Constitutional Gaps in Bankruptcy
56 Pages Posted: 31 Aug 2011 Last revised: 12 Sep 2013
Date Written: August 31, 2011
Federal bankruptcy law incorporates a broad range of commercial and related matters that are otherwise left to the States under the Constitution, follows an efficiency-centered process model that may implicate due process, and relies upon a judicial structure that appears to be inconsistent with Article III. In spite of the crushing volume of bankruptcy cases and proceedings each year in which the resolution of one or more of these questions may be relevant, the Supreme Court has had few opportunities to tackle them directly. Indeed, after more than two centuries, the Court has provided precious few insights into the limits of the bankruptcy power and the degree to which the various mechanisms for administering and adjudicating bankruptcy cases and proceedings may be assigned to Article I courts. And, for more than a quarter century, the modern bankruptcy adjudication structure has been premised upon untested assumptions about the bankruptcy power and Article III that were rejected in, or may be subject to challenge following, the Court’s conclusions in Stern v. Marshall.
Using Marshall as a focal point of the discussion, this article explores both the structural gap between the design of the bankruptcy system and its constitutional limits and the causes of the temporal gap between the adoption of the current structure and the Court’s consideration of its constitutionality. Although these constitutional gaps have allowed the bankruptcy system to flourish during the last three decades, they have also increased its cost and complexity unnecessarily and, after Marshall, we should expect these effects to be far more pronounced. This article also outlines the need to correct these gaps as a precondition to developing an informed and constitutionally sound bankruptcy system that can realize the promise of the Bankruptcy Code.
Keywords: Marshall, bankruptcy, constitutional law, appeals, private rights
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