The Virtue of Speed in Bankruptcy Proceedings

The following essay is based on testimony presented before the Bankruptcy Commission in May 1997 in Washington, D.C. Today I address a single problem associated with Chapter 11 and propose alternative changes in Chapter 11 that might alleviate the problem. There are many ways to criticize the substance of Chapter 11 and the procedure embedded in it. Others will argue today that several of the proposed changes before this Commission are unwise. I leave those specific issues to them; I direct my attention to a change that would alleviate many of the other substantive problems with Chapter 11.

In my opinion the principal difficulty with Chapter 11 is not that it unfairly favors one group or that the priorities which it establishes are misguided. In my opinion the principal difficulty with Chapter 11 is that it gives strong incentives to various Chapter 11 players to distort the priorities that were intended by Congress.