Protection for Whom?

6 Pages Posted: 14 Jan 2006  

Stanley D. Longhofer

Wichita State University - W. Frank Barton School of Business

Stephen R. Peters

Kansas State University - Department of Finance

Abstract

Once a debtor becomes financially distressed, conflict among creditors can occur, leading to an inefficient liquidation of the debtor. We argue that bankruptcy law is intended to protect creditors from one another. In the absence of a bankruptcy system, creditors generally find individual debt-collection remedies privately optimal, even though a coordinated liquidation would increase the total value of the firm's assets that could be distributed to the creditors as a group.

Keywords: bankruptcy, bankruptcy law, bankruptcy system, creditor, debtor, debt-collection, liquidation

JEL Classification: G3, G33

Suggested Citation

Longhofer, Stanley D. and Peters, Stephen R., Protection for Whom?. Regulation, Vol. 28, No. 4, pp. 20-25, Winter 2005. Available at SSRN: https://ssrn.com/abstract=875362

Stanley D. Longhofer (Contact Author)

Wichita State University - W. Frank Barton School of Business ( email )

1845 N. Fairmount
Wichita, KS 67260
United States
316-978-7120 (Phone)
316-978-3263 (Fax)

HOME PAGE: http://webs.wichita.edu/longhofer

Stephen R. Peters

Kansas State University - Department of Finance ( email )

Manhattan, KS 66506
United States

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