In the United States, few failing businesses invoke the Bankruptcy Code to reorganize or liquidate. Most use non-bankruptcy procedures to accomplish the same purposes. These procedures include voluntary agreements between the debtor and its creditors (workouts) and formal devices such as...

This empirical study suggests that, far from ensuring assets are put to their best use, Chapter 11 encourages small-business entrepreneurs to remain too long with failed businesses before trying to start (or work for) new ones. Small entrepreneurs open and close a number of businesses over the...

The reforms of 2005 yield important but subtle changes in the Bankruptcy Code's treatment of financial contracts. They might appear only to eliminate longstanding uncertainty surrounding the protections available to financial contract counterparties, especially counterparties to repurchase...

The Supreme Court's decision in Timbers of Inwood Forest occupies an unhappy position in bankruptcy case law. It is often remembered as a troubled interpretation of the Code, denying undersecured creditors compensation for an important source of depreciation - depreciation in the real value of a...

Prior scholarship points to valuation disputes and valuation error as key drivers of Chapter 11 outcomes. Avoiding valuation disputes and errors is also the underlying driver of most proposed reforms, from Baird's auctions to Bebchuk's options. In this paper, we undertake a detailed examination...

African American bankruptcy filers are more likely to select Chapter 13 than other debtors, who opt instead for Chapter 7, which has higher success rates and lower attorney fees. Prior scholarship blames racial discrimination by bankruptcy attorneys. We present an alternative explanation:...

We develop a model of a firm in financial distress. Distress can be mitigated by filing for bankruptcy, which is costly, or preempted by restructuring, which is impeded by a collective action problem. We find that bankruptcy and restructuring are complements, not substitutes: Reducing bankruptcy...

This paper tests whether housing wealth mitigates the effects of health shocks on financial stress and mortality. We link cancer records to mortgage, bankruptcy, foreclosure, and credit report data. We find that cancer diagnoses are financially destabilizing even for households with health...

Recent decades have seen substantial expansion in exemptions from the Bankruptcy Code's normal operation for repurchase agreements. These repos, which are equivalent to very short-term (often one-day) secured loans, are exempt from core bankruptcy rules such as the automatic stay that enjoins...

This essay surveys important contributions to the economics of bankruptcy. It is an introductory chapter for a forthcoming volume (from Edward Elgar Press) that compiles the work of legal scholars as well as economists working in the field of corporate finance. The essay begins with the...