Article Abstract:
Bankruptcy courts should be accorded broad equity powers to achieve the goals of bankruptcy, such as debtor rehabilitation. Instead, the circuit court decisions in Chiason v. J. Louis Matherne & Associates (In re Oxford Management) and Shapiro v. Saybrook Manufacturing Co. (In re Saybrook Manufacturing Co.) gave a too restricted role to equity in Chapter 11 bankruptcy and also stressed equal distribution to creditors rather than the primary goal of rehabilitation of the debtor. The courts failed to appreciate the traditional criteria governing the use of equity powers.
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Article Abstract:
Bankruptcy plans and disclosure statements should be structured to allow avoidance actions to be resolved after confirmation of the plan. Avoidance actions should be referred to as claims or interests rather than property of the estate. In addition, avoidance claims should be described as retained rather than assigned. Some provision should also be made for continuance of the estate after confirmation. Post-confirmation avoidance actions are generally allowed as long as the recoveries benefit the estate or unsecured creditors and the claim is expressly retained.
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Article Abstract:
Bankruptcy courts have drawn sanctioning power from three sources of law but only two are appropriate. Sanctioning power under 28 U.S.C. section 1927 is inappropriate because it grants sanctioning power to federal courts created under Article III of the US Constitution, bankruptcy courts were created under Article I. Sanctioning power under Federal Rule of Bankruptcy Procedure 9011 is appropriate. Sanctioning power drawn from the court's inherent authority is also appropriate.
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