Court Upholds Bankruptcy Protections

The Supreme Court on Monday made it easier for people to use federal bankruptcy law to prevent creditors from foreclosing on property.

In another case, the high court ruled unanimously that federal securities law allows former stockholders of a company to sue on behalf of the company to recover alleged short-term profits from trades by corporate insiders.

The court unanimously ruled in favor of a Kansas farmer, Curtis Reed Johnson, who sought to prevent the Home State Bank, which holds a mortgage on his property, from forcing him to sell his land.

Johnson proposed deferred payment of what he owed the bank by invoking Chapter 13 of the bankruptcy code, a provision that permits those in financial difficulty to pay off a share of their debts.

Johnson, who lives in Edwards County, Kan., previously had declared bankruptcy under Chapter 7, a provision that generally requires debtors to sell their assets and distribute the proceeds to creditors.

The high court said the bankruptcy law permits such sequential filings to protect property from foreclosure by mortgage holders.

But Justice Thurgood Marshall said for the court that the alternative repayment plan must be feasible and be made in good faith.