Avoiding the Ex Post Facto Slippery Slope of Deer Park

Abstract

This Article contends that bankruptcy courts had no power to order the Internal Revenue Service (IRS) to allocate funds to trust fund taxes or non-trust fund taxes by granting designation orders ex post facto. It argues that Deer Park was wrong not just in extending the Energy Resources rule to a Chapter 11 bankruptcy liquidation case, but also by doing so ex post facto. It is suggested that the Energy Resources rule is properly applied only when the designation order is proposed before a Chapter 11 plan is approved or before the plan has been completed. This Article also suggests that Deer Park illustrates the limits and the weakness of Energy Resources rule which gives bankruptcy courts the discretion to allow or disallow proposed designations of tax payments to trust fund taxes or non-trust fund taxes. Designation orders of tax payments should not be allowed ex post facto or in liquidation plans, but should be restricted to true rehabilitation plans where the designation order is requested before the plan has failed, and the designation order of tax funds should apply only to future plan payments.