Interest Rate Swaps and the 1990 Amendments to the United States Bankruptcy Code: A Measure of Certainty Within Swap Market Contracts

In today's uncertain financial markets the Bankruptcy Code ("Code") provides welcome relief for the debtor whose assets are insufficient to meet its obligations. With respect to participants in the major financial markets, however, the same respite that allows a debtor time to assess its financial situation free from harassment may force creditors to incur substantial losses. The uniquely dynamic nature of many financial transactions means that delays in terminating a breached contract could have substantial negative economic effects on the nonbreaching party. Such was the case in the United States swap market prior to the addition of section 560 and certain related amendments ("1990 amendments") to the Code in June 1990.