Public Understanding of Bankruptcy Law

I'm deep into this semester, and my schedule is quite heavy. In addition to coursework in Constitutional Law, Criminal Procedure, Secured Transactions, Federal Criminal Law, and Evidence, I am in the depths of Moot Court (and that is all I'm allowed to say about Moot Court, apparently) as well as representing the student body as a member of the Indiana University Student Association. That would explain why I haven't blogged since I got back from the ABA Annual Meeting in New York (which, incidentally, was one of the most enjoyable law-related activities I have yet to participate in).

There is no doubt that the press sometimes picks up stories about the law and frames them in the context of "Judge is evil for enforcing law X". Sometimes I agree; the law in question is sometimes abhorrent and should be overturned on Constitutional grounds. Even better, here in Indiana, let a jury find that the law is something other than it seems to be. But other times, the press is making something sound horrible without considering anything in the world of the law.

Today the AP picked up a story about a bankruptcy court ordering a victim to pay back a thief. The story begins:

Mark Poveromo feels ripped off twice over. A judge ordered him to repay money he collected from a builder convicted of stealing from him — and told him to kick in the thief's attorney fees and court costs, too.
Some legal experts say the case, in which a criminal case in Connecticut intersects a bankruptcy judgment filed in St. Louis, shows a need for Congress to revise the nation's bankruptcy laws to better treat people who are awarded money as part of ruling in a criminal case.

Apparently, the builder stole a lot of money from Mr. Poveromo. Then, two months before being convicted, the thief declared bankruptcy because, well, he was bankrupt. The thief paid off a large portion of the stolen property. Then the bankruptcy judge took it back because, as we all know, Article 9 of the U.C.C. says unsecured creditors are on the bottom of the totem pole (nevermind that the reporter never mentions the law behind this judge's reasoning... just make the judge out to be a jerk).

Now, a few months ago I may have thought to myself that this is completely unfair; a miscarriage of justice! But I've taken a few weeks of Secured Transactions now, and, unlike the general populace, I won't fall for this reporter's trickery.

The story advocates altering the bankruptcy code to allow victims of crimes to essentially become secured creditors after their judgment. As the law exists now, as Mr. Poveromo puts it, "Crime does pay." Obviously, this would be a hard law to write. Why limit the law to protect only victims of crime? If your legislative intent is to protect victims, shouldn't every victorious plaintiff in a tort claim be granted this secured status? And what makes a victim more important than a commercial lender? After all, if a new class of secured parties suddenly appears, lenders will be less likely to grant loans (because they will be in a worse position), or at least will demand higher interest rates to compensate them for the additional risk.

Do I feel bad for victims who, unfortunately, don't get the protections of Article 9? Sure. They've been wronged, and they deserve restitution. But why should we put them above commercial lenders, or anyone that was wise enough to get a security agreement? Mr. Poveromo's lawyer should have done enough research to know that the thief had filed for bankruptcy.

Of course, my biggest complaint here is the reporter who covered this story. He should have at least put the judge's reasoning in the article instead of making judges out to be evil dictators taking money from victims to compensate thieves (or, as one law professor was quoted, making "outrageous decision[s]" and executing a "miscarriage of justice"). If the populace feels judges are acting improperly, the press is certainly responsible for leading them in that direction.