‘Bankruptcy’s Uneasy Shift to a Contract Paradigm’

“The most dramatic development in twenty-first century bankruptcy practice has been the increasing use of contracts to shape the bankruptcy process. In our article, we assess – and try to make sense of – this striking shift in large scale reorganization practice. Because the antecedents of the new contract paradigm seem to lie in the 1978 Bankruptcy Code itself, we begin by exploring the structure of Chapter 1. Although the Bankruptcy Code has long been viewed as mandatory, its voting and cramdown rules, among others, invite considerable contracting. The emerging paradigm is asymmetric, however. While the Code and bankruptcy practice allow for ex post contracting (after the onset of distress or default), ex ante contracts (around the time of investment or credit extension) are viewed with suspicion …” (more)

[David Skeel and George Triantis, Oxford Business Law Blog, 13 March]

Leave a Reply