The bankruptcy code without safe harbors

American Bankruptcy Law Journal

Volumn 84, Issue 2, 2010, Pages 123-144

  Lubben, Stephen J ^a  

^a NONE

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EID: 77954890333     PISSN: 00279048     EISSN: None     Source Type: Journal    
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References (114)

1. Stephen J. Lubben, Repeal the Safe Harbors, 18 A.B.I.L. Rev. 319 (2010).
2. Stephen J. Lubben, Derivatives and Bankruptcy: The Flawed Case for Special Treatment, 12 U. Pa. J. Bus. L. 61 (2009);
3. see also Bryan G Faubus, Note, Narrowing the bankruptcy Safe Harbor For Derivatives To Combat Systemic Risk 59 Duke LJ. 801 (2010).
4. See Stephen J. Lubben, Systemic Risk & Chapter 11, 82 Temp. L. Rev. 433 (2009).
5. Frank Partnoy & David A. Skeel, Jr, The Promise and Perils of Credit Derivatives, 75 U. Cin. L. Rev. 1019, 1049 (2007) -(The first thing to note is that the standard explanation for the special treatment is not particularly compelling. It is far from clear that the exception reduces systemic risk; it may even increase this risk because it eliminates a possible curb on counter-parties' rush to close out their contracts in the event of a wave of failures").-
6. For example, one CLE outline advises: Parties should always structure their transactions as Safe Harbor Contracts to take advantage of the scxalled "safe harbor" provisions of the Bankruptcy Code, even if the counterparty is a foreign company that might file its main insolvency proceed' ing in another country. Similarly, parties should seriously consider structuring their Safe Harbor Contracts to enable maximum use of netting and setoff rights under the Bankruptcy Code, including the implementation of master netting agreements.
7. Arnold Gulkowitz & Brian E. Goldberg, Looking For Light At The End Of The Tunnel-Navigating The Subprime Mortgage Derivatives Market In Bankruptcy, 1688 PLI/Corp 535, 546 (2008).
8. See also Huston v. E.I. du Pont de Nemours and Co., Inc. (In re National Gas Distributors, LLC), 556 F.3d 247 (4th Cir. 2009), and my discussion of warehouse loans in Part II, infra.
9. CSX Corp. v. Children's Inv. Fund Management (UK) LLP, 562 F. Supp.2d 511, 519 (S.D.N.Y. 2008).
10. See also Mark A. Guinn & William L. Harvey, Taking OTC Derivative Contracts as Collateral, 57 Bus. Law. 1127, 1128 (2002).
11. Stephen J. Lubben, Credit Derivatives and the Future of Chapter 11,81 Am. Bankr. L.J. 405,411-12 (2007).
12. see also Douglas G. Baird & Robert K. Rasmussen, Anti-Bankruptcy, 119 Yale LJ. 648, 683 (2010).
13. Anna Gelpern, Domestic Bonds, Credit Derivatives, and the Next Transformation of Sovereign Debt, 83 Chi.-Kent L. Rev. 147, 169 (2008).
14. Total return swaps can be used as a substitute for repurchase agreements, which I extensively discuss in Part II. Total return swaps are discussed in more detail in connection with Figure 2, infra.
15. See John D. Beck, Cashing In At The Debtor's Expense: How Total Return Swaps Can Alter Creditor Voting Incentives in a Chapter 11 Banlpuptcy, 41 Tex. Tech L. Rev. 1275, 1285-86 (2009).
16. See Henry T.C. Hu, Misunderstood Derivatives: The Causes of Informational Failure and the Promise of Regulatory Incrementalism, 102 Yale L.J. 1457, 1466-67 (1993).
17. See Lynn A. Stout, Why the Law Hates Speculators: Regulation and Private Ordering in the Market for OTC Derivatives, 48 Duke L.J. 701, 735-40 (1999).
18. The key exception arises for commodity futures, which are regulated and traded on exchanges.
19. Centrally cleared trading involves trades cleared through a central counterparty, which assumes responsibility for the counterparty performance of both sides of a trade. In other words, the central counterparty becomes a "middleman" in the transaction. Christian A. Johnson, The Enigma of Clearing Buy Side OTC Derivatives, 29 Futures and Derivatives Law Report, 11 (December 2009) - - Trading on an exchange brings price transparency that some have argued will also reduce systemic risk.-
20. See, e.g., Gary Gensler, How to stop another derivatives inferno (last modified Feb. 24, 2010) .
21. Jay Lawrence Westbrook, A Functional Analysis of Executory Contracts, 74 Minn. L. Rev. 227, 231 (1989).
22. See Shmuel Vasser, Derivatives in Bankruptcy, 60 Bus. Law. 1507 (2005).
23. Non-financial, corporate users of derivatives have traditionally not been required to post collateral. Similarly, the posting of collateral was often not required of large highly-rated financial institutions - like AIG. All this may change as part of proposed legislation requiring central clearing of more derivative transactions.
24. Stephen R. Kruft, Cross-Default Provisions in Financing and Derivatives Transactions, 113 Banking L.J. 216, 231 n.24 (1996).
25. See. eg., 1994 ISDA Credit Support Annex (Security Interest - New York Law) 12 and 13.
26. Although termed "collateral," the funds and securities in question were comingled with Lehman's own funds and in many cases rehypothecated (i.e., used as collateral in Lehman's own transactions).
27. See Christian A. Johnson, Derivatives and Rehypothecation Failure: It's 3:00 P.M., Do You Know Where Your Collateral Is?, 39 Ariz. L. Rev. 949, 951 (1997).
28. The latter move, of course, creates a three-way credit exposure, and probably does not accomplish much that could not be achieved with an escrow arrangement, other than perhaps neutral monitoring of compliance with the escrow agreement. The key to reducing risk would seem to be prohibitions or limits on rehypothecation.-
29. See Lubben, supra note 3.
30. The Financial Netting Improvements Act of 2006, Pub. L. No. 109-390, 120 Stat. 2692, makes certain technical amendments and clarifications to the provisions enacted as part of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8,119 Stat. 23, but for simplicity I will refer throughout to these as the 2005 Amendments.-
31. Michael Simkovic, Secret Liens and the Financial Crisis of 2008, 83 Am. Bankr. LJ. 253, 282 (2009).
32. The definition of "securities contract, in 11 U.S.C. § 741(7) includes: a contract for the purchase, sale, or loan of a security, a certificate of deposit, a mortgage loan ⋯ or option on any of the foregoing, including an option to purchase or sell any such security, certificate of deposit, mortgage loan... including any repurchase or reverse repurchase transaction on any such security, certificate of deposit, mortgage loan ⋯ The definition of "securities contract, was amended in 2005 to conform to the definition in the Federal Deposit Insurance Act. The term "security, is itself defined in 11 U.S.C. § 101(49).
33. 11 U.S.C. § 761(4). As explained in Collier's: The meaning of the term "commodity contract" differs depending upon the type of commodity broker at issue. A commodity contract with respect to a futures commission merchant is a contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a contract market or board of trade. Such a contract is known in the commodities trade as a "commodity futures contract." A commodity contract with respect to a foreign futures commission merchant is a foreign future, and with respect to a leverage transaction merchant is a leverage transaction. A commodity contract with respect to a clearing organization is either a commodity futures contract that is cleared by such clearing organization or is a commodity option traded on, or subject to the rules of, a contract market or a board of trade that is cleared by such clearing organization. A commodity contract with respect to a commodity options dealer is a commodity option.
34. Collier on Bankruptcy 761.05 (Alan N. Resnick & Henry J. Sommer, eds., 15th ed. rev.) (footnotes omitted). Commodity is defined in § 761(8) through cross-reference to the Commodity Exchange Act CCEA"), which is codified in chapter 1 of Title 7 of the United States Code. 7 U.S.C. § la(4) defines "commodity" to include agricultural products "and all other goods and articles, except onions as provided in section 13-1 of this title, and all services, rights, and interests in which contracts for future de-livery are presently or in the future dealt in." The origins of the amusing "onion" exception are detailed in Commodities: Odorous Onions, Time, July 2, 1956, at . Several other parts of 11 U.S.C. § 761 also cross reference the CEA.
35. See Williams v. Morgan Stanley Capital Group, Inc., (In re Olympic Natural Gas, 294 F.3d 737, 74l)(5th Cir. 2002) C"The term 'commodity contract''encompasses purchases and sales of commodities for future delivery on, or subject to the rules of, a contract market or board of trade⋯ .' In contrast, lorward contracts' are contracts for the future purchase or sale of commodities that are not subject to the rules of a contract market or board of trade."'(quoting 5 COLLIeR ON BANICRUPTOY 1556.02[2] (Lawrence P. King, ed., 15th ed. rev. 2002)).
36. Forward contract is defined in § 101(25), to include contracts (other than commodity contracts, see supra note 26) for the purchase, sale or transfer of a commodity at least two days in the future, and includes " a repurchase or reverse repurchase transaction.., consignment, lease, swap, hedge transaction, deposit, loan, option, allocated transaction, unallocated transaction, or any other similar agreement."
37. 11 U.S.C. § 101(47). A repurchase agreement or "repo," is essentially the sale of a financial instrument combined with a forward contract to repurchase the same. The initial " buyer" is compensated by the " seller" through a difference between the initial payment and the final payment. To qualify under the Code's definition, the repurchase obligation must occur within one year, but the definition expressly excludes a repurchase obligation involving a participation in a commercial mortgage loan. Note, however, that these types of repos might constitute another type of protected contract, particularly a swap or securities contract.
38. Wylie V. Howard, Weil, Labouisse, Freidrichs Inc. (In re Hamilton Taft & Co.), 114 F.3d 991 (9th Cir. 1997).
39. 11 U.S.C. § 101(53B). The definition includes not only obvious swaps, like CDS, interest rate swaps, and currency swaps, but also any similar agreement or transaction "of a type that has been, is presently, or in the future becomes, the subject of recurrent dealings in the swap or other derivatives markets," and is "a forward, swap, future, option, or spot transaction on one or more rates, currencies, commodities, equity securities, or other equity instruments, debt securities or other debt instruments, quantitative measures associated with an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or economic consequence, or economic or financial indices or measures of economic or financial risk or value." In short, every conceivable derivative contract would seem to be included.
40. 11 U.S.C. § 101(22A) (defining "financial participant").
41. With regard to securities contracts with the debtor, the counterparty must be a "stockbroker, financial institution, financial participant or securities clearing agency." 11 U.S.C. § 555.
42. 11 U.S.C. § 101(26). See also In re Mirant Corp., 310 B.R. 548, 568 (Bankr. N.D. Tex. 2004).
43. 11 U.S.C.§ 101(46).
44. 11 U.S.C.§ 101(53C).
45. 11 U.S.C.§555 (securities contracts), 556 (forward and commodities contracts) 559 (repurchase or "repo" agreements), 560 (swaps). The exceptions apply to a "contractual right,"which includes rights established by rules of trade organizations or exchanges.
46. 11 U.S.C.§362(b)(6) (securities contracts, forwards and commodity contracts), 362(b)(7) (repos), 362(b)(17) (swaps).
47. 11 U.S.C.§ 362(o) (exercise of rights under the forgoing provisions not subject to any stays), 556 (protected parties' right to margin payments under forwards and commodity contracts shall not be stayed, avoided or limited), 560 (right of a swap participant to offset or net-out any termination values or payment amounts shall not be stayed, avoided or limited).
48. 11 U.S.C.§ 546(e),(f),(g) and(j),and § 548(d)(2)(B),(C),(D).The foregoing subdivisions of § 546 prohibit the bringing of avoidance actions under § 544,545,547,548 (a)(1)(B),and 548(b) of the Bankruptcy Code. Stating that a derivatives counterparty always takes for value, the foregoing subdivisions of § 548(d) will potentially complicate any attempt to recover a transfer as an actual fraudulent transfer.
49. 11 U.S.C.§ 548(c). This author is at a loss to explain how a derivative might be a statutory lien under § 545. These provisions do not seem to prohibit the lifting of the automatic stay to allow a creditor to bring an avoidance action under state or federal non-bankruptcy law, so long as the creditor did not bring such action on behalf of the estate. Cf.11 U.S.C. § 544(b)(l).
50. 11 U.S.C.§ 362(b)(27) (allows setoffs and netting under master netting agreements) 561 (a right to terminate, accelerate or liquidate, or to offset, or net termination values, payment amounts or other transfer obligations arising under or in connection with one or more securities contracts, commodity contracts, forward contracts, repurchase agreements, swap agreements or master netting agreements, shall not be stayed, avoided or limited by operation of the bankruptcy code or by order of a court or administrative agency).
51. 11 U.S.C.§ 101(38A) (definition of "master netting agreement"). The definitions of securities contract, commodity contract, forward contract, repurchase agreement, and swap agreement also include "a master agreement" that includes the defined contracts.
52. 11 U.S.C. § § 741(7)(x),761(4)(I),l0l(25)(D),101(47)(iv) and 101(53B)(A)(v). Note the slight difference in terminology between "master agreement" and master netting agreement".
53. See, e.g.. 11 U.S.C. 101(25)(E)(definition of "forward contract").
54. See In re Enron, Inc., 349 B.R.96,106 (Bankr. S.D.N.Y. 2006).
55. See Steven L. Schwarcz, Systemic Risk, 97 Geo. L.J.193,196-204 (2008)(defining systemic risk as: "the risk that (i) an economic shock such as market or institutional failure triggers (through a panic or otherwise) either (X) the failure of a chain of markets or institutions or (Y) a chain of significant losses to financial institutions, (ii) resulting in increases in the cost of capital or decreases in its availability, often evidenced by substantial financial-market price volatility").
56. THE PRESIDENT's WORKING GROUP ON FIANCIAL. MARKET, Hedge Funds. Leverage, and the Lessons of Long-Term Capital Management (1999); HR.Rep. No. 109-31(I), at 3, 20, 131-32 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 89, 105-06, 191-92.
57. The safe harbor provisions permit qualifying non-debtor counterparties to liquidate, terminate or accelerate contracts and net Out positions. All other ipso facto provisions remain unenforceable under the Bankruptcy Code.
58. In re Lehman Bros. Holdings Inc.,416 B.R.392 (Bankr. S.D.N.Y. 2009).
59. Adam R. Waidman, OTC Derivatives C & Systemic Risk: Innovative Finance Or The Dance Into The Abyss?, 43 AM. U. L Ray. 1023, 1059-1060 (1994).
60. Although rarely made, one argument that might support the safe harbors or at least some special treatment of derivatives in bankruptcy turns on the "zero sum" nature of derivative contracts. While most contracts can have value to both parties, most derivatives are only valuable to the debtor in situations where they are not valuable to the non-debtor, and vice-versa.
61. The safe harbors give the non-debtor the option to terminate, but do not require it, and thus create a kind of assumption and rejection power on behalf of the non-debtor. Jonathon Keath Hance, Derivatives at Bankyuprcy: Lifesaving Knowledge for the Small Firm, 65 WASH.& Lee L. Rev. 711,736 (2008).
62. It is also sometimes suggested that the mere act of a financial firm's bankruptcy filing creates systemic risk, but that seems to confuse the process of bankruptcy with the general reality of default. Jean Helwege, Financial Firm Banknprcy and Systemic Risk, 20 J. INT'L Fu'i. MARKETS, INSTITUTIONS & MONEY, Feb. 2010, at 1, 2 (arguing that bankruptcies of financial firms "are symptomatic of common factors in portfolios that lead to wealth losses regardless of whether any particular firm files for bankruptcy"s).
63. Jeffrey McCracken, Lehrna's Chaotic Bankuptcy Filing Destroyed Billions in Value, WALL Sr. J.,December 29,2008,at AlO.
64. For example, the knowledge that the debtor will be unable to bring a preference action related to a derivative contract removes any incentive to refrain from demanding collateral on the eve of bankruptcy.
65. 11 U.S.C.§ 362(d). Due to the number of contracts involved in the Chapter 11 case of a large financial institution, the bankruptcy court may need to rule on entire classes of derivatives, absent unique facts regarding a specific transaction that might warrant lifting the stay.
66. 11 U.S.C.§ 547.
67. Cf Alpha, S.A.B. de C.V. V. Enron Creditors Ṙecovery Corp. (In re Enron Creditors Recovery Corp.), 422 B.R. 423 (S.D.N.Y. 2009) (non-ordinary course termination of commercial paper on eve of bankruptcy not avoidable because of safe harbor provisions).
68. AS my students well know, BOGARTCO is the leading hypothetical manufacturer of trench coats and fedoras.
69. London Interbank Offered Rate, a floating rate published by the British Bankers Association. http:// www.bbalibor.com/bba/jsp/polopoly.jsp?d=1638&a= 15682. There are LIBOR rates of different durations (3-month, 6-month, etc.) and in different currencies (Dollar, Euro, etc.). As of this writing, in Late March, 2010, the 3-month Dollar LIBOR was 0.29% and the equivalent Euro rate was 0.58%.
70. Aline Van Duyn, Derivatives traders pressured to use central clearings. FINANCIAL TIMES, Jan. 12, 2010, available at http/www.ft.com/cms/s/0/e81c32c0- 0077-11df-b50b00144feabdc.html.
71. 11 U.S.C.§ 365(d)(2)(In a case under chapter 9,11,12,or13 of this title, the trustee may assume or reject an executory contract or unexpired lease of residential real property or of personal property of the debtor at any time before the confirmation of a plan..").
72. This is,an option to buy an asset at a price less than the current market price.
73. 11 U.S.C.§ 363(c)(l).
74. 11 U.S.C.§ 361.
75. Although the cases are split on the issue, many courts hold that breach claims on traditional contracts are " as of" the petition date.
76. 11 U.S.C.§ 562.
77. In re SemCrude, L.P., 399 B.R. 388 (Bankr. D. Del. 2009)
78. But see Martin J. Bienenstock et al., Are Triangular Seroff Agreements Enforceable in Bankyuptcy?, 83 Aas. Bncit. U. 325 (2009) (arguing that SemCruck was wrongly decided).
79. Although the scope of this article does not include the development of "resolution authority" to handle the collapse of financial institutions, the multi-national character of these institutions suggests a need to coordinate such authority across the key financial jurisdictions. At the very least, New York and London need to be integrated in this regard.
80. See Cohen v. Savings Building & Loan Co. (In re Bevil, Bresler & Schulman Asset Mgmt. Corp.), 896 F.2d 54, 57 (3d Cir. 1990) ("setoff is at odds with a fundamental policy of bankruptcy, equality among creditors . . .
81. Stephen J. Lubben, Beyond True Saks: Secuntzation and Chapter 11, 1 N.Y.UJ.L. & Bus. 89, 107 (2004).
82. U.S.C. § 547(cX2).
83. See Alpha, S.A.B. de c.v. v. Enron Creditors Recovery Corp. (In re Enron Creditors Recovery Corp.), 422 B.R. 423 (S.D.N.Y. 2009Xnon-ordinary course termination of commercial paper on eve of bankruptcy not avoidable because of safe harbor provisions).
84. The enforceability of "walk-away" provisions is presently being litigated in several adversary proceedings in the Lehman Brothers Holdings Inc. and Lehman Brothers Special Financing Inc. bankruptcy cases.
85. See e.g.. Lehman Brothers Special Financing Inc. v. Harrier Finance Ltd. (In re Lehman Brothers Holdings Inc.), Ch. 11 Case 08-13555, A.P. 09-01241 (Bankr. S.D.N.Y. 2009) (regarding the enforceability of a credit default swap "walk-away" provision). Some of the adversary cases have been settled without a decision. But see Drexel Burnham Lambert Prods. Corp. v. Midland Bank PLC, 1992 U.S. Dist. LEXIS 21223 (S.D.N.Y. Nov. 9, 1992) (similar provision found enforceable).
86. 11 U.S.C. § 548(aXLXB)
87. Mellon Bank, NA v. Metro Communications, Inc., 945 F.2d 635, 647 (3d Cir. 1991). In the context of collateralized debt obligations, ratings agencies often demanded these provisions to protect the special purpose entity from incurring a large payment obligation.
88. See 12 U.S.C. § 182 1(eX8XG) walk-away provisions unenforceable under the Federal Deposit Insurance Act)
89. Stephen A. Lumpkin, Repurcho.se and Reverse Repurchase Agreements, in INSTRUMENTS OP THE MONEY MitxFr ch. 6 (TIMOTHY Q. Cooic AND ROBERT K. LAROCHE, ens., 1993).
90. This discount or haircut was extremely small before 2007, but began to grow, particularly for housing-related assets, as counterparties began to doubt their ability to properly value the assets. The growth of these haircuts can create a liquidity crunch for an institution that is heavily reliant on the ability to borrow against mortgage-backed securities to finance daily operations.
91. See Gary Gorton, Questions and Answers About the Financial Crisis, 12-13 (last modified Feb. 20, 2010)
92. See Kenneth C. Kettering, Securitization and Its Discontents: The Dynamics of Financial Product Development, 29 CARDOZO L. REv. 1553, 1640-43 (2008).
93. Federal Reserve Bank of New York, Repurchase and Reverse Repurchase Transactions (visited May 9, 2010) http://www.newyorkfed.org/ aboutthefedIfedpoint/fed04.html).
94. I approach this from a bankruptcy perspective. The size of and extensive reliance on the repo market, even in its traditional form, may represent a systemic risk problem in need of a regulatory solution. But that solution would not occur through the Bankruptcy Code.
95. Claudio E. Raddatz, When the Rivers Rim Dry: Liquidity and the Use of Wholesale Funds in the Transmission of the U.S. Subpnme Crisis. WORLD B,x POLICY RESEARCH WoIuUNG PApea Seiuss No. 5203 (last revised March 1, 2010)
96. Although data on the total size of the repo market is limited, it is often said to have been in the $10 to $12 trillion range in early 2007.
97. Thomas B. Plank, Toward a More Efficient Bankruptcy Law: Mortgage Financing Under the 2005 Bankrupccy Arnendnients, 31 S. ILL. U. U. 641, 666-67 (2007) (lauding this development).
98. Defaults in this market began to occur more than a year before the Lehman bankruptcy. Daniel Covitz, Nellie Liang and Gustavo Suarez , The Evolution of a Financial Crisis: Runs in Asset.Backed Corn,nercial Paper Markets (last modified July 2, 2009)
99. See Prank Partnoy, The Going Private Phenomenon: Shapeshifting Corporations, 76 U. CHI L. Ray. 261, 268-69 (2009) ("An SW is sometimes called a "conduit" because it raises short-term funds and channels those funds into longer-term assets. An SIVs business model resembles that of a bank: it seeks to earn a spread between the interest rate at which it borrows and the interest rate at which it lends.").
100. Trade receivables, auto loan transactions, and credit card receivables were the most common assets used in multi-seller facilities - that is, facilities where the sponsor did not generate the assets. Seller facilities - where the sponsor generated the assets - often involved credit card receivables and mortgages.
101. The Economyliighly Volatile Paper, Time, July 6, 1970, at ('Until the collapse of the Penn Central, commercial paper was the nation's fastest-growing type of credit, but now it has become a prime source of financial worry.).
102. Arthur E. Wilmarth, Jr., The Dark Side of Universal Banking: Financial Conglomerates and the Origins the Subprime Financial Cnsis, 41 CONN. L. Rev. 963, 1033-34 (2009).
103. U.S.C. § 1821(eX8).
104. Conduits entered into reverse repo agreements with sponsors under which the sponsor sold assets to the conduit. On the maturity date of the repo, if the conduit was unable to roll (i.e., refinance) the ABCP, the repo counterparty was then required to repurchase the assets at the agreed upon price. The conduit would use the proceeds to repay maturing ABCP and the facility would come to an end. The safe harbors gave investors and rating agencies comfort that the assets could be sold if the sponsor experienced financial distress - an assumption that rested on a faith in the ability to sell the underlying assets.
105. See Carrick Mollenkamp, Credit Cnsnch: Cirigroup Moves to Quell SIV Concerns, WALt. ST. J., Sept. 7,2007, at C2.
106. See Viral V. Acharya et al., Secuntization Without Risk Transfer, NBER Working Paper 15730 (2010) http://www.nber.org/papers/w 15730>.
107. Currently collateral posting is a function of both the exposure of the in the money party (the Secured Party" in ISDA terms) and any applicable independent Amounts." See supra note 19. In addi tion, the parties sometimes agree to a "threshold" under which collateral will not be exchanged, meaning that collateral is only exchanged if the derivative price moves outside a kind of 'tolerance interval." One additional effect of allowing ongoing mark to market collateral during Chapter 11 at the pre-bankruptcy relative level would be to move all thresholds to zero.
108. After filing the notice, the bankruptcy court would need to have a short period of time, perhaps 24 hours, to address any claims by the debtor that the nondebtor party had improperly demanded the collateral in question.
109. See generally Jay Lawrence Westbrook, The Control of Wealth in Bankruptcy, 82 Tax. L. Ray. 795 (2004).
110. U.S.C. § 101(47).
111. Por several years the Code has had a similar provision with regard to non-residential real estate leases, although arguably the 2005 amendments may have overly constricted the time the debtor has in this regard. 11 U.S.C. § 365(dX4).
112. While short timelines no doubt will cause the debtor to incur additional professional fees, which reduces the overall value of the estate, the balance of the economic losses would seem to tilt toward reducing the period of uncertainty for non-debtors.
113. 11 U.S.C. § 547(cX2).
114. Of course, this could not extend to ipso fo.cw provisions, lest the preference defense become a new safe harbor.