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Protection for Whom? Creditor Conflicts in Bankruptcy

Author

Listed:
  • Longhofer, S.D.
  • Peters, S.R.

Abstract

In this article we provide a rationale for bankruptcy law that is based on the conflicts among creditors that occur when a debtor's iabilities exceed its assets. In the absence of a bankruptcy law, the private debt-collection remedies that creditors pursue when a debtor is insolvent result in an ad hoc disposal of the debtor's assets, thereby reducing the aggregate value of creditors' claim. We show that coordination clauses can be used by creditors in their loan agreements that will result in coordination, ex post.

Suggested Citation

  • Longhofer, S.D. & Peters, S.R., 1999. "Protection for Whom? Creditor Conflicts in Bankruptcy," Papers 9909, London School of Economics - Centre for Labour Economics.
    • Handle: RePEc:fth:lseple:9909
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    More about this item

    Keywords

    BUSINESS FINANCING ; BANKRUPTCY ; CREDIT;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)

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