Bankruptcy Law Commons^™

Confirmation And Claims Trading, Frederick Tung

Faculty Scholarship

The buying and selling of claims against companies in financial distress is not a new phenomenon. In times of financial distress, liquidity has always commanded a profit. However, the late 1980s and early 1990s saw the first significant trading of claims under Chapter 11 of the Bankruptcy Code, our relatively new and novel system of corporate reorganization. Traditionally scorned by the financial establishment, distress investment came into vogue with the "megabankruptcies" that followed in the wake of the leveraged buyout boom of the 1980s. With its prospects for huge profits, claims trading in Chapter 11 became a Wall Street staple. …

Chapter 11 Case Management And Delay Reduction: An Empirical Study, Samuel Bufford

Faculty Scholarship

Chapter 11 bankruptcy cases will drag on interminably if judges let them. The recent nine-month O.J. Simpson trial was short compared to the careers of some chapter 11 bankruptcy cases. The typical duration of chapter 11 cases can be reduced remarkably, however, through moderate judicial case management.

The data in this study show that relatively modest judicial case management can squeeze a substantial amount of delay out of chapter 11 cases within the context of the present bankruptcy law. The case management program in this study, applied to 81.2% of the chapter 11 case load, shortened by 24.1% the time …

Bankruptcy Law In European Countries Emerging From Communism: The Special Legal And Economic Challenges, Samuel Bufford

Faculty Scholarship

Bankruptcy law is developing rapidly in the countries of Central and Eastern Europe (CEE) that have recently escaped the domination of the Union of Soviet Socialist Republics (USSR). The communist governments fell in those countries that were separate from the USSR in 1989, and those countries that were a part of the USSR gained their independence and acquired new non-communist governments in 1989 (the Baltic states) and 1991 (Ukraine, Belarus, Moldova, and Russia). While many other areas of law that are basic to the development of a market economy need substantial development or revision, bankruptcy law is leading the way, …

The Fdic's Fraudulent Conveyance Power Under The Crime Control Act Of 1990: Bank Insolvency Law And The Politics Of The Iron Triangle, Edward J. Janger

Faculty Scholarship

No abstract provided.

The Denial Of Future Tort Claims In In Re Piper Aircraft: Will The Court's Quick-Fix Solution Keep The Debtor Flying High Or Bring It Crashing Down?, Michelle M. Harner

Faculty Scholarship

No abstract provided.

Bankruptcy And The Entitlements Of The Government: Whose Money Is It Anyway?, Ronald J. Mann

Faculty Scholarship

A debate between two groups of scholars has dominated bankruptcy scholarship for the past decade. The first group, often referred to as the creditors' bargain theorists, argues that creditors' agreements with debtors create entitlements to payment the proper role of the bankruptcy system, therefore should be to benefit creditors by enforcing rules to which creditors would have agreed before bankruptcy. The second group of scholars contends that the goals of the bankruptcy system should not be limited to the interests of creditors. Instead, they maintain that the bankruptcy system, as a part of our country's wider system of social protection, …

What Is Right About Bankruptcy Law And Wrong About Its Critics, Samuel Bufford

Faculty Scholarship

My comments in this paper focus on the papers in thus Symposium by Professors Barry Adler, James Bowers, and Philippe Aghion, Oliver Hart, and John Moore. I argue that the central points of these papers are gravely mistaken because they completely misunderstand the character of the bankruptcy caseload and procedures, they ignore some important purposes of bankruptcy reorganization, and they misstate the success rate for reorganizations. I have chosen these papers for comment for two reasons: they recommend radical changes in bankruptcy law, and they are based on the thinnest knowledge of bankruptcy practice. Incidentally, they also all take an …

Hail Britannia?: Institutional Investor Behavior Under Limited Regulation, John C. Coffee Jr., Bernard S. Black

Faculty Scholarship

A central puzzle in understanding the governance of large American public firms is why most institutional shareholders are passive. Why would they rather sell than fight? Until recently, the Berle-Means paradigm – the belief that separation of ownership and control naturally characterizes the modern corporation – reigned supreme. Shareholder passivity was seen as an inevitable result of the scale of modern industrial enterprise and of the collective action problems that face shareholders, each of whom owns only a small fraction of a large firm's shares.

A paradigm shift may be in the making, however. Rival hypotheses have recently been offered …

Bondholder Coercion: The Problem Of Constrained Choice In Debt Tender Offers And Recapitalizations, John C. Coffee Jr., William A. Klein

Faculty Scholarship

The past decade saw the flourishing of risky, high-yield corporate debt, often called "junk" bonds. Too many companies took on too much debt, and the chickens are now coming home to roost as these bonds have begun to default with increasing frequency.The magnitude of the problem is potentially enormous; by one estimate, $318 billion of debt has either defaulted already or trades at yields indicating the market's skepticism that it will be repaid on maturity.

Facing the prospect of default, corporate issuers are seeking to restructure or recapitalize their financial structures at a correspondingly increased pace. The market force driving …

What Can Be Done About Stock Market Volatility, Tamar Frankel

Faculty Scholarship

Volatility is as old as the financial markets. The bull market of 1986 and the crash that followed in 1987 were but the latest of periodic market gyrations that started with the South Sea Bubble and the Lombard Street run on commercial paper and have continued ever since.' Volatility in the financial markets would not be very important if market activity simply mirrored economic activity. Volatility would be much less important if the markets moved independently of the economy. But if we believe, as I do, that the markets and the economy are interdependent, and that their volatility is generally …

On The Nature Of Bankruptcy: An Essay Of Bankruptcy Sharing And The Creditor's Bargain, Thomas H. Jackson, Robert E. Scott

Faculty Scholarship

Finance theorists have long recognized that bankruptcy is a key component in any general theory of the capital structure of business entities. Legal theorists have been similarly sensitive to the substantial allocational and distributional effects of the bankruptcy law. Nevertheless, until recently, underlying justifications for the bankruptcy process have not been widely studied. Bankruptcy scholars have been content to recite, without critical analysis, the two normative objectives of bankruptcy: rehabilitation of overburdened debtors and equality of treatment for creditors and other claimants.

The developing academic interest in legal theory has spurred a corresponding interest in expanding the theoretical foundations of …

Sharing The Risks Of Bankruptcy: Timbers, Ahlers, And Beyond, Robert E. Scott

Faculty Scholarship

Bankruptcy policy appears to be in disarray. Recent decisions by the United States Supreme Court have only served to reinforce the uncertainties that mar the bankruptcy process. In United Savings Association of Texas v. Timbers of Inwood Forest Associates, Ltd., the Court held that an undersecured creditor was not entitled to interest on its collateral as compensation for the opportunity costs of delay caused by the bankruptcy process. Timbers thus supports the argument that secured creditors should be forced to share the burdens of bankruptcy with other claimants. Conversely, in Norwest Bank Worthington v. Ahlers, the Court held …

The Inconsistent Treatment Of Secured Tax Claims In Liquidation And Reorganization Proceedings Under The Bankruptcy Code, Steven B. Levine

Faculty Scholarship

There is general inconsistency and tension regarding the treatment of secured tax claims under the Bankruptcy Code. In order to resolve the ambiguity and tension in the Code, tax claims for the same periods should be treated alike regardless of whether one taxing authority has filed a notice of lien in the appropriate public records office or whether such claims are asserted in a reorganization or liquidation proceeding. Some of the rights and priorities associated with tax liens outside of bankruptcy must be limited so as not to harm 2 basic goals of the reorganization process. These are: 1. equitable …

The Election Of Directors And Chapter 11--The Second Circuit Tells Stockholders To Walk Softly And Carry A Big Lever, Michael A. Gerber

Faculty Scholarship

No abstract provided.

(Part 2) Chapter 7 Cases: Do Erisa And The Bankruptcy Code Conflict As To Whether A Debtor's Interest In Or Rights Under A Qualified Plan Can Be Used To Pay Claims, Donna Litman

Faculty Scholarship

No abstract provided.

(Part 1) Chapter 7 Cases: Do Erisa And The Bankruptcy Code Conflict As To Whether A Debtor's Interest In Or Rights Under A Qualified Plan Can Be Used To Pay Claims, Donna Litman

Faculty Scholarship

No abstract provided.

Basics Of Business Reorganization In Bankruptcy, Steven L. Schwarcz

Faculty Scholarship

In this article, Steven Schwarcz offers an overview of Chapter 11 bankruptcy. In addition to beginning a Chapter 11 case, he also discusses administration of these cases and the plan of reorganization that a debtor must consider.

Through Bankruptcy With The Creditors' Bargain Heuristic, Robert E. Scott

Faculty Scholarship

It is a commonplace, but nonetheless true: the study of bankruptcy has attained a new respectability in American law schools. After years of modest enrollments and few genuine scholarly contributions, bankruptcy courses are now fully subscribed and many young academics are turning their attention to the technical complexities and conceptual underpinnings of modern bankruptcy law. A number of factors contribute to this new-found glamour. Most obviously, the enactment of the new Bankruptcy Code has fueled scholarly interest in reporting its modifications and changes and in exploring its theoretical unity. Simultaneously, there has been increasing resort to the bankruptcy process to …

"Value" Judgments: Accounts Receivable Financing And Voidable Preference Under The New Bankruptcy Code, Neil B. Cohen

Faculty Scholarship

No abstract provided.

Nonjudicial Foreclosure Under Deed Of Trust May Be A Fraudulent Transfer Of Bankrupt's Property: Durrett V. Washington National Insurance Co., Franklin G. Snyder

Faculty Scholarship

In theory, the substantive rights of secured creditors such as mortgagees are affected much less by bankruptcy proceedings than those of unsecured creditors. In practice, however, bankruptcy proceedings have affected mortgagees. Filing a bankruptcy petition automatically stays pending foreclosures. Trustees in bankruptcy also can set aside foreclosures of certain liens obtained by unsecured creditors and certain mortgages and deeds of trust executed in the year preceding bankruptcy. The decision in Durrett adds yet another weapon to the bankruptcy trustee's arsenal: the power to void nonjudicial foreclosure sales even though the sale is proper and final under state law.

State Taxation Of Bankruptcy Liquidations: Federalism Misconceived, Neil S. Hecht

Faculty Scholarship

ONCE viewed as immune property within the custody of the federal sovereign, a bankrupt's estate is now generally subject to the same state and local taxes as are the property and activities of an individual. Judicial recognition that government services subsidized by state property taxes were ratably extended to property in the hands of the bankruptcy trustee engendered the initial inroad on this immunity. Subsequent federal legislation relegates agents or officers conducting businesses by authority of United States courts to the status of private parties for purposes of taxation. However, some courts have denied the imposition of state and local …

Section 4 Of The Bankruptcy Act: The Excluded Corporations, Michael I. Sovern

Faculty Scholarship

Section 4 of the Bankruptcy Act excludes from both voluntary and involuntary bankruptcy municipal, railroad, insurance and banking corporations and building and loan associations, and excludes from involuntary bankruptcy corporations that are not "moneyed, business or commercial." The exclusion of railroad and municipal corporations lost much of its significance when special reorganization provisions were enacted for those corporations. Insurance and banking corporations and building and loan associations, on the other hand, are excluded from the Bankruptcy Act's corporate reorganization chapters as well as from straight bankruptcy; and creditors can no more compel a corporation that is not moneyed, business or …