What's Your Position? Amending the Bankruptcy Disclosure Rules to Keep Pace With Financial Innovation


This Comment addresses the threat posed to the bankruptcy process by creditors whose true economic incentives are not aligned with their disclosed claims. Under current bankruptcy law, these so-called “empty creditors” may actively participate in the debtor’s reorganization without ever disclosing their real economic interests. This Comment begins by exploring the extent to which empty creditors have influenced modern Chapter 11 cases. It then details the current controversy concerning the degree of position-level transparency required by Rule 2019 of the Federal Rules of Bankruptcy Procedure. Finally, it describes and critiques a proposed amendment to Rule 2019 and offers a disclosure regime that would mitigate the harms created by empty creditors.

By uclalaw