Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Quasi-Bankruptcy Quagmires

By Howard C. Rubin and Deirdre M. Richards
April 01, 2019

This article explores the difficulties some entities have encountered in filing bankruptcies and how one organization used extraordinary civil remedies in an attempt to accomplish what reorganization under Chapter 11 of the United States Bankruptcy Code would have provided.

The United States Constitution, Article I, Section 8, provides, in pertinent part, that Congress shall have the power to establish “uniform Laws on the subject of Bankruptcies throughout the United States.” It is generally accepted that there is one uniform regime of bankruptcy law throughout the United States — Title 11 of the United States Code. However, in the past several years, situations have arisen where bankruptcy protection has been elusive for parties in need of reorganization. What remedies do those unfortunate parties, who either do not qualify under the Bankruptcy Code, or who may qualify but cannot effectively reorganize under Title 11, have? Furthermore, if a receivership under federal law is an option, can it be used as an “offensive” remedy by a debtor against its creditors in an attempt to reorganize outside of Title 11?

Entities That Cannot Legally File for Bankruptcy Relief

Certain entities may be precluded by federal law or policy from filing for bankruptcy; and they may be forced to use alternative relief, if available. For instance, the Commonwealth of Puerto Rico found itself in a situation where it could not qualify for relief under Chapter 9 of the Bankruptcy Code because 11 U.S.C. §101(52) specifically excluded it from the definition of a State that may seek relief under Chapter 9, and the law its legislators passed to track the relief afforded to debtors under Chapters 9 and 11 of the Bankruptcy Code (the Puerto Rico Public Corporation Debt Enforcement and Recovery Act) was held to be pre-empted by Bankruptcy Code Section 903(1). The latter section specifically bars states (in this context Puerto Rico was included in the definition of a state) from enacting “municipal bankruptcy laws.”

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It Image

Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?

Bankruptcy Sales: Finding a Diamond In the Rough Image

There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.

A Lawyer's System for Active Reading Image

Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.

The DOJ's Corporate Enforcement Policy: One Year Later Image

The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.

Blockchain Domains: New Developments for Brand Owners Image

Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.