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Full-Text Articles in Bankruptcy Law
Corporate Restructuring Under Relative And Absolute Priority Default Rules: A Comparative Assessment, Jonathan M. Seymour, Steven L. Schwarcz
Corporate Restructuring Under Relative And Absolute Priority Default Rules: A Comparative Assessment, Jonathan M. Seymour, Steven L. Schwarcz
Faculty Scholarship
The European Union recently adopted a Restructuring Directive intended to facilitate the reorganization of insolvent and other financially troubled firms. Although the central goal of the Directive parallels that of chapter 11 of U.S. bankruptcy law—to protect and maximize the value of financially distressed but economically viable enterprises by consensually reorganizing their capital structure—the Directive introduces an innovative but controversial option: that EU Member States can decree that reorganization negotiations should be subject to a relative priority default rule, in contrast to the type of absolute priority default rule used by chapter 11. EU officials argue that relative priority is …
Derivatives And Collateral: Balancing Remedies And Systemic Risk, Steven L. Schwarcz
Derivatives And Collateral: Balancing Remedies And Systemic Risk, Steven L. Schwarcz
Faculty Scholarship
U.S. bankruptcy law grants special rights and immunities to creditors in derivatives transactions, including virtually unlimited enforcement rights. This Article examines whether exempting those transactions from bankruptcy’s automatic stay, including the stay of foreclosure actions against collateral, is necessary or appropriate in order to minimize systemic risk.
The Failed Reform: Congressional Crackdown On Repeat Chapter 13 Bankruptcy Filers, Sara Sternberg Greene
The Failed Reform: Congressional Crackdown On Repeat Chapter 13 Bankruptcy Filers, Sara Sternberg Greene
Faculty Scholarship
After decades of lobbying to “get tough” on bankruptcy repeat filers, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). The Bankruptcy Code now requires that the automatic stay, which prevents creditors from pursuing the property of bankruptcy debtors, expires after thirty days for petitioners who file for bankruptcy within one year of a previously failed petition. Debtors can file a motion to extend the stay, but there is a presumption of a bad faith filing, only overcome if a debtor can show there has been a “substantial change in his or her financial or personal …
The Bankruptcy-Law Safe Harbor For Derivatives: A Path-Dependence Analysis, Steven L. Schwarcz, Ori Sharon
The Bankruptcy-Law Safe Harbor For Derivatives: A Path-Dependence Analysis, Steven L. Schwarcz, Ori Sharon
Faculty Scholarship
U.S. bankruptcy law grants special rights and immunities to creditors in derivatives transactions, including virtually unlimited enforcement rights. This article argues that these rights and immunities result from a form of path dependence, a sequence of industry-lobbied legislative steps, each incremental and in turn serving as apparent justification for the next step, without a rigorous and systematic vetting of the consequences. Because the resulting “safe harbor” has not been fully vetted, its significance and utility should not be taken for granted; and thus regulators, legislators, and other policymakers—whether in the United States or abroad—should not automatically assume, based on its …
The Role Of The Imf In Future Sovereign Debt Restructurings: Report Of The Annenberg House Expert Group, Douglas G. Baird, Nicole Bollen, Lee C. Buchheit, Mitu Gulati, Anne O. Krueger, Fridrik Mar Balursson, Robert K. Rasmussen, David A. Skeel Jr., Sergei Storchak, Jeromin Settelmeyer
The Role Of The Imf In Future Sovereign Debt Restructurings: Report Of The Annenberg House Expert Group, Douglas G. Baird, Nicole Bollen, Lee C. Buchheit, Mitu Gulati, Anne O. Krueger, Fridrik Mar Balursson, Robert K. Rasmussen, David A. Skeel Jr., Sergei Storchak, Jeromin Settelmeyer
Faculty Scholarship
A meeting of international finance and insolvency experts was held on November 2, 2013 at the Annenberg House in Santa Monica, California. The meeting was co-hosted by the USC Law School and the Annenberg Retreat at Sunnylands. The goal was to solicit the views of experts on the implications of the IMF’s April 26, 2013 paper captioned “Sovereign Debt Restructuring -- Recent Developments and Implications for the Fund’s Legal and Policy Framework”. The April 26 paper may signal a shift in IMF policies in the area of sovereign debt workouts. Although the Expert Group discussed a number of the ideas …
Revisiting Sovereign Bankruptcy, Lee C. Buchheit, Anna Gelpern, Mitu Gulati, Ugo Panizza, Beatrice Weder Di Mauro, Jeromin Zettelmeyer
Revisiting Sovereign Bankruptcy, Lee C. Buchheit, Anna Gelpern, Mitu Gulati, Ugo Panizza, Beatrice Weder Di Mauro, Jeromin Zettelmeyer
Faculty Scholarship
Sovereign debt crises occur regularly and often violently. Yet there is no legally and politically recognized procedure for restructuring the debt of bankrupt sovereigns. Procedures of this type have been periodically debated, but so far been rejected, for two main reasons. First, countries have been reluctant to give up power to supranational rules or institutions, and creditors and debtors have felt that there were sufficient instruments for addressing debt crises at hoc. Second, fears that making debt easier to restructure would raise the costs and reduce the amounts of sovereign borrowing in many countries. This was perceived to be against …
Sovereign Debt Reform And The Best Interest Of Creditors, William W. Bratton, G. Mitu Gulati
Sovereign Debt Reform And The Best Interest Of Creditors, William W. Bratton, G. Mitu Gulati
Faculty Scholarship
In April 2002 the International Monetary Fund introduced a sovereign bankruptcy proposal only to be rebuffed by the United States Treasury. Where the IMF wanted a mandatory bankruptcy regime, the Treasury wanted to solve distress problems with contractual devices. Sovereign bondholders and sovereign issuers themselves flatly rejected both proposals, even though they were nominally the beneficiaries of both proponents. This Article addresses and explains this bondholder reaction. In so doing, it takes a highly skeptical view of the IMF's proposal even as it shows that the incentive structure surrounding sovereign lending renders untenable the Treasury's contractarian proposal. The Article's analysis …