The Seventh Circuit recently ruled that a pre-petition cleanup obligation under RCRA § 7003 cannot be discharged in bankruptcy. The decision significantly weakens the “fresh start” afforded by the Bankruptcy Code. Companies that have emerged from bankruptcy should reassess their risk of future environmental liability from pre-bankruptcy activities, and may expect EPA, states and other PRPs to use the precedent to more aggressively pursue their participation in cleanup activities going forward.
The question before the Court was whether the government’s right to require cleanup under RCRA § 7003 is a dischargeable “claim” under the Bankruptcy Code. The Court held that cleanup obligations survive whenever the government cannot seek alternative monetary relief, and that RCRA § 7003 does not allow the government to collect payment in lieu of performance.