A Guide to Interpretation of the 2005 Bankruptcy Law

Abstract

As a bulge of new issues under the 2005 bankruptcy law works its way through the courts, this article makes two arguments about statutory interpretation: (1) to satisfy the Supreme Court in purposive mode, bankruptcy practitioners and lower court judges should always take into account the law's purposes and policies, and (2) despite the drafting and empirical errors of Congress, interpretation in light of purposes and policies is the best way to minimize unintended consequences. The stated purposes of the law, consumer protection, abuse prevention and fairness to debtors and creditors, are sound guides to interpretation. Judges must exercise their discretion wisely to reconcile these objectives and implement all three to the greatest extent possible. The Article first examines the Supreme Court's turn to purposes and policies, either as primary or partial guide, when interpreting bankruptcy law. It then discusses the mismatch between congressional assumptions and the actual workings of the bankruptcy system, giving examples of how courts can nonetheless interpret the law to keep the system running as efficiently as possible while also protecting consumer debtors, preventing abuse, and balancing the interests of debtors and various types of creditors.

Keywords: bankruptcy, consumer protection, statutory interpretation, purposivism, law in action

JEL Classification: K2, K41