Emory Bankruptcy Developments Journal

Volume 31Issue 1
Article

Not Just Anna Nicole Smith: Cleavage in Bankruptcy

David G. Epstein, Casey Ariail, & David M. Smith | 31 Emory Bankr. Dev. J. 15 (2014)

This is an essay about the unwarranted erosion of two basic bankruptcy principles: the cleavage effect of a debtor’s filing of a bankruptcy petition and the equality of treatment of prepetition unsecured claims. These are two of the most fundamental bankruptcy concepts. First courts and then Congress have fashioned rules favoring the prepetition unsecured claims of vendors and lessors that are inconsistent with these concepts. The authors explore the origins of such favored treatment, question the commonly offered policy justifications, and argue that the prepetition unsecured claims of vendors and lessors generally should be afforded the same treatment in bankruptcy as other prepetition unsecured claims.

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