Abstract

http://ssrn.com/abstract=683273
 
 

References (90)



 
 

Citations (6)



 


 



A Normative Theory of Business Bankruptcy


Alan Schwartz


Yale Law School


Virginia Law Review, Forthcoming

Abstract:     
It is widely agreed that capital cost reduction should be among the goals that a business bankruptcy law should pursue. This Essay argues that capital cost reduction should be the only goal, and that a bankruptcy system seriously committed to this goal would be both smaller and less centralized than the current U.S. Bankruptcy Code. In particular, a bankruptcy law that sought to reduce the cost of debt capital to firms would (a) require the trustee or debtor in possession to maximize the value of the insolvent firm rather than the payoffs of general creditors; (b) permit preferences (but continue to bar fraudulent conveyances); (c) permit suppliers and customers to contract for the right to cease dealing with a firm that has become insolvent; (d) not subsidize the use of expert professionals by junior creditors, but sometimes subsidize expert use by seniors; and (e) permit parties in the lending agreement to induce the debtor to use the bankruptcy procedure, either Chapter 7 or Chapter 11, that turns out to be optimal in the state of the world in which insolvency occurred.

Number of Pages in PDF File: 75

Accepted Paper Series





Download This Paper

Date posted: March 11, 2005  

Suggested Citation

Schwartz, Alan, A Normative Theory of Business Bankruptcy. Virginia Law Review, Forthcoming. Available at SSRN: http://ssrn.com/abstract=683273

Contact Information

Alan Schwartz (Contact Author)
Yale Law School ( email )
P.O. Box 208215
New Haven, CT 06520-8215
United States
203-432-4030 (Phone)
203-432-8260 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 3,769
Downloads: 666
Download Rank: 20,898
References:  90
Citations:  6
People who downloaded this paper also downloaded:
1. Separation of Ownership and Control
By Eugene Fama and Michael Jensen

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.485 seconds