Abstract

http://ssrn.com/abstract=1065501
 


 



Adversary Proceedings in Bankruptcy: A Sideshow


Douglas G. Baird


University of Chicago Law School

Edward R. Morrison


University of Chicago - Law School


American Bankruptcy Law Journal, Vol. 79, p. 951, 2005
Columbia Law and Economics Working Paper No. 325

Abstract:     
Recent scholarship emphasizes the increasing rarity of trials (adversary proceedings) in bankruptcy cases. We assess the importance of this pattern using data from the Northern District of Illinois. Adversaries are indeed rare - they are absent from the vast majority of bankruptcy cases - but their rarity tells us little that is meaningful about the bankruptcy process. They tend to be clustered in a tiny number of cases (one percent of bankruptcy cases account for over fifty percent of adversaries). They also focus on a narrow range of issues (objections to discharge in consumer cases; recovery of preferential transfers in business cases). Little has changed since the early 1990s. Although we see a decline in the rate with which adversaries are filed (from six percent of bankruptcy cases in 1993 to about three percent in the late 1990s), the baseline rate was already very low. The decline only tells us that a rare event has become rarer. One temporal change, however, is noteworthy: the average duration of adversaries fell from ten months to 7.5 between 1993 and 2002. This is consistent with recent evidence on the speediness of today's Chapter 11 process. These patterns tell us two things about the bankruptcy process. First, in consumer cases, the persistent rarity of adversaries, even when consumer filings surged during the late 1990s, casts doubt on claims that bankruptcy abuse was prevalent during the late 1990s and early 2000s. If abuse were becoming more prevalent, we should have seen more frequent use of adversaries to contest a debtor's discharge. Second, in corporate cases, adversary proceedings generally address issues, such as preferential transfers, that are orthogonal to the primary concern of Chapter 11 - rehabilitation of the debtor's business. Moreover, when adversaries are brought to attack preferential transfers, the proceedings are often commenced after the court has confirmed a plan of reorganization.

Number of Pages in PDF File: 22

Keywords: Bankruptcy, trials, adversary proceedings, empirical

JEL Classification: K29, K41

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Date posted: January 25, 2008  

Suggested Citation

Baird, Douglas G. and Morrison, Edward R., Adversary Proceedings in Bankruptcy: A Sideshow. American Bankruptcy Law Journal, Vol. 79, p. 951, 2005; Columbia Law and Economics Working Paper No. 325. Available at SSRN: http://ssrn.com/abstract=1065501

Contact Information

Douglas G. Baird
University of Chicago Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
773-702-9571 (Phone)
773-702-0730 (Fax)
Edward R. Morrison (Contact Author)
University of Chicago - Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
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