Peterson v. McGladry & Pullen, LLP, 2012 WL 1088274 (7th Cir. April 3, 2012) (pdf), is an important new case from the 7th Circuit addressing the ability (or better, inability) of a bankruptcy trustee to overcome the “in pari delicto” defense on policy grounds alone. In it, Judge Easterbrook–writing for the majority–once again grounds his opinion on the bedrock principle laid down by the US Supreme Court in Butner (1979) that
“state law defines the ‘property’ that enters the bankruptcy estate, unless a provision in the Bankruptcy Code displaces state law.” Id. at *3. Here are key quotes from the case:Continue Reading 7th Circuit: Bankruptcy Code Doesn’t Override the “In Pari Delicto” Defense