Emory Bankruptcy Developments Journal

Volume 34Issue 1
Articles

Doing Equity in Bankruptcy

Daniel J. Bussel | 34 Emory Bankr. Dev. J. 13 (2017)

This intriguing Article by Professor Daniel J. Bussel argues that in some cases a non-debtor’s right to specific relief should be treated as a “claim,” monetized, given pro rata treatment and discharged. Notwithstanding this idea and the text of the Bankruptcy Code, many courts have concluded that an injunction or other equitable remedy is not a “claim” unless the court’s decree can be satisfied by the payment of money under nonbankruptcy law. This Article argues that consistent with the Code’s text and policy, injunctions or other forms of equitable relief should be presumptively treated as “claims,” even if nonbankruptcy law does not permit the enjoined party to satisfy the injunction by the payment of money. A balancing approach is then analyzed with seven factors introduced for courts to weigh when considering granting equitable relief claims in bankruptcy.

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A Theoretical Framework for Evaluating Debtor-in-Possession Financing

Sandeep Dahiya & Korok Ray | 34 Emory Bankr. Dev. J. 57 (2017)

This excellent Article by business school professors Sandeep Dahiya and Korok Ray provides a mathematical framework as an analytical tool to assist bankruptcy judges when confronting a Debtor-in-Possession financing situation. The U.S. Bankruptcy Code provides enhanced priority and security features to debtor-in-possession (DIP) loans which can be obtained from a lender with whom the borrower may have no past lending relationship. The enhanced priority of DIP financing, and the choice of a DIP lender, significantly affect the investment decisions made by the firm. This Article shows that DIP loans from an existing lender leads to a higher level of investment. The authors also show that a higher priority of DIP financing also leads to higher investment by the firm. A bankruptcy judge should take these incentives into account when approving the DIP loan. The authors conclude with extensive mathematical models to assist judges and firms in evaluating DIP loan decisions.

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