The decision below is the first by a circuit court in history to hold that the Constitution prohibits a category of unsecured claims from being discharged in bankruptcy. Specifically, the First Circuit held that unsecured claims for just compensation that arise under the Fifth Amendment's Takings Clause before bankruptcy cannot be adjusted in a bankruptcy case, even though claims for money damages arising under other constitutional provisions can. The court believed the Takings Clause mandates a remedy and that unique feature renders the remedy non-dischargeable. The First Circuit acknowledged it was creating a split with the Ninth Circuit, which, when faced with the identical question, held that pre-bankruptcy unsecured claims for just compensation are dischargeable. The First Circuit's novel ruling frustrates both pillars of the Constitution's bankruptcy power—fresh starts for debtors and equitable treatment of unsecured claimholders.

Are pre-bankruptcy unsecured claims for just compensation under the Takings Clause uniquely non-dischargeable, unlike every other type of unsecured claim?

Are pre-bankruptcy unsecured claims for just compensation under the Takings Clause uniquely non-dischargeable, unlike every other type of unsecured claim?