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Bankruptcy’S Corporate Tax Loophole, Diane Lourdes Dick

Faculty Articles

Imagine you are a company with a failing business that is drowning in debt. On the bright side, you also possess a very valuable asset. This asset is unique because, unlike most assets, if you liquidate the business through a Chapter 7 bankruptcy, it will be extinguished and its value will not be realized by any shareholders or creditors. On the other hand, even if you substantially liquidate the business using Chapter 11, you can, thanks to an extraordinary ambiguity in the law, preserve this valuable asset. Even better, you can direct the value of this asset to your preferred …