Efficient Bankruptcy Law in the u.s. and the Netherlands

Abstract

Bankruptcy serves to prevent the arising of a common pool problem and to ensure value maximisation of the debtor’s assets. The question is whether in addition to this goal of value maximization, it is efficient to allow the introduction of new substantive policies in the bankruptcy process as to redistribute wealth. The author, in light of Dutch and American bankruptcy law, compares several theories to answer this question about the goals of bankruptcy. He concludes that the introduction of substantive policies leads to inefficient forum shopping and that and the absolute priority of creditors and shareholders should be warranted as much as possible in bankruptcy.