Abstract

http://ssrn.com/abstract=2457967
 


 



The Bankruptcy Code's Safe Harbors for Settlement Payments and Securities Contracts: When Is Safe Too Safe?


Charles W. Mooney Jr.


University of Pennsylvania Law School

2014

Texas International Law Journal, Vol. 49, p. 245, 2014
U of Penn, Inst for Law & Econ Research Paper No. 14-25

Abstract:     
This Article addresses insolvency law-related issues in connection with certain financial-markets contracts, such as securities contracts, commodity contracts, forward contracts, repurchase agreements (repos), swaps and other derivatives, and master netting agreements. The Bankruptcy Code provides special treatment — safe harbors — for these contracts (collectively, qualified financial contracts or QFCs). This special treatment is considerably more favorable for nondebtor parties to QFCs than the rules applicable to nondebtor parties to other contracts with a debtor. Yet even some strong critics of the safe harbors concede that some special treatment may be warranted. This Article offers a critique of the safe harbor for settlement payments, as interpreted by the courts, and the safe harbor for transfers in connection with securities contracts that is clearly written into the Bankruptcy Code. It provides an overview of the legislative history, describes the scope and operation of the statutory components of the safe harbors, briefly describes the various academic critiques, and offers my general views on revisions that should be made to the safe harbor provisions. It questions the quite expansive interpretation given by some courts to the safe harbor for settlement payments. It then explains how the safe harbor for transfers made in connection with security contracts could be used to protect from the avoidance powers payments and collateralizations of ordinary debt, transactions that have nothing to do with the QFC markets.

Number of Pages in PDF File: 26

Keywords: Bankruptcy, sovereign debt, international finance, insolvency, credit derivatives, financial crisis, sovereign bonds, qualified financial contracts, QFCs, safe harbor provisions of Bankruptcy Reform Act, misuse of over-expansive safe harbors

JEL Classification: F34, H63, H69, K39

Accepted Paper Series





Download This Paper

Date posted: June 24, 2014  

Suggested Citation

Mooney, Charles W., The Bankruptcy Code's Safe Harbors for Settlement Payments and Securities Contracts: When Is Safe Too Safe? (2014). Texas International Law Journal, Vol. 49, p. 245, 2014; U of Penn, Inst for Law & Econ Research Paper No. 14-25. Available at SSRN: http://ssrn.com/abstract=2457967

Contact Information

Charles W. Mooney Jr. (Contact Author)
University of Pennsylvania Law School ( email )
3501 Sansom Street
Philadelphia, PA 19104
United States
Feedback to SSRN


Paper statistics
Abstract Views: 287
Downloads: 61
Download Rank: 218,746

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.234 seconds