Open Access. Powered by Scholars. Published by Universities.®

Law Commons

Open Access. Powered by Scholars. Published by Universities.®

Series

Columbia Law School

Bankruptcy Law

Bankruptcy

2020

Articles 1 - 2 of 2

Full-Text Articles in Law

Bankruptcy’S Role In The Covid-19 Crisis, Edward R. Morrison, Andrea C. Saavedra Jan 2020

Bankruptcy’S Role In The Covid-19 Crisis, Edward R. Morrison, Andrea C. Saavedra

Faculty Scholarship

Policymakers have minimized the role of bankruptcy law in mitigating the financial fallout from COVID-19. Scholars too are unsure about the merits of bankruptcy, especially Chapter 11, in resolving business distress. We argue that Chapter 11 complements current stimulus policies for large corporations, such as the airlines, and that Treasury should consider making it a precondition for receiving government-backed financing. Chapter 11 offers a flexible, speedy, and crisis-tested tool for preserving businesses, financing them with government funds (if necessary), and ensuring that the costs of distress are borne primarily by investors, not taxpayers. Chapter 11 saves businesses and employment, not ...


Restructuring Vs. Bankruptcy, Jason Roderick Donaldson, Edward R. Morrison, Giorgia Piacentino, Xiaobo Yu Jan 2020

Restructuring Vs. Bankruptcy, Jason Roderick Donaldson, Edward R. Morrison, Giorgia Piacentino, Xiaobo Yu

Faculty Scholarship

We develop a model of a firm in financial distress. Distress can be mitigated by filing for bankruptcy, which is costly, or preempted by restructuring, which is impeded by a collective action problem. We find that bankruptcy and restructuring are complements, not substitutes: Reducing bankruptcy costs facilitates restructuring, rather than crowding it out. And so does making bankruptcy more debtor-friendly, under a condition that seems likely to hold now in the United States. The model gives new perspectives on current relief policies (e.g., subsidized loans to firms in bankruptcy) and on long-standing legal debates (e.g., the efficiency of ...