The Debtor’s Dilemma: Economic Analysis of Asset Retention in Consumer Bankruptcy

Amber Moren, Yale Law School


Since 2005, the Bankruptcy Code has limited Chapter 7 debtors to two asset retention options, reaffirmation and redemption. This Note explores the impact of the modified asset retention options both on the incentives of debtors and creditors during bankruptcy proceedings and on the deals they reach in practice.

While the 2005 revisions succeeded in eliminating an irksome circuit split, this Note illustrates the way in which they fostered deeper problems with asset retention. It argues that allowing ride-through – the option laid to rest in 2005 – would better achieve the bankruptcy goals of protecting debtors and creditors while promoting doctrinal uniformity.