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The Precarious Plight of Corporate and Partnership Debtors under Section 362(h) of the Bankruptcy Code

Does Section 362(h) provide a damage action to corporations and partnerships, or is it limited to natural persons? Since Congressional enactment of Section 362(h) in 1984, a majority of courts have held that Section 362(h) applies not only to natural persons, but also to non-natural entities such as corporations and partnerships. However, a minority of courts, including the Second Circuit Court of Appeals, have held that Section 362(h) applies only to debtors who are natural persons. These courts have suggested that relief for corporations and partnerships lay in contempt proceedings under Section 105 of the Bankruptcy Code. Although under either reading of Section 362(h), an aggrieved corporate or partnership debtor is not left completely without a remedy, the remedial differences attached to each respective interpretation of the statute are significant. So significant, in fact, that much turns on whether the majority or the minority approach is governing law. In this paper, Professor Wiggins examines the interpretive controversies surrounding Section 362(h) and evaluates the principal lines of authority. Professor Wiggins’ analysis illustrates strongly contrasting approaches to statutory interpretation, with the majority approach adopting a broader, more contextualized approach and the minority approach using the so-called “plain meaning” analysis of United States v. Ron Pair. Professor Wiggins argues that the majority approach is more compelling as a policy matter even if the minority approach is superior as a matter of statutory interpretation. Ultimately, she urges Congress to amend Section 362(h) to make its reach indisputably broader and thus vindicate vital policy aims in bankruptcy.