The Uneasy Case for the Priority of Secured Claims in Bankruptcy: Further Thoughts and a Reply to Critics

Abstract

In an earlier article, Uneasy Case for the Priority of Secured Claims in Bankruptcy 105 Yale Law Journal 857 (1996), we suggested that the case for a full priority of secured claims in bankruptcy is an uneasy one. In this paper, we address various reactions and objections to our analysis that have been offered by subsequent work. We also further develop some of the main elements of the analysis in our earlier article with respect to both our analysis of the comparative † Professor of Law, Economics, and Finance, Harvard Law School. †† Acting Professor of Law, School of Law (Boalt Hall), University of California at Berkeley. We have benefitted from the comments and suggestions of various participants in this Symposium as well as John Ayer, Carl Bjerre, David Gray Carlson, Claire Hill, Steve Schwarcz and Joel Zweibel. For financial support, Lucian Bebchuk would like to thank the John M. Olin Center for Law, Economics, and Business at Harvard Law School and the National Science Foundation, and Jesse Fried would like to thank the John M. Olin Center for Law, Economics, and Business at Harvard Law School F:\HOME\ILJPRINT\BEBCHUK.FMT Tue, 06-Apr-99 04:37 PM 102 CORNELL LAW REVIEW [Vol. 82:101 merits of full and partial priority and our analysis of how a partial priority regime could be implemented. The analysis confirms our earlier conclusion that the case for a full priority of secured claims in bankruptcy is an uneasy one. and the School of Law, University of California at Berkeley.