Bankruptcy’s Role in the COVID-19 Crisis

Current policy discussions tend to minimize the role of bankruptcy law in mitigating the financial fallout from COVID-19. Scholars too are unsure about the merits of bankruptcy, especially Chapter 11, in resolving business distress. In this paper, we argue that bankruptcy should be a central part of policies targeting large corporations, but should be used only as a backup to other policies for consumers and small businesses.

With respect to large corporations, we begin with the observation that, although the current crisis has destabilized all businesses, many were likely to suffer distress regardless of a pandemic. The past decade saw … Read more