A fundamental question for corporate bankruptcy law is why it exists in the first place. Why are there special rules that apply only in financial distress? The conventional law-and-economics answer—known as the Creditors’ Bargain Theory—identifies two core purposes of bankruptcy law: recreating a hypothetical ex ante bargain and respecting creditors’ nonbankruptcy entitlements.
This Article challenges...
Bankruptcy judges consider both value to creditors and harm to employees in deciding whether to liquidate or reorganize firms. This Article proposes to systematize what is currently an ad hoc trade-off by making bankruptcy law explicitly counter-cyclical—that is, placing more weight on preserving employment during times of high unemployment. Although the suggestion that bankruptcy law should consider employment effects runs counter to decades...
Bankruptcy scholarship is largely a debate about the comparativemerits of a mandatory regime on one hand and bankruptcy by free design on the other. By the standard account, the current law of corporate reorganization is mandatory. Various rules that cannot be avoided ensure that investors’ actions are limited and they do not exercise their rights against specialized assets in a way that destroys the value of a business as a whole. These...
Whether a right to payment is a “claim” is one of the most important determinations in bankruptcy because only “claims” are subject to the bankruptcy process, including the all-important automatic stay and discharge provisions. The Bankruptcy Code (“Code”) provides a definition of claim in § 101(5), but courts have differed greatly in what “rights to payment” are covered by that definition. For twenty-six years, the Third...