Bankruptcy Court Refuses to Enforce Arbitration Clause for Claims Inextricably Bound Up with Bankruptcy Process

By Julia Wisenberg, Contributing Author

In a recent Chapter 13 case, the Bankruptcy Court in the Eastern District of Kentucky examined whether a conflict exists between an arbitration and the Bankruptcy Code.1 While courts are required under the Federal Arbitration Act (FAA) to rigorously enforce arbitration agreements, the court held that it had the discretion to deny enforcement of the parties’ arbitration agreement for the Chapter 13 debtor’s claims which were inextricably intertwined with the claims allowance process in bankruptcy court.2

The FAA was enacted by Congress . . .

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