Bankruptcy Law Commons^™

The Chapter 11 Efficiency Fallacy, Diane Lourdes Dick

Faculty Articles

This article challenges the persistent claim that Chapter 11's increasing utilization of market mechanisms will help facilitate economically efficient resolutions of corporate financial distress. Using two recent case studies, this article shows that, in fact, these mechanisms are used by stakeholders with existing market power to take control of the restructuring process and extract rents at the expense of other constituents: creditors, equity holders, and—in the case of companies that receive governmental bailouts—taxpayers. These distortionary effects are obscured by a dominant, neoclassical legal paradigm that ignores institutional and political dynamics. This article advances a new explanatory model that draws upon …

The Unlucky Penny: How $0.01 In Collateral Value Can Limit The Debtor's Ability To Strip Off A Junior Mortgage In A Chapter 7 Bankruptcy Proceeding, Keri Mahoney

Touro Law Review

No abstract provided.

A Capital Market, Corporate Law Approach To Creditor Conduct, Mark J. Roe, Frederico Cenzi Venezze

Michigan Law Review

The problem of creditor conduct in a distressed firm—-for which policymakers ought to have the distressed firm’s economically sensible repositioning as a central goal—-has vexed courts for decades. Because courts have not come to coherent, stable doctrine to regulate creditor behavior and because they do not focus on building doctrinal structures that would facilitate the sensible repositioning of the distressed firm, social costs arise and those costs may be substantial. One can easily see why developing a good rule here has been hard to achieve: A rule that facilitates creditor intervention in the debtor’s operations beyond the creditor’s ordinary collection …

Central Falls Retirees V. Bondholders: Assessing Fear Of Contagion In Chapter 9 Proceedings, Maria O'Brien

Faculty Scholarship

Modern Chapter 9 litigation has been characterized by extraordinary protections for municipal bondholders, and Central Falls is no exception. Although not well understood by politicians, fear of contagion has encouraged the adoption of legal arrangements that have limited the bankruptcy courts’ ability to include bondholders in the cost of restructuring municipal debt. This preference for bondholders (and, by extension, their insurers) has meant increased misery for taxpayers and retirees. Given that all of these actors appear to have been complicit to some degree in the creation and maintenance of the fiscally imprudent conditions that triggered bankruptcy and that evidence of …

Substance Vs. Form: Rethinking The Scope Of Dodd-Frank's End-User Clearing Exception In Light Of Systemic Risk, David Hamid

Cardozo Public Law, Policy & Ethics Journal

No abstract provided.

Breaking Bankruptcy Priority: How Rent-Seeking Upends The Creditors' Bargain, Mark J. Roe, Fred Tung

Faculty Scholarship

Bankruptcy reallocates value in a faltering firm. The bankruptcy apparatus eliminates some claims and alters others, leaving a reduced set of claims to match the firm’s diminished capacity to pay. This restructuring is done according to statutory and agreed-to contractual priorities, so that lower-ranking claims are eliminated first and higher ranking ones are preserved to the extent possible. Bankruptcy scholarship has long conceptualized this reallocation as a hypothetical bargain among creditors: creditors agree in advance that if the firm falters, value will be reallocated according to a fixed set of predetermined rules and contracts. In any given reorganization case, creditors …

Extinction And Creation Of Property Interests Encumbered By Liens – The Strange Legacy Of Farrey V. Sanderfoot, Laura B. Bartell

Law Faculty Research Publications

No abstract provided.

Bankruptcy, James D. Walker Jr., Amber Nickell, Tim Colletti

Mercer Law Review

This Article focuses on bankruptcy opinions issued in 2012 by the courts in the Eleventh Circuit. The topics are varied, ranging from the constitutionality of bankruptcy-specific exemption schemes enacted by the states to the ever-growing body of law arising from the means test.

Adr's Place In Foreclosure: Remedying The Flaws Of A Securitized Housing Market, Lydia Nussbaum

Cardozo Law Review

Millions of Americans lost their homes during the foreclosure crisis, an unprecedented disaster still plaguing local and national economies. A primary factor contributing to the crisis has been the failure of conventional foreclosure procedures to account for the new realities of securitization and the secondary mortgage market, which transformed the traditional borrower-lender relationship. To compensate for the shortcomings of conventional foreclosure procedures and stem the tide of residential foreclosure, state and local governments turned to ADR processes for a solution. Some foreclosure ADR programs, however, have greater potential to avoid foreclosures than others. This Article comprehensively examines the key components …

Capital Structure, Creditor Composition, And Insolvency Law In Japan, Benjamin T. Jones

Washington International Law Journal

This article identifies potential relationships between the methods by which large firms in the business sector are externally financed and creditors’ determinations to resolve business failure through private negotiation or formal insolvency proceedings. Prior to the deregulation of Japan’s capital markets in the 1980s, large firms relied heavily on bank debt as a source of external capital. Consequently, their capital structures and their creditor compositions were relatively homogenous. Japanese banks appeared to primarily resolve the failure of their borrowers through private reorganizations or liquidations rather than court proceedings, and evidence suggests that creditor homogeneity was a favorable condition for the …

Third Time's The Charm: The Coming Impact Of The Restatement (Third) Restitution And Unjust Enrichment In Bankruptcy, C. Scott Pryor

Pepperdine Law Review

Bankruptcy courts have frequently been characterized as courts of equity. Often this characterization has accompanied unusually relaxed interpretation or application of a provision of the Bankruptcy Code. However, this understanding does not exhaust the meaning of equity in bankruptcy. Historically, equity covered a large range of topics–trusts and estates, injunction, contracts, specific performance, unjust enrichment, restitution, and disgorgement. In addition, equity was not limited to particular remedies. Equity’s remedies certainly included money damages but recognized many more. The law of equity was substantive as well as remedial; it recognized primary rights as well as secondary rights of rectification. Among equity's …

Debtor's Defense To A Deficiency Judgment Under Ucc , Gail Clifford Hutton

Pepperdine Law Review

No abstract provided.

Cross-Border Bankruptcy And The Cooperative Solution, Leah Barteld

Brigham Young University International Law & Management Review

No abstract provided.

How Long Is Forever This Time? The Broken Promise Of Bankruptcy Trusts, S. Todd Brown

Journal Articles

Bankruptcy trusts consistently fail to protect the interests of future claimants as contemplated by Section 524(g) of the Bankruptcy Code. Although this reality is generally understood, the extent of this failure has not been examined. And, as demonstrated in this study, the degree to which trusts are failing future victims is greater than commonly realized. More than two-thirds of the trusts that have completed their initial claims processing are paying new asbestos personal injury victims at or near historically low rates, and several others appear to be defunct or inactive. Nearly two-thirds of the trusts that remain active have reduced …

Adjudication Under The Bankruptcy Amendments Of 1984: An Examination Of Congressional Response To The Northern Pipeline Decision, John M. Evans

Journal of the National Association of Administrative Law Judiciary

No abstract provided.

A Skeptic’S Case For Sovereign Bankruptcy, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

This essay describes fundamental flaws in the sovereign debt restructuring regime, but questions the prevailing arguments for sovereign bankruptcy. The author concludes that efficient debt outcomes may well come about without bankruptcy, but that a statutory regime is necessary to achieve sovereign autonomy and political legitimacy.

Force Out: A Dodgers Bankruptcy, Richard Marrero, Cj Fayton

Chapter 11 Bankruptcy Case Studies

The premise of a chapter 11 bankruptcy is that the business’ going concern value exceeds its liquidation value. It provides the debtor with an opportunity to restructure their debt so that they can pay back their creditors and stay in business.

The debtor’s filing of the bankruptcy petition creates an “automatic stay.”[1] The automatic stay is an injunction that prevents creditors from pursuing legal actions against the debtor and its assets. The automatic stay, however, protects not only the debtor but the creditors as well. In the absence of the automatic stay, creditors would “race to the courthouse” to …

In Re Dewey Ranch Hockey, Llc: The Bankruptcy Of The Phoenix Coyotes, Chris Rowe, Jeff Upshaw

Chapter 11 Bankruptcy Case Studies

While only a small percentage of Chapter 11 bankruptcy filings garner the attention of the American public, a bankruptcy petition involving a “big four” professional sports franchise (NFL, MLB, NBA, NHL) is big news to the American sports world. Perhaps the reason is that few, if any, commercial entities make such a passionate connection with its customers as professional sports teams.

In comparison to the other members of the “big four”, the NHL simply does not have the same level of financial success. Almost half of the 30 NHL franchises lost money in the 2011-2012 season.^[1] Of the nine …

In Re Thq Inc. "Game Over", Henry Ned Hildebrand, Carlo Julio Salas, Taylor K. Wirth

Chapter 11 Bankruptcy Case Studies

(From Introduction)

Videogames have come a long way since PONG for Atari was introduced in 1972. The industry has advanced from simplistic 8-bit geometric shapes descending from players’ screens (Tetris) and a side-scrolling, overall-clad plumber saving a princess in a faraway land (Super Mario Bros.). Today, the global videogame industry is a $67 billion enterprise, consisting of hardware (gaming consoles like Nintendo and Playstation), software (the actual videogames themselves), and secondary markets (online games, mobile phones, and other devices). The major players in this enterprise are few—the “AAA” game developers. In the videogame industry, …

Circuit City's Chapter 11 Bankruptcy, Jeff Smith, Peyton Hairston

Chapter 11 Bankruptcy Case Studies

Circuit City Stores, Inc. sold consumer electronics, personal computers, entertainment software, and appliances in the growing consumer electronics market.[1] Circuit City was founded by Samuel S. Wurtzel in 1949 under the name Wards Company. The store named “Wards” was an acronym of Wurtzel’s family name’s: “W” for Wurtzel, “A” for his son Alan, “R” for his wife Ruth, “D” for his son David, and “S” for his own name.[2] Circuit City was the first electronics superstore and was the nation’s second largest retailer of consumer electronics as recently as 2004.[3] Circuit City began the superstore concept for …