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Highlight Updates Case Law Under the Code

Over the years, many bankruptcy cases under the Code have reached the United States Supreme Court. Although the Supreme Court’s definitive holdings reach only limited specific issues in bankruptcy law, two important guiding principles have been enunciated on several occasions. First, as expected, the plain language of the statute controls.101 Second, the Court has repeatedly held that it will not find congressional intent to overrule law under the prior Bankruptcy Act absent a clear statement by Congress to that effect.102 Because of the latter principle, it is important to review precedent under the Bankruptcy Act as well as cases under the Bankruptcy Code in researching unresolved bankruptcy questions. Since 1978, a substantial body of case law from the bankruptcy courts has been reported. In addition, appellate decisions in each jurisdiction have created a pool of binding precedent which must be examined before advocating on bankruptcy issues. In a bankruptcy court, it is generally only circuit court precedent which is considered binding. District court decisions and bankruptcy appellate panel decisions103 have stare decisis effect in bankruptcy, but because of the potential for inconsistent decisions from different judges of the same district court, they are generally not considered binding even on bankruptcy judges in the district in which they arose.104

Additionally, state courts have ruled on issues directly or indirectly related to bankruptcy, most notably in the areas of state exemptions, dischargeability of certain debts, and lien rights of secured creditors. As is discussed more fully below, many bankruptcy issues turn on questions of state law. The body of bankruptcy case law continues to grow and careful research will generally uncover helpful decisions, if not binding precedent, on virtually any issue.


  • 101 {99} See, e.g., Lamie v. United States Tr., 540 U.S. 526, 124 S. Ct. 1023, 157 L. Ed. 2d 1024 (2004); Toibb v. Radloff, 501 U.S. 157, 111 S. Ct. 2197, 115 L. Ed. 2d 145 (1991); Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991); Pennsylvania Dep’t of Pub. Welfare v. Davenport, 495 U.S. 552, 110 S. Ct. 2126, 109 L. Ed. 2d 588 (1990); United States v. Ron Pair Enter., Inc., 489 U.S. 235, 109 S. Ct. 1026, 1030, 103 L. Ed. 2d 290 (1989). However, whether some of the Supreme Court’s recent decisions purporting to rely on the Code’s plain language have actually comported with that language is quite debatable. See, e.g., Rake v. Wade, 508 U.S. 464, 113 S. Ct. 2187, 124 L. Ed. 2d 424 (1993) (a mortgage arrearage is an allowed secured claim that must be paid interest under 11 U.S.C. § 1325(a)(5)(B)).

  • 102 {100} See, e.g., Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (1992); Kelly v. Robinson, 479 U.S. 36, 107 S. Ct. 353, 93 L. Ed. 2d 216 (1986); Midlantic Nat’l Bank v. New Jersey, 474 U.S. 494, 106 S. Ct. 755, 88 L. Ed. 2d 859 (1986).

  • 103 {101} See § 2.4.3, infra, for discussion of bankruptcy appellate panels.

  • 104 {102} See In re Rheuban, 128 B.R. 551 (Bankr. C.D. Cal. 1991) (bankruptcy judge in multi-judge district need not follow decisions of the district court); In re Johnson-Allen, 67 B.R. 968 (Bankr. E.D. Pa. 1986) (bankruptcy court should make every effort to follow decisions of district court where it is sitting).

    Similarly, bankruptcy appellate panel decisions are not binding on district or bankruptcy judges in districts of the circuit other than where the panel sits. In re Selden, 121 B.R. (D. Or. 1990). See Bank of Maui v. Estate Analysis, Inc., 904 F.2d 470 (9th Cir. 1990) (bankruptcy appellate panel decisions do not bind the district courts).