On Dicta's Trail: Espinosa's Messy Repercussions

Norton Bankruptcy Law Adviser, January 2018, at 1

18 Pages Posted: 5 Mar 2018 Last revised: 13 Jan 2020

Date Written: 2018

Abstract

In United States Aid Funds, Inc. v. Espinosa, Justice Clarence Thomas first penned a simple holding endorsed by the decided majority of lower courts: once a debtor has won confirmation of a multi-year repayment plan pursuant to Chapter 13 of the Bankruptcy Code (“Code”), any creditor who received actual notice of the plan may not challenge a single provision, even those inconsistent of the Code, as void pursuant to Federal Rule of Civil Procedure 60(b)(4) (“Rule 60(b)(4)”). But Thomas thereupon proceeded to append fateful dicta to this conclusion: regardless of a creditor’s degree of participation in a Chapter 13 case and that person’s capacity to invoke Rule 60(b)(4), the Brethren now charged every bankruptcy court with independently safeguarding a plan’s adherence to the Code’s requirements. While classic principles of interpretation could be conjectured in defense of Espinosa’s holding, its dictum represented a strange departure from the Court’s preferred predilection: in devising a safety valve of sorts, the Court now invited bankruptcy courts to roam and tinker in equity’s hallowed name. As a result, Espinosa has generated a cacophony of lawyerly arguments and judicial holdings and thereby begat the kind of delay and uncertainty inimical to a Chapter 13 case’s orderly adjudication. What the Court has seemingly striven to repress again and again — barely bridled discretion in an “expansive (and sometimes) unruly area of law” that the Code purportedly “standardize[]” — Espinosa’s dicta may have unleashed, as this article shows not only by pinpointing Espinosa's interpretive flaws but also providing an overview of the tests recently created in the vain hope of satisfying the Court's latest demand. In so doing, this article both jumps into a nascent academic debate and gives practitioners some guidance in navigating a post-Espinosa Chapter 13 process.

Note: Posted with permission from Norton Bankruptcy Law Adviser, Jan. 2018 issue. Copyright © 2018 Thomson Reuters/West.

Keywords: Espinosa, debt, bankruptcy, chapter 13, rehabilitation, discharge, Chapter 7, liquidation, good faith, dicta, holding, Holmes, Thomas, student loan, plain meaning, holistic interpretation, textualism, literalism

JEL Classification: K10, K19, K2, K29, K39, K40, K41, K49, K42, K35, K22, K23

Suggested Citation

Shachmurove, Amir, On Dicta's Trail: Espinosa's Messy Repercussions (2018). Norton Bankruptcy Law Adviser, January 2018, at 1, Available at SSRN: https://ssrn.com/abstract=3063452

Amir Shachmurove (Contact Author)

Reed Smith LLP ( email )

Washington, DC 20001
United States

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