Finding a Port in the Storm: Constitutional Claims Find Protection Under the Fifth Amendment in Municipal Bankruptcy in In re Financial Oversight & Management Board

This Note examines the First Circuit’s decision in In re Financial Oversight & Management Board and argues that the court erred in holding that claims for just compensation under the Fifth Amendment’s Takings Clause cannot be impaired or discharged in municipal bankruptcy. Analyzing the historical relationship between bankruptcy law and the Takings Clause, the circuit split created by In re City of Stockton and In re City of Detroit, and the Supreme Court’s decision in Knick v. Township of Scott, the Note contends that the First Circuit relied too heavily on the maxim that the bankruptcy power is subject to the Fifth Amendment. The Note argues that modern Takings Clause doctrine undermines the distinction between uncompensated takings claims and other constitutional claims routinely adjusted in bankruptcy, and warns that extending special protection to takings claimants may encourage creditors to recharacterize claims as constitutional property interests. It concludes that the First Circuit’s approach creates doctrinal inconsistency and may hinder the ability of financially distressed municipalities to achieve meaningful debt relief. [This abstract was written by Microsoft Copilot, a generative artificial intelligence.]