Power, Tools, and Process: Some Reflections on Bankruptcy Minimalism

Authors

Edward J. Janger

First Page

19

Abstract

In Unjust Debts: How Our Bankruptcy System Makes America More Unequal, Melissa Jacoby offers a brilliant and sweeping indictment of the way in which bankruptcy law is currently practiced in the United States. As she puts it, “This book is a story of falling out of love. With a law.” Like me, Professor Jacoby came of professional age, at the close of the first age of the Bankruptcy Code. Enacted in 1978, we both learned the statute in the mid-1990s, at a time when the transformative power of the 1978 Code was reaching its peak. On the business side, corporations were figuring out how to use the Bankruptcy Code to reorganize and preserve value, while on the consumer side, the fresh start held promise for mitigating the harsh effects of consumer over indebtedness. In 1994, Congress mandated a review of the 1978 statute and named Elizabeth Warren the reporter. Jacoby was the senior staff attorney. The 1997 Report of the National Bankruptcy Review Commission was an optimistic document, identifying ways in which the Bankruptcy Code could be balanced to work better for both consumers and businesses. Unfortunately, as Jacoby details, however, the optimism was not, in large measure, justified. On the consumer side, the reforms proposed by the Commission were immediately controversial, with two commissioners filing their dissenting views. The legislative proposals that ultimately became the 2005 Amendments to the Code hewed closely to the views of the dissenting commissioners. Meanwhile, on the business side, debtors and powerful creditors became adept at strong-arming their desired deal. Over time, practice innovations have largely swept away the procedural safeguards that are, at least under the statute, the quid pro quo for invoking the coercive powers of the Bankruptcy Code. Unjust Debts looks at the current state of bankruptcy practice and asks, “what have we become?” Jacoby’s answer is that the Bankruptcy Code, originally dedicated to giving overindebted individual debtors a fresh start, winding up failed businesses, and preserving viable ones, has become a tool of debtors and powerful creditors, used to reallocate enterprise value and reinforce rather than reduce social and economic inequality.

Recommended Citation

Edward J. Janger, Power, Tools, and Process: Some Reflections on Bankruptcy Minimalism, 20 Brook. J. Corp. Fin. & Com. L. 19 (2025).
Available at: https://brooklynworks.brooklaw.edu/bjcfcl/vol20/iss1/2