues that civil asset forfeiture can unfairly punish the creditors in a bankruptcy proceeding and that, when the forfeiture constitutes an excessive fine under the Eighth Amendment, the police power exception to the automatic stay should not apply.

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The Decline in Value Formulation: How Courts Should Approach State Bulk Sale Provisions in Bankruptcy

Anthony Check | 36 Emory Bankr. Dev. J. 259 (2020)

Bulk sale statutes require purchasers in a bulk sale to follow certain procedures in order to protect the state’s interest in recovering and collecting unpaid taxes. The recent decision in Illinois Department of Revenue v. Hanmi Bank left many practitioners wanting for a more robust answer to the questions of whether bulk sale provisions create interests of value for state revenue departments and how courts should classify those interests. The author argues that these interests should be protectable under § 363(e) of the Bankruptcy Code. The author further provides a framework for courts to determine the extent to which this protection should extend. Under this framework, which builds on statements made in dicta in Illinois Department of Revenue v. Hanmi Bank, the burden should be placed on a state’s department of revenue to prove that failing to protect an interest derived from the bulk sale statute will result in that interest losing value. A state would successfully prove this by showing that it would have recovered value from its interest had that interest been protected.

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Volatile Windfalls: Effects of Tax Cuts and Jobs Act for S-Corp Shareholders Warrant Strong Arm Power Limitation in Bankruptcy

Jack M. Dougherty | 36 Emory Bankr. Dev. J. 299 (2020)

The 2017 Tax Cuts and Jobs Act changed the landscape for the approximately 4 million S corporations in the United States. This Comment addresses how the TCJA has highlighted an existing tension between the Bankruptcy and Tax Codes concerning whether S corporation shareholder termination rights granted under § 1362 of the Tax Code should constitute avoidable fraudulent transfers under § 548 of the Bankruptcy Code. Traditionally, courts have permitted bankruptcy trustees to unilaterally shift capital gains liabilities incurred from asset liquidation sales of insolvent S corporations to the businesses’ shareholders and characterize such terminations as fraudulent transfers. However, recent decisions in the Third and Fourth Circuits have restricted the trustee’s “Strong Arm” power to avoid S election terminations. The author considers this tension between the two codes as well as the TCJA’s implications on S corporation shareholders. It then finally makes a suggestion for creating an exception to the fraudulent transfer conveyance doctrine for S corporations.

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