Involuntary Creditors and Corporate Bankruptcy

21 Pages Posted: 6 Oct 2011 Last revised: 28 Aug 2012

Stephen J. Lubben

Seton Hall University - School of Law

Stephanie Ben-Ishai

Osgoode Hall Law School

Date Written: October 4, 2011

Abstract

In this paper we focus on the concern that a preference for quick sales over traditional reorganization cases - which we see in both the United States and Canada - might allow the debtor’s management to work with secured lenders to extract assets from the debtor in a way that would not be possible in a “normal” bankruptcy case. In particular, we examine how a quick sale can be used to cleanse assets of their association with environmental claims.

We also consider how the insolvency systems in our respective countries might adapt to address this problem. Ultimately, the best protection for involuntary creditors, including environmental creditors, is to maximize the value of the debtor’s assets. That counsels for improving stakeholders’ ability to monitor the sale process and ensure that the sale process in not rushed for the sole benefit of senior creditors.

Keywords: Chapter 11, CCAA, CERCLA, environmental cleanup, involuntary creditors, 363 sales, section 36

Suggested Citation

Lubben, Stephen J. and Ben-Ishai, Stephanie, Involuntary Creditors and Corporate Bankruptcy (October 4, 2011). Seton Hall Public Law Research Paper No. 1938599. Available at SSRN: https://ssrn.com/abstract=1938599 or http://dx.doi.org/10.2139/ssrn.1938599

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)

Stephanie Ben-Ishai

Osgoode Hall Law School ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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