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Insider Guaranties In Bankruptcy: A Framework For Analysis, Marshall E. Tracht

Articles & Chapters

This article presents an economic analysis of insider guaranties in small business finance and bankruptcy, explaining their role in the panoply of legal and contractual devices used to control financial agency costs. It then uses this model to examine two areas of concern in the bankruptcy treatment of insider guaranties (the Deprizio preference problem and the enforceability of springing and exploding guaranties) and to explore some of the wider implications of insider guaranties for small business bankruptcy. Building on the fact that insider guaranties are typically used less to increase the assets available for repayment of the debt than to …