The Uneasy Case for the Priority of Secured Claims in Bankruptcy: Further Thoughts and a Reply to Critics

Abstract

In an earlier article, "The Uneasy Case for the Priority of Secured Claims in Bankruptcy" 105 Yale Law Journal 857 (1996), we suggested that the case for a full priority of secured claims in bankruptcy is an uneasy one. In this paper, we address various reactions and objections to our analysis that have been offered by subsequent work. We also further develop some of the main elements of the analysis in our earlier article with respect to both our analysis of the comparative merits of full and partial priority and our analysis of how a partial priority regime could be implemented. The analysis confirms our earlier conclusion that the case for a full priority of secured claims in bankruptcy is an uneasy one.

Keywords: Secured debt, bankruptcy, reorganization, chapter 11, priority, creditors, debtors, security interests, collateral, unsecured debt, lenders, borrowers

JEL Classification: G33, K22