By Joseph J. Wielebikski, Munsch Hardt Kopf & Harr, P.C.Davor Rukavina, Munsch Hardt Kopf & Harr, P.C.

This has been one of the most important periods for bankruptcy law developments since the authors began writing for the Survey. On the one hand, the Fifth Circuit decided several important cases of particular importance to Chapter 11: Village at Camp Bowie, Texas Grand Prairie Hotel Realty, and MPF Holdings, among others. These cases, whether one agrees or disagrees with the results, stand for the proposition that bankruptcy is equitable and flexible and that, within the confines of the law, the bankruptcy courts should have sufficient equitable discretion to arrive at appropriate results. In other words, the days of the Fifth Circuit attempting to tell the bankruptcy courts how to decide cases by a talismanic approach appear to be coming to an end.

On the other hand, the Fifth Circuit issued several opinions that threaten the very structure of the Bankruptcy Code. In two opinions, the Fifth Circuit held that parties may not consent to the entry of a final order in a non-core proceeding. Although this issue is presently before the Supreme Court and will likely be decided prior to the publication of this Survey (or shortly thereafter), the inability to consent to final orders severely curtails the ability of the bankruptcy court to function as a centralized forum for adjudicating all estate disputes. Separately, the Fifth Circuit severely curtailed the power of section 1146(c) of the Code by holding that service of a proposed plan is insufficient to strip a secured creditor of his lien, if the secured creditor has not actively participated in the case (such as by filing a claim). Thus, even as the Fifth Circuit continues its pro-equitable approach with respect to deciding the merits of a case, it continues to threaten or to remove from bankruptcy courts the very tools that enable the process to function properly.

Lower courts have not seen much activity due to the general slowdown in bankruptcy filings. As a result, they published few bankruptcy opinions of particular note. However, even if the slowdown continues into the foreseeable future (which the authors do not believe will be the case), future Survey periods are likely to see a large volume of lower court opinions as bankruptcy courts will continue to struggle with interpreting and applying the changes to their fundamental structure in the wake of Stern v. Marshall and its progeny.

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Recommended Citation
Joseph J. Wielebikski, et al., Bankruptcy, 1 SMU Ann. Tex. Surv. (2014)