The Federal Rules of Bankruptcy Procedure in Reorganization Cases: Do They Have a Constitutional Dimension?

Abstract:     
In United Student Aid Funds, Inc. v. Espinosa, 130 S. Ct. 1367 (2010), the Supreme Court recently upheld the Ninth Circuit in its minority view that the Federal Rules of Bankruptcy Procedure do not set the minimum due process standard in a bankruptcy case. In ruling that Mullane v. Central Hanover Bank provides the constitutional minimum, the Supreme Court has vastly increased the res judicata worth of a confirmed reorganization plan. The Espinosa decision also has much to say on the substantive law on chapter 13 cases and imposes onerous new duties on bankruptcy courts to review chapter 13 plans, even when no one shows up to protest confirmation. In ruling that the Federal Rules of Bankruptcy Procedure have no constitutional dimension, the Espinosa case probably overrules the half-century old precedent of City of New York v. New York N.H.H.R.R., which, in a collateral attack, struck down a confirmed reorganization plan where the procedural rules were not precisely followed. This article explores some internal tensions and contradictions in the Espinosa case and predicts impacts in the practice of chapter 13 cases.

Number of Pages in PDF File: 41

Keywords: Espinosa, Student Loans, Inquiry Notice, Student Lenders, Reorganization, Bankruptcy Courts, Due Process

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