wordpress-themes.org wordpress themes wordpress themes

SECURED CLAIMS IN BANKRUPTCY: Considering the Issue of Priority with an Open Mind

The second important implication of the fact that we are living in a partial priority world is that those who would criticize our analysis by pointing to evidence that the existing system works perfectly well would in fact support our claim that partial priority is likely to be superior to full priority. The question, however, is whether it would work even better with a change in the degree of priority accorded to secured claims in bankruptcy (and in the way in which the priority system is implemented). That is, if currently secured creditors receive, on average, 90% of the value of their collateral, would we be better off under a regime under which that percentage is lower (e.g., 80%) or even higher (e.g., 100%—full priority)? And if some degree of partial priority is desirable, should we implement it in the current ad hoc manner, or should there be, as there is in a growing number of other countries,43 a formal rule of partial priority?


E. Considering the Issue of Priority with an Open Mind

In the previous sections, we have tried to show that the principle of full priority is not required by fundamental principles of contract or property law, is actually inconsistent with important principles of insolvency law, and therefore is not logically, legally, morally, or otherwise compelling. We have also explained that, as a practical matter, we are not living under a regime of full priority, but rather under one of partial priority, which means that adoption of a formal partial priority rule would not necessarily entail a radical change. In short, one should approach the question of whether we should have a rule of partial priority with an open mind.

This post was written by , posted on July 13, 2014 Sunday at 3:33 pm