The Bankruptcy Act of 1938, also known as the Chandler Act, expanded voluntary access to the
bankruptcy system in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
and made voluntary petitions more attractive to debtors. It also gave authority to the
Securities and Exchange Commission in the administration of bankruptcy filings. One effect was to remove
investment bank
Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort.
In finance, the purpose of investing i ...
s from control of the corporate reorganization process by eliminating the equity receivership technique. Instead, a trustee was appointed by the bankruptcy court to oversee the reorganization process.
The Bankruptcy Act, though now superseded by the
Bankruptcy Code, remains an important interpretive tool for current bankruptcy law.
Several United States Supreme Court decisions have interpreted the Bankruptcy Code by looking back to the history of the Chandler Act. Some of the most notable decisions include:
* ''United States v. Whiting Pools, Inc.'', 462 U.S. 198 (1983), which justified the practice of requiring the IRS to return a bankrupt company's property under the Bankruptcy Code by reference to previous practice under the Bankruptcy Act. The Court wrote that Congress must have been aware of this previous practice and decided not to change it when it passed the Bankruptcy Code.
* ''Johnson v. Home State Bank'', 501 U.S. 78 (1991), in which the Court looked to the legislative history and precedent of the Bankruptcy Act to interpret the term "claim" in the Bankruptcy Code.
* ''Fidelity Financial Services, Inc. v. Fink'', 522 U.S. 211 (1998), in which the Court considered Bankruptcy Act's rules about and precedent interpreting avoidable preferences to resolve a similar question under the Bankruptcy Code.
* ''Cohen v. de la Cruz'', 523 U.S. 213 (1998), in which the court relied on practice under the Bankruptcy Acts to interpret the non-dischargeability provisions of the Bankruptcy Code.
The practice of using the Bankruptcy Act to interpret the Bankruptcy Code has been criticized by some bankruptcy scholars. They claim that this interpretive tool leads to unpredictable results, may ignore the intent of Congress, and confuses lower courts interpreting Supreme Court decisions.
[Gebbia, Karen (2000).]
Interpreting the Bankruptcy Code: An Empirical Study of the Supreme Court's Bankruptcy Decisions
. 3 ''Chapman L. Rev.'' 173.
References
1938 in American law
United States bankruptcy legislation
History of bankruptcy law
Repealed United States legislation
75th United States Congress
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