American Bankruptcy Institute
10 III. Background on the Commission and the Study Project
placed the reorganization largely in the hands of the debtor and its unsecured creditors’ committee and was premised on the efforts of these parties to structure a negotiated resolution to the debtor’s financial distress.20 After almost 40 years of restructuring experience under Chapter X and Chapter XI of the Chandler Act, policymakers and practitioners agreed that reform was needed.21
Consequently, in 1970, Congress created the Commission on the Bankruptcy Laws of the United States (the “Commission on Bankruptcy Laws”) to “study, analyze, evaluate and recommend changes to the [1898] Act.”22 In 1973, the Commission on Bankruptcy Laws issued a report and a draft of proposed bankruptcy legislation.23 The National Conference of Bankruptcy Judges, excluded from the Commission on Bankruptcy Laws, submitted a competing legislative proposal.24 President Carter ultimately signed into law the 1978 Bankruptcy Code, which combined various concepts from both legislative proposals and merged Chapters X, XI, and XII of the 1898 Bankruptcy Act into a single business reorganization chapter (the current chapter 11).25 In passing the Bankruptcy Code, Congress believed that “the purpose of a business reorganization case [under chapter 11] . . . is to restructure a business’s finances so that it may continue to operate, provide its employees with jobs, pay its creditors, and produce a return for its stockholders”26 with the understanding that “reorganization, in its fundamental aspects, involves the thankless task of determining who should share the losses incurred by an unsuccessful business and how the values of the estate should be apportioned among creditors and stockholders.”27
After its enactment, Congress amended the Bankruptcy Code on a periodic and piecemeal basis. In 1982, Congress broadened protections for the commodities and securities markets.28 In 1984, Congress clarified the jurisdiction of the bankruptcy courts, set the term and appointment procedures of bankruptcy judges, and enacted specialized rules for the treatment of collective bargaining agreements.29 In 1986, Congress created additional bankruptcy judgeships, expanded the U.S. Trustee pilot program to a nationwide program,30 and codified chapter 12 for family farmers.31 In 1988, Congress added protections for retirees and intellectual property licensees, and resolved conflicts between bankruptcy law and state laws.32 In 1990, Congress added various provisions, such as swap protections, making certain debts nondischargeable, and establishing bankruptcy appellate panels.33 In 1992, Congress added more provisions related to, among others, judgeships and chapter
20 See Bussel, supra note 17, at 1557–58 (explaining key elements of Chapter XI). 21 Elizabeth Warren, Bankruptcy Policymaking in an Imperfect World, 92 Mich. L. Rev. 336, 371–73 (1993) (“One of the key reasons for the adoption of the 1978 Code was the widespread perception that the old Code was unworkable.”). 22 Act of July 24, 1970 Establishing a Commission on the Bankruptcy Laws of the United States, Pub. L. No. 91-354, 84 Stat. 468 (1970). For further discussion about the Commission on Bankruptcy Laws and its composition, see Report of the Commission on the Bankruptcy Laws of the United States, 29 Bus. Law. 75, 75–76 (1973). 23 Report of the Commission on the Bankruptcy Laws of the United States, H.R. Doc. No. 93-137 (1st Sess. 1973). See also Report,
supra note 22; Frank R. Kennedy, The Report of the Bankruptcy Commission: The First Five Chapters of the Proposed New
Bankruptcy Act, 49 Ind. L.J. 422 (1974). 24 See Kenneth N. Klee, Legislative History of the New Bankruptcy Law, 28 DePaul L. Rev. 941, 943–44 (1979).
25 See Tabb, supra note 9, at 35. 26 Harvey R. Miller & Shai Y. Waisman, Is Chapter 11 Bankrupt?, 47 B.C. L. Rev. 129, 181 (2005) (quoting H.R. Rep. No. 95-595, at 220 (1978), reprinted in 1978 U.S.C.C.A.N. 5963, 6179). 27 Id. (quoting S. Rep. No. 95-989, at 10 (1978), reprinted in U.S.C.C.A.N. 5787, 5796). 28 See 1 Norton Bankr. L. & Prac. 3d § 2:11. 29 See id. § 2:12. 30 The U.S. Trustee Program was piloted in certain judicial districts prior to the 1986 legislation. The 1986 legislation made the program permanent nationwide, with the exception of North Carolina and Alabama. Bankruptcy cases in Alabama and North Carolina are not under the jurisdiction of the U.S. Trustee, but rather are administrated by Bankruptcy Administrators in those jurisdictions. 31 See 1 Norton Bankr. L. & Prac. 3d § 2:13. 32 See id. § 2:14. 33 See id. § 2:15.