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The (Il)Legitimacy Of Bankruptcies For The Benefit Of Secured Creditors, Charles W. Mooney Jr.
The (Il)Legitimacy Of Bankruptcies For The Benefit Of Secured Creditors, Charles W. Mooney Jr.
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This paper explores the legitimacy—or illegitimacy—of filing and maintaining a case under the Bankruptcy Code when the sole or principal beneficiary or beneficiaries of the case would be a secured creditor or secured creditors. In the situation posited here, the application of the usual distributional priority rules would not produce any distribution for the general, unsecured creditors of the debtor. In the prototypical case virtually all of the assets of the debtor would be subject to secured claims securing obligations that exceed the value of the collateral, i.e., the secured creditor would be undersecured and there would be no equity …
Bankruptcy Or Bailouts?, Kenneth M. Ayotte, David A. Skeel Jr.
Bankruptcy Or Bailouts?, Kenneth M. Ayotte, David A. Skeel Jr.
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The usual reaction if one mentions bankruptcy as a mechanism for addressing a financial institution’s default is incredulity. Those who favor the rescue of troubled financial institutions, and even those who prefer that their assets be promptly sold to a healthier institution, treat bankruptcy as anathema. Everyone seems to agree that nothing good can come from bankruptcy. Indeed, the Chapter 11 filing by Lehman Brothers has been singled out by many the primary cause of the severe economic and financial contraction that followed, and proof that bankruptcy is disorderly and ineffective. As a result, ad-hoc rescue lending to avoid bankruptcy …