Abstract

The bankruptcy courts are currently split on the appropriate choice of law rule, some contend that they must apply the forum state's choice of law rule while others contend that they are free to create a federal choice of law rule. This Article contends that the forum state's choice of law rule is inapplicable in the bankruptcy context when interpretation and application of the Bankruptcy Code requires reference to state law. In these instances,bankruptcy courts should be free to develop a federal choice of law rule that promotes the federal policies underlying the Bankruptcy Code. This approach will result in the Bankruptcy Code being interpreted by reference to state laws that are consistent with and promote the Code's underlying policies. Importantly, such an approach requires courts to ensure that the parties' rights and obligations are not unnecessarily altered by the bankruptcy process. Likewise, it avoids the situation where a state's public policy dictates which state law should be used to interpret and apply federal law. Under this paradigm, courts would choose the state law that aids a debtor's fresh start upon emergence from bankruptcy, promotes the ratable distribution of available assets among the creditors, and, perhaps most importantly, ensures that the rights of the parties are not unnecessarily undermined by the happenstance of bankruptcy.