Seventh Circuit Review


In its recent decision in United States v. Apex Oil, Inc., the Seventh Circuit considered whether an injunction under an environmental statute, even one that requires significant expenditures on the part of the debtor, could ever be a "right to payment" under the Bankruptcy Code, which would allow the claim to be discharged in the bankruptcy. The Seventh Circuit answered in the negative. Since the Supreme Court's decision in Ohio v. Kovacs, the federal circuits have disagreed on the discrete issue of when a claim arises for purposes of bankruptcy with respect to clean-up injunctions under environmental laws. The Sixth Circuit has suggested that all money obligations of the debtor are claims under the Code, while the Third Circuit and others distinguish claims based on whether they may be reduced to money judgments. Because the environmental statute in Apex does not authorize any form of monetary relief, the Seventh Circuit concluded that that the clean-up order at issue could not be deemed a right to payment. In light of the current circuit split, this Note analyzes the strengths and weaknesses of the circuits' various applications of section 105(B) of the Bankruptcy Code. It concludes that while the Seventh Circuit correctly determined that a clean-up injunction requiring money expenditures is not a claim under the Code, equitable concerns remain in the wake of the court's decision. Accordingly, this Note suggests that courts should adopt the Seventh Circuit's analysis, but with the caveat that bankrupt debtors may not receive the fabled "fresh start" in bankruptcy as a result.

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DischargeOfRCRA.mp3 (3691 kB)
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