Opinion ID: 472139
Heading Depth: 2
Heading Rank: 3

Heading: Provisions Facilitating Speedy Proceedings.

Text: 107 The driving force behind the American Mariner line of cases is clearly the delay of the reorganization process, a delay necessitated by federal law which in effect imposes a monetary loss on all creditors. See Nicholas, 384 U.S. at 683, 86 S.Ct. at 1679. Although postpetition interest is not mandated by the Fifth Amendment, see Wright v. Union Central Life Insurance Co., 311 U.S. 273, 278, 61 S.Ct. 196, 199, 85 L.Ed. 184 (1940); Briggs, 780 F.2d at 1342; American Mariner, 734 F.2d at 434 n. 8 (no such protection is constitutionally required), courts that award postpetition interest to undersecured creditors seem to be motivated by considerations of fairness: those creditors should not be placed in the deep freeze for an unreasonable period without some compensation for the delay. 108 Indeed, as noted above, delay was an overriding concern of Congress in recodifying the adequate protection and reorganization provisions in 1978. Witness after witness complained that the cumbersome procedures under the Act and inattention by the courts to motions for relief from the stay led to delay that did not serve the purposes of the bankruptcy laws. Congress responded to the complaints with numerous provisions of the Code that were designed to encourage a more rapid resolution of reorganization proceedings. Various sections--including Secs. 305(a) (permitting dismissal or suspension of proceedings if interests of creditors and debtor would be served, such as when a reorganization or arrangement has been or is being effected in another forum), 1102(b)(1) (permitting continuation of prepetition creditors' committees), and 1126(b) (streamlining procedures for acceptance of plan, particularly prepetition solicitation of plan approval)--encourage speedy out-of-court workouts. Further, the debtor's exclusive right to file a plan is limited to 120 days, Sec. 1121(b), unless extended for cause, see House Report, supra, at 223, 231, and even the 120-day period may be reduced by the court for cause, Sec. 1121(d). Thereafter, a creditor may file a plan, Sec. 1121(c). A creditor may move to dismiss the petition or convert the proceeding to a Chapter 7 liquidation if the debtor is dilatory, Sec. 1112; In re Shriver, 33 B.R. at 188, or may move for appointment of a trustee, Sec. 1104(a). 109 Most important, Congress provided that motions for relief from the stay are entitled to priority: if the court does not act on a motion for relief from the stay within thirty days, the stay automatically lifts. 45 The 30-day rule is the most direct attack on the problem of delay and dilatoriness in dealing with requests for relief from the stay. Kennedy, Automatic Stay II, supra, 12 U.Mich.J.L.Ref. at 40 n. 166. Further, relief from the stay is now sought by means of a motion, rather than by the commencement of an adversary proceeding in which complicated counterclaims and offsets were often raised, requiring time consuming procedures to adjudicate. The legislative history of Sec. 362(e) makes clear that the brief time periods allowed in Sec. 362 litigation and the use of a motions procedure were designed to streamline and speed up the process: 110 At the expedited hearing under subsection (e), and at all hearings on relief from the stay, the only issue will be the claim of the creditor and the lack of adequate protection or existence of other cause for relief from the stay. This hearing will not be the appropriate time at which to bring in other issues, such as counterclaims against the creditor on largely unrelated matters. Those counterclaims are not to be handled in the summary fashion that the preliminary hearing under this provision will be. Rather, they will be the subject of more complete proceedings by the trustees to recover property of the estate or to object to the allowance of a claim. 111 House Report, supra, at 344, U.S.Code Cong. & Admin.News 1978, p. 6300. See also 2 Collier on Bankruptcy p 362.08, at 362-63 (15th ed. 1985). Finally, Sec. 362(d) motions require only limited notice to creditors. 46 112 One conclusion from the legislative history is unassailable: Congress responded in 1978 to creditors' complaints about delay. It expressly did so by streamlining the stay relief litigation procedure, by building into the Code assurance that requests for relief from the stay will be considered in a timely manner and by providing all creditors with numerous means of limiting the delay of the reorganization process. 113 If the American Mariner position is accepted and undersecured creditors are entitled to periodic postpetition interest payments, perhaps at a rate higher than the contract rate and which (according to some courts) need not be credited against principal, the end result may, in fact, be delaycontrary to Congress' clearly expressed intent to speed up reorganization proceedings. There would be little economic incentive for the undersecured creditor, particularly one whose prospects for a significant distribution on the unsecured portion of its claim are not bright, to cooperate in developing a negotiated plan. In many cases, delay would have little adverse effect on the creditor, and, in fact, the creditor might be rewarded for delay if the court allowed it to retain without adjustment the amount of the American Mariner payments above interest due under the contract. That very delay, however, will almost certainly adversely affect the unsecured creditors, as it is often the unencumbered assets, otherwise available for distribution to unsecured creditors, that are funding the interest payments to the undersecured creditors. 114 A bankruptcy court, faced with a difficult and unpleasant decision whether, in effect, to terminate a reorganization case with bleak prospects for success, might well prefer to let the case continue and to assuage the undersecured creditor by ordering the payment of postpetition interest. But that very decision is a decision for delay and for increased expense, both in the form of interest and in the form of administrative expense, expense that in most cases will be funded by the unsecured creditors. A decision for delay--without a meaningful possibility that the delay will ultimately benefit creditors--is not the decision that Congress has made, and the obligation of the courts is to honor and effectuate the decisions that Congress has made to limit delay. 115