New Faculty Publication: Kathryn Watts on Bankruptcy Exceptionalism

Rafael I. Pardo & Kathryn A. Watts, The Structural Exceptionalism of Bankruptcy Administration, 60 UCLA L. Rev. 384-460 (2012).

Kathryn A. Watts

Professor Watts' latest article discusses:

• Judicial Administration of the Bankruptcy Code
• Problems Posed by the Current Structure of Bankruptcy Administration
• Redesigning Bankruptcy Administration to be Unexceptional

Abstract from the SSRN posting:

The current system of administration of the Bankruptcy Code is highly anomalous. It stands as one of the few major federal civil statutory regimes administered almost exclusively through adjudication in the courts, not through a federal regulatory agency. This means that rather than fitting bankruptcy into a regulatory model, Congress has chosen to give the courts primary interpretive authority in the field of bankruptcy, delegating to courts the power to engage in residual policymaking.

Although scholars have noted some narrow aspects of the structural exceptionalism of bankruptcy administration, Congress’s decision to locate responsibility for bankruptcy policymaking almost exclusively with the federal judiciary, with little input from administrative agencies, has evaded scholarly attention. This Article aims to fill the gap by analyzing Congress’s choice of delegate in the bankruptcy context and assessing the consequences of the congressional decision to locate residual policymaking power in the courts. After identifying the structural anomalies of the current court-centered model and some of the constitutional and policy-driven concerns that flow therefrom, this Article makes the case for moving bankruptcy toward an administrative model with a regulatory agency charged with setting bankruptcy policy. Such a shift away from bankruptcy exceptionalism could bring greater expertise, accountability, uniformity, accessibility, transparency, prospective clarity and flexibility to policymaking in the bankruptcy arena. In addition, such a shift could help alleviate some of the constitutional issues that cast doubt on the legitimacy of our current system, such as Article III questions highlighted by the Supreme Court’s 2011 decision in Stern v. Marshall.