Ethics, Bankruptcy and Greed: The Unintended Consequences for Landlords of the 2005 Bankruptcy Amendments

Abstract

This article is about ethics, or more correctly questionable ethics. It is also about greed. When a commercial party’s consideration for its stakeholders is distorted by an opportunity for short-term gain, it creates a self-centric view of the world. This myopia creates a blurred vision of others – their needs and roles – and consequently may cause parties to make decisions that ultimately prove to be disastrous not just to those immediately affected by the decision, but to the industry as well. This paper concerns certain provisions of the 2005 revisions to the United States Bankruptcy Code referred to as The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Specifically, this paper considers how commercial property landlords used BAPCPA to obtain certain changes to the Bankruptcy Code that under a given set of (historically prevailing) circumstances would have had the effect of transferring value from other creditors to the landlords, but under other (now prevailing) circumstances actually have had disastrous consequences – for the landlords, and for other parties. We submit that the failures to consider how these changes would affect other parties, and the apparent failure to recognize that historical circumstances could change, represent an ethical failure by commercial landlords.