The
Uneasy Case for the Priority of Secured Claims in Bankruptcy: Further
Thoughts and a Reply to Critics
82 CORNELL
L. REV. 1279 (1997) (with L. Bebchuk)
Abstract
A
longstanding and basic principle of U.S. bankruptcy law is that a secured
creditor is entitled to receive the entire amount of its secured claim
-- the portion of its bankruptcy claim that is backed by collateral
-- before any unsecured claims are paid. In a 1996 article published
in the Yale Law Journal, we presented a detailed analysis of the economic
costs that arise from according full priority to secured claims in bankruptcy.
One of the main contributions of the paper was to show that full priority
could give rise to inefficient contracting between a borrower and its
creditors, even in a world where all of the borrower's creditors are
voluntary and sophisticated. Our analysis received some attention, much
of it critical. This paper further developed the arguments we made in
the Yale Law Journal article and responded to the criticisms that had
been directed against it.
Paper
(pdf 10, 053 KB)
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