wordpress-themes.org wordpress themes wordpress themes

SECURED CLAIMS IN BANKRUPTCY: Some Preliminary Points

kamen
The Availability of Secured Credit Under Partial Priority

One argument against partial priority is that certain lenders will not lend at any interest rate unless they have full priority in the collateral that is subject to the security interest. The evidence adduced in support of this claim is that currently there are lenders that will not lend unless they receive a security interest. Supporters of full priority argue that under partial priority these lenders simply will not lend money to borrowers at any interest rate and, therefore, that partial priority will reduce the amount of credit these lenders extend. (Presumably, those who make this argument would also claim that under partial priority, unsecured creditors would not be more willing to supply credit, so that the total supply of credit would be reduced.)
Let us assume, arguendo, that currently, certain lenders will not lend without getting a security interest. Even if this assertion were true, it certainly does not prove that these lenders will not lend under a rule of partial priority. After all, these lenders are currently operating under a system of de facto partial priority. The assertion proves only that under the current rule of partial priority, certain lenders require a security interest. http://cash-loans-for-you.com/

The question, then, is whether reducing the degree of priority in bankruptcy will cause these lenders not to lend. This, in turn, will depend on why these lenders will not lend without a security interest (again, assuming, arguendo, that these lenders would in fact not lend without a security interest). For our purposes, there are two possible reasons why certain lenders currently will not lend without a security interest: (1) because the security interest gives the lender priority over the claims of unsecured creditors in bankruptcy or (2) because the security interest gives the lender priority-independent rights (for example, priority over the claims of transferees or subsequent secured creditors) that are unrelated to the lender’s priority in bankruptcy over the claims of unsecured creditors.

This post was written by , posted on January 27, 2015 Tuesday at 4:39 pm