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Derivatives and Bankruptcy: The Flawed Case for Special Treatment


Stephen J. Lubben


Seton Hall University - School of Law

September 8, 2008

Seton Hall Public Law Research Paper No. 1265070
U. Pa. J. Bus. Law, Vol. 12, No. 1, p. 61, 2009

Abstract:     
The putative scourge of "cherry picking" provides the foundation for the Bankruptcy Code's special treatment of derivative contracts, which are not subject to the automatic stay or the Code's normal rules prohibiting termination solely as a result of one party's bankruptcy filing. Alternatively, some argue that the special treatment of derivatives is justified because "derivatives contracts are generally not firm-specific assets and therefore giving them special treatment will increase economic efficiency." In this paper I argue that neither argument is very convincing, and that derivative contracts should be subject to the general rules of bankruptcy in most cases.

Number of Pages in PDF File: 19

Keywords: Chapter 11, derivatives, safe harbor, CDS, Lehman, bankruptcy

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Date posted: September 10, 2008 ; Last revised: March 3, 2010

Suggested Citation

Lubben, Stephen J., Derivatives and Bankruptcy: The Flawed Case for Special Treatment (September 8, 2008). Seton Hall Public Law Research Paper No. 1265070. Available at SSRN: http://ssrn.com/abstract=1265070 or http://dx.doi.org/10.2139/ssrn.1265070

Contact Information

Stephen J. Lubben (Contact Author)
Seton Hall University - School of Law ( email )
One Newark Center
Newark, NJ 07102-5210
United States
973-642-8857 (Phone)
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