Narrowing Equity in Bankruptcy

94 American Bankruptcy Law Journal 303 (2020)

27 Pages Posted: 19 Mar 2020 Last revised: 1 Jun 2021

See all articles by Laura Coordes

Laura Coordes

Arizona State University - Sandra Day O'Connor College of Law

Date Written: April 17, 2020

Abstract

Bankruptcy law has a language problem. Words concerning bankruptcy “equity” and a bankruptcy court’s “equitable powers” are tossed about, in pleadings, court opinions, and scholarly literature, but no one agrees on what “equity” means in the bankruptcy context. Is equity about filling gaps within the Bankruptcy Code? Is it, instead, about working around the Code? Is it about “promoting justice?” There is considerable room for disagreement and debate.

This Article posits that in bankruptcy, equity has a narrower meaning than it perhaps has in other contexts. U.S. bankruptcy law is governed by a statute, the U.S. Bankruptcy Code, and bankruptcy equity, as granted by the Bankruptcy Code, is part and parcel of statutory interpretation. This is so for two reasons. First, statutes are not drafted in a vacuum; rather, Congress creates statutes against a backdrop of existing laws and legal frameworks. This is particularly true in bankruptcy: several bankruptcy statutes preceded the current Bankruptcy Code, and the bankruptcy courts can trace their roots to the Court of Chancery in England. Second, statutes by their very nature are limited; they cannot encompass every conceivable situation that may arise in practice. Thus, entities, such as bankruptcy courts, tasked with interpreting and applying statutory language must have the flexibility to interpret the statute in a way that is consistent with the broader framework against which it was enacted and in a way that furthers the statutory purpose as the situation demands. Equity exists in bankruptcy to provide this flexibility.

Keywords: bankruptcy, equity

Suggested Citation

Coordes, Laura, Narrowing Equity in Bankruptcy (April 17, 2020). 94 American Bankruptcy Law Journal 303 (2020), Available at SSRN: https://ssrn.com/abstract=3543636

Laura Coordes (Contact Author)

Arizona State University - Sandra Day O'Connor College of Law ( email )

Box 877906
100 S. McAllister Ave.
Tempe, AZ 85287-7906
United States

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