Bruckner on Higher Education & Bankruptcy

Bankruptcy scholar Matthew A. Bruckner, Assistant Professor of Law, Howard University School of Law, has a couple of very interesting new papers exploring the peculiar intersection of bankruptcy law and higher education. In the first, Bankrupting Higher Education, he explains why it is a problem that colleges and universities cannot file for Chapter 11 bankruptcy. Here is the abstract:

Many colleges and universities are in financial distress but lack an essential tool for responding to financial distress used by for-profit businesses: bankruptcy reorganization. This Article makes two primary contributions to the nascent literature on college bankruptcies by, first, unpacking the differences among the three primary governance structures of institutions of higher education, and, second, by considering the implications of those differences for determining whether and under what circumstances institutions of higher education should be allowed to reorganize in bankruptcy. This Article concludes that bankruptcy reorganization is the most necessary for for-profit colleges and least necessary for public colleges, but ultimately concludes that all colleges be allowed to reorganize in chapter 11.

In the second, Higher Ed ‘Do Not Resuscitate’ Orders, he explains why Congress chose to prevent colleges and universities from filing for Chapter 11 bankruptcies, and why it was a bad idea. Here is the abstract:

Concerned about exploitative profiteers opening fly-by-night colleges to defraud students and then seeking respite in bankruptcy court, Congress chose to effectively preclude all institutions of higher education from reorganizing in bankruptcy court. This Article contributes to the literature on higher education bankruptcies by explaining why Congress’ solution could never achieve its fraud-prevention goal. It also compares the bankruptcy treatment of healthcare enterprises to that of higher education enterprises to support this claim.

In addition, Bruckner recently recorded a podcast on these two papers with the American Bankruptcy Institute. You can listen to it here.

Bruckner recently presented these two papers at the University of Kentucky College of Law, to the great interest of the faculty. Highly recommended!

BLF