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SECURITY INTERESTS, CREDITOR PRIORITIES, AND BANKRUPTCY

Abstract


The law of creditors’ remedies in developed western economies has a dual character. This title reviews the law and economics literature which addresses four principal issues raised by this duality: First, when individualized remedies are appropriate vs. when collective proceedings are called for; second, should the remedy system be asset-based, or rather should it be based on claimant type; third, what explains the first-in-time and last-in-time priority system and the priority granted to secured creditors under nonbankruptcy law and when should that law be abandoned in favor of ratable sharing priorities; and finally, what explains the existence of corporate reorganization law under which investment contracts are modified ex-post. The review points out that the existing explanations found for the last three questions are all subsets of the answers given to the first question.


Keywords: Creditors’ Remedies, Priorities, Security Interests, Bankruptcy Liquidations, Corporate Reorganization.




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