Ever thought about “adequate protection” as being a 5th Amendment Takings Violation?
I never thought about it like this, but the bankruptcy concept of “adequate protection” presents an inherent constitutional 5th amendment takings issue! Doesn’t it? Think — a creditor who has a lien has both (a) right to payment [contract right] and (b) an interest in property of the debtor securing that right to payment [property right]. We all know that the Fifth Amendment protects this interest in property such that a persons interest in property cannot be deprived without due process or just compensation.
So my nerdy bankruptcy friends — isn’t Congress’s exercise of its bankruptcy powers under Article I subject to the Fifth Amendment? In dealing with whether or not a creditor’s interest is “adequately protected” is Congress not prospectively regulating your property rights? The answer after the jump….
No! said the Supreme Court in United States v. Security Industrial Bank, 459 U.S. 70 (1982) and Wright v. Vinton Branch of Mountain Trust Bank of Roanoke, 330 U.S. 440 (1937).
Note: this was mostly from my reading of David Epstein’s bankruptcy textbook Dealing with Financial Failure for Individuals and Businesses. This is the textbook I will be using for my first ever bankruptcy law class at a local private university. I can already tell my intellectual curiosity will be heightened.