Posted: 6 Jun 1997
Date Written: March 1997
This Comment argues for free bargaining in bankruptcy reorganizations and the enforcement of waivers of Chapter 11. Bankruptcy opt-outs would permit the parties to adopt risk- sharing strategies denied them by Chapter 11. This would correct a misincentive problem identified by Alan Schwartz, and would do so more effectively than Schwartz claims. More importantly, bankruptcy opt-outs would permit the parties to transfer control of the firm to creditors on default. Governance strategies of this kind police management misbehavior more effectively than the risk-sharing theories proposed by Schwartz and others.
JEL Classification: G33, K12
Suggested Citation: Suggested Citation
Buckley, F. H., Free Contracting in Bankruptcy (March 1997). Available at SSRN: https://ssrn.com/abstract=10458