Setting the Record Straight: A Sur-Reply to Professors Lawless et al.

In this sur-reply, Professor Pardo seeks to clarify the misperceptions and mischaracterizations of his commentary by Professors Lawless et al. and to demonstrate that his arguments not only are grounded in a compelling theory of the operation of the bankruptcy system and an understanding of the First Report’s data, but also offer useful ideas for exploring available empirical data. The sur-reply will identify three of the main substantive points made in his original critique that Professors Lawless et al. misinterpret and/or mischaracterize and will clarify why these original points are valid

Taking Bankruptcy Rights Seriously

Perhaps more so than any other area of law affecting individuals of low-to-moderate means, bankruptcy poignantly presents an affordability paradox: the system’s purpose is to relieve individuals from financial distress, yet it simultaneously demands a significant commitment of resources to obtain such relief. To date, no one has undertaken a comprehensive study of the complexities and costs of the litigation burden that Congress has imposed on self-represented debtors who seek a fresh start in bankruptcy. In order to explore the problems inherent in a system that sometimes necessitates litigation as the path for vindicating a debtor’s statutory right to a discharge, this Article focuses on the particular example of debtors who seek to discharge their educational debt (e.g., student loans) through bankruptcy. Such debt may be discharged only if the debtor can establish through a full-blown lawsuit, essentially governed by the Federal Rules of Civil Procedure, that repaying the debt would impose an undue hardship on the debtor. Using an original dataset of educational-debt dischargeability determinations, this Article reveals that, even when controlling for a variety of factors, including a debtor’s financial characteristics and applicable legal standards, the typical self-represented debtor in such proceedings has only a 28.5% chance of litigation success, which pales in comparison to the 56.2% success rate of a similarly situated debtor who is represented. This finding casts serious doubt on the litigation framework that has been implemented to resolve disputes over a debtor’s discharge rights. After exploring various approaches to reforming the framework, this Article concludes that our reform efforts will signify how committed we are as a society to deliver bankruptcy law’s promise of a fresh start to financially distressed individuals—to wit, whether we are willing to take bankruptcy rights seriously

Rethinking Antebellum Bankruptcy

Bankruptcy law has been repeatedly reinvented over time in response to changing circumstances. The Bankruptcy Act of 1841—passed by Congress to address the financial ruin caused by the Panic of 1837—constituted a revolutionary break from its immediate predecessor, the Bankruptcy Act of 1800, which was the nation’s first bankruptcy statute. Although Congress repealed the 1841 Act in 1843, the legislation lasted significantly longer than recognized by scholars. The repeal legislation permitted pending bankruptcy cases to be finally resolved pursuant to the Act’s terms. Because debtors flooded the judicially understaffed 1841 Act system with over 46,000 cases, the Act’s administration continued into the 1860s, thereby allowing further development of the law. Importantly, the system operated at a time when the role of the business of slavery in the national economy was increasingly expanding. This Article focuses on two postrepeal episodes involving legal innovation under the Act to demonstrate how an expanded periodization of its duration yields fresh insights into understanding the interaction between federal bankruptcy law and slavery: (1) the judicial constitutional settlement of voluntary bankruptcy relief, part of which occurred through a case involving a bankrupt enslaver; and (2) the practice pursuant to which some federal district courts empowered assignees—the federal court officials appointed to administer property surrendered by bankrupts in 1841 Act cases—to operate a bankrupt’s business before liquidating it, as evidenced by certain cases involving plantation owners who sought relief under the Act

Reconceptualizing Present-Value Analysis in Consumer Bankruptcy

During the three decades following the enactment of the Bankruptcy Code, courts and commentators have been vexed by the problem of determining the present value of future payments to creditors proposed in a debtor’s repayment plan. The issue central to this problem has been the discount rate to be applied when conducting present-value analysis. While the Code unmistakably requires the discounting of future payments as part of the process for confirming a repayment plan, the Code does not explicitly specify the rate itself or the manner in which the rate should be calculated. No uniform rule of decision has emerged on this issue. Instead, a multitude of approaches has proliferated within and across circuits. Not even the Supreme Court has been able to bring uniformity to bear on the issue. When given the opportunity to do so in 2004, the Court in Till v. SCS Credit Corp.1 could muster only a plurality opinion. In the wake of Till, disarray over the discount-rate calculus continues to abound. The main goal of this Article is to reconceptualize present-value analysis in consumer bankruptcy. It argues that, as a positive matter, the Bankruptcy Code compels use of a discount rate that solely accounts for expected inflation, but that does not take into account opportunity cost or the risk of nonpayment. The Article also examines whether the doctrinal prescription for the application of an inflation discount rate is normatively desirable. The Article concludes that, not only does an inflation rate comport with generally held theory of bankruptcy law’s procedural and substantive goals, it also optimizes the statutory design of the Bankruptcy Code and the institutional design of the bankruptcy courts

Bankrupted Slaves

Responsible societies reckon with the pernicious and ugly chapters in their histories. Wherever we look, there exist ever-present reminders of how we failed as a society in permitting the enslavement of millions of black men, women, and children during the first century of this nation\u27s history. No corner of society remains unstained. As such, it is incumbent on institutions to confront their involvement in this horrific past to fully comprehend the kaleidoscopic nature of institutional complicity in legitimating and entrenching slavery. Only by doing so can we properly continue the march of progress, finding ways to improve society, not letting the errors of our past define us, yet at the same time never forgetting them. This Article represents a contribution toward this progress, by telling what has been, until now, an untold story about institutional complicity in antebellum slavery-that is, the story of how the federal government in the 1840s became the owner and seller of hundreds, if not thousands, of slaves belonging to financially distressed slaveowners who sought forgiveness of debt through the federal bankruptcy process. Relying on archival court records that have not been systematically analyzed by any published scholarship, this Article recounts how the Bankruptcy Act of 1841 and the domestic slave trade inevitably collided to create the bankruptcy slave trade, focusing on a case study of the Eastern District of Louisiana, home to New Orleans, which was antebellum America\u27s largest slave market. Knowing the story of the black men, women, and children who found themselves subjected to sale through the federal bankruptcy process is a crucial step toward recognizing how yet another aspect of our legal system-one that has brought in its modern incarnation financial relief to millions upon millions of debtors-had deep roots in antebellum slavery

Racialized Bankruptcy Federalism

Notwithstanding the robust national power conferred by the U.S. Constitution’s Bankruptcy Clause, the design and administration of federal bankruptcy law entails choices about the extent to which non-bankruptcy-law entitlements will remain un-displaced. When such entitlements sound in domestic nonfederal law (i.e., state or local law), displacing them triggers federalism concerns. Considerations regarding the relationship between the federal government and the nation’s smaller political subdivisions might warrant preserving nonfederal-law entitlements even though their displacement would be authorized pursuant to the bankruptcy power. But such considerations might also suggest replacing those entitlements with bankruptcy-specific ones. Some scholarship has theorized about the principles that should govern the balancing of bankruptcy federalism concerns, though without considering the implications of race. Other scholarship has critically examined how federal bankruptcy law, which is facially neutral, has nevertheless been designed and administered in ways that are racially biased, though without considering the implications of federalism. This Article offers a preliminary exploration of the origins of racialized bankruptcy federalism—that is, federalism policymaking in bankruptcy with racially harmful effects. Looking back to modern bankruptcy law’s first forebear, the 1841 Bankruptcy Act, the Article analyzes how the U.S. District Court for the Eastern District of Louisiana promulgated a rule that replaced creditors’ state-law entitlements to enslaved collateral with federal public control of the enslaved in cases under the Act. Not only did this rule routinely impose on enslaved Black Americans the trauma of forced sale by the federal government, it also frequently enriched federal officials without providing any pecuniary benefit to a bankrupt’s general unsecured creditors. This Article concludes with a brief commentary on the Supreme Court’s January 2021 decision in City of Chicago v. Fulton, arguing that, especially when viewed from a historical perspective, race matters in determining how bankruptcy federalism ought to be operationalized

An Empirical Investigation into Appellate Structure and the Perceived Quality of Appellate Review

What is the ideal structure for appellate review? Without providing a definitive answer to the question, commentators have suggested several factors that may improve the process, and thus perhaps the accuracy, of appellate review. First, it is said that panels of judges are preferable to review by a single judge. Second, expertise in the relevant area of law is a benefit. Third, other indicia of lawfinding ability-such as the ability of lawyers and judges to focus on legal issues without the distraction of factual conflicts and the amenability of judges\u27 schedules to careful contemplation and reflection-contribute to the quality of appellate review. Fourth, a court\u27s adherence to traditional notions of appellate hierarchy, as exemplified by following its earlier precedents, has been deemed to produce better results. Finally, it is said that the independence of appellate judges-that is, the extent to which job features such as life tenure and a guaranteed salary tend to insulate judges from pressures to decide cases or issues one way or another-is of value. In this Article, we endeavor to evaluate empirically the relative quality of appellate review. To do this, we rely upon data obtained from the appellate review of bankruptcy matters. The current federal bankruptcy appellate structure provides an excellent setting in which to study appellate review because it offers litigants two paths for obtaining appellate review. First, after the bankruptcy judge issues a ruling, litigants may have the district court-in the person of a single district judge-review that ruling. Alternatively, the parties may agree (in circuits that have them) to have the bankruptcy judge\u27s ruling reviewed by a panel of bankruptcy judges-a so-called bankruptcy appellate panel or BAP. Further appeal in both cases- whether from the district court or the bankruptcy appellate panel- lies with the proper federal circuit court of appeals. We have collected data on affirmance rates in and citation rates to appellate bankruptcy opinions. Analyses of the data generally-and analyses of the citation data in particular-support the notion that BAP decisions in our study are perceived to be of greater quality than are district court decisions. First, we find support for the proposition that courts of appeals are more likely to uphold upon review the conclusions of BAPs than district courts. Second, BAP decisions are, with statistical significance, cited more frequently by bankruptcy courts, BAPs, federal courts of appeals, and courts in other circuits than are district court decisions. Only district courts are not more likely .to cite BAP decisions than decisions rendered by district courts