Law Review: Baird, Douglas- Bankruptcy Minimalism

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Abstract:

Bankruptcy exceptionalism, which was called into serious question by the Supreme Court in Harrington v. Purdue Pharma L.P., pushed the outer parameters of the remedial elasticity of the Bankruptcy Code. In this essay from Professor Douglas G. Baird, by contrast, examines the founding conceptions of the laws of corporate reorganizations rooted in Butner v. United States, which focused on not altering state law rights except to the extent necessary to resolve creditors’ collective action problems. In doing so, he explores the challenges that the minimalist account of corporate reorganizations must confront to be effective and balanced. 

Commentary:

Against my recurring gripe that corporate bankruptcy law review articles should pay some attention to consumer bankruptcy law,  here is Footnote 4 from Prof.  Baird in its entirety:

"Of course, the law governing individual bankruptcy is cut from an altogether different cloth. The honest, but unfortunate debtor is entitled to a fresh start, and this requires dramatic changes in nonbankruptcy rights. Individual bankruptcy is not and cannot be minimalist. Its origins and its rationale are utterly different. Indeed, it is an unhappy accident that individual bankruptcy and corporate reorganization law are fused together, as it leads many to assume that policies designed for one type of debtor are suitable for the other. Debt is “discharged” in both kinds of cases, but the discharge of corporate debtors is not about helping flesh-and-blood individuals. It is merely part of the mechanism that allows dispersed investors to create a new and more sensible capital structure. There is no reason to think that the exchange of one investment instrument for another should have much in common with giving a flesh-and-blood individual a fresh start. Given the distinct (and radically different) purposes each sort of “discharge” serves, there is no need to treat them the same. Indeed, it would seem most unlikely that they should be the same." 

So while conjoined in the same Title of the U.S. Code,  corporate and consumer bankruptcy do benefit in many ways from being mindful of developments in each sphere,  this point that   the purposes of each are radically different  is just as important to recognize.

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