Doing Equity in Bankruptcy
34 Emory Bankruptcy Developments Journal 11 (2018)
43 Pages Posted: 17 Nov 2017 Last revised: 28 Nov 2017
This Article argues that consistent with the Code’s text and policy, injunctions or other forms of equitable relief should be presumptively treated as “claims,” even if nonbankruptcy law does not permit the enjoined party to satisfy the injunction by the payment of money. This presumption, however, should be rebuttable. No categorical rule can determine when equitable remedies should be monetized and discharged. Consistent with a chancery tradition of flexibility and discretion in the employment of equitable remedies stretching back for centuries, however, a balancing approach can appropriately determine the availability of equitable relief. The Article identifies factors to be weighed in this balancing process. When the factors tilt against equitable relief then monetization and discharge is the correct result absent compelling countervailing nonbankruptcy policies.
Part I discusses the availability of equitable relief under nonbankruptcy law, including the tradition of discretion that historically governs the availability of such relief. It also notes the increasing availability of such relief under both statute and common law in the past 30 years, a trend that only heightens the importance of getting the treatment in bankruptcy right. Part II critiques the confused state of the authorities regarding treatment of equitable remedies in bankruptcy and argues that the existing Code, properly construed, carries forward nonbankruptcy tradition by conferring discretion on bankruptcy judges to monetize nonbankruptcy entitlements to equitable relief by weighing bankruptcy as well as nonbankruptcy equities. Part III discusses the special insolvency-related factors that should govern that exercise of discretion in bankruptcy.
Keywords: Nonbankruptcy Law, Equity Relief, Equitable Remedies, Bankruptcy
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