Abstract

http://ssrn.com/abstract=905906
 
 

Footnotes (157)



 


 



The Limits of Enron: Counterparty Risk in Bankruptcy Claims Trading


Adam J. Levitin


Georgetown University Law Center


Journal of Bankruptcy Law and Practice, Vol. 15, pp. 389-429, 2006

Abstract:     
Creditors have long understood that any claims they submit for repayment in a bankruptcy might be valid, but subject to subordination in the order of payment of the bankruptcy estate's limited funds if the creditor behaved inequitably as the debtor failed. Enron's on-going bankruptcy raised many instances of inequitable conduct, but a recent opinion by the bankruptcy court expands the practice of equitable subordination far beyond its traditional reach. According to the court, buyers of bankruptcy claims are now subject to subordination, not just for their own conduct, but also for conduct of previous owners of the claims, regardless of whether the conduct was connected to the claims.

In a world of active bankruptcy claims trading, Enron raises powerful policy questions that may affect both the doctrinal development of bankruptcy law and the survival of a market that has provided liquidity for creditors with claims against bankrupt debtors. This article argues that Enron was based on questionable legal authority and that it does not present the best policy solution for redressing the problems of inequitable behavior by creditors.

Number of Pages in PDF File: 41

Keywords: Enron, equitable subordination, bankruptcy claims, good faith, creditor, transferee, assignment, counterparty risk, liquidity, distressed debt, vulture funds, loan syndication, credit default swap, bankruptcy, remedy, nemo dat, Refco, short and distort, market manipulation

JEL Classification: G33, K10, K11, K12, K22, K29, K39, K41

Accepted Paper Series





Download This Paper

Date posted: June 6, 2006  

Suggested Citation

Levitin, Adam J., The Limits of Enron: Counterparty Risk in Bankruptcy Claims Trading. Journal of Bankruptcy Law and Practice, Vol. 15, pp. 389-429, 2006. Available at SSRN: http://ssrn.com/abstract=905906

Contact Information

Adam J. Levitin (Contact Author)
Georgetown University Law Center ( email )
600 New Jersey Avenue, NW
Washington, DC 20001
United States
Feedback to SSRN


Paper statistics
Abstract Views: 2,865
Downloads: 520
Download Rank: 29,461
Footnotes:  157

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.312 seconds