|
Abstract: Recently, my third grader has become interested in grammar. She has been learning sentence diagramming and grammar rules in school, and sometimes, she’ll quiz me at dinner to see if I can correctly identify various parts of a sentence. Her interest in this subject (and her fixation on getting the rules down pat) gives me hope for her generation, which one day will occupy seats in Congress.
By contrast, whenever I read § 541(b)(7) of the Bankruptcy Code, I find myself dismayed at a previous Congress’ poor drafting. Section 541(b)(7) is home to an infamous hanging paragraph, one that has bedeviled courts since its placement into the Bankruptcy Code in 2005. Hanging paragraphs are often confusing. This hanging paragraph, in particular, seems like very poor drafting. Recently, I had occasion to revisit this hanging paragraph upon reading the Ninth Circuit’s recent decision in In re Saldana. However, it appears that the Ninth Circuit majority has no problem with the hanging paragraph. In Saldana, the court held that § 541(b)’s hanging paragraph “unambiguously excludes voluntary contributions from a debtor’s disposable income in a Chapter 13 case.”
This holding is not as inevitable as it seems, however. Notably, with Saldana, the Ninth Circuit created a circuit split with respect to whether voluntary contributions to employer-managed retirement plans are disposable income in a chapter 13 bankruptcy. But what struck me about the Ninth Circuit’s decision in particular is the ease with which the majority concluded that the hanging paragraph was plain and unambiguous.
Commentators have already written about how bad Congress’ drafting was in this particular instance, and this Bankruptcy Law Letter is not going to rehash all of those criticisms. Instead, I will walk through the hanging paragraph problem and explain why I think the result in Saldana has the potential to direct attention away from the very entity that could solve this problem. Because Saldana has created a circuit split, the Supreme Court may now be more interested in granting certiorari and seeking to clarify this issue. Nevertheless, it is Congress’ poor drafting that has created the problem of numerous, conflicting interpretations of the hanging paragraph. The Supreme Court’s resources are not put to their best use if the Court is asked to puzzle through which of those interpretations should govern. Instead, Congress should act to resolve the problem that it created: Congress can and should clarify its meaning through an amendment to the Bankruptcy Code.
|