New Rules for a New World: How Technology and Globalization Shape Bankruptcy Venue Decisions

17 Asper Review of International Business and Trade Law 85 (2017)

27 Pages Posted: 5 Jan 2018

See all articles by Laura Coordes

Laura Coordes

Arizona State University - Sandra Day O'Connor College of Law

Date Written: September 15, 2017

Abstract

Technological change has created new possibilities and new challenges in commercial bankruptcy practice. Debtors may now exist entirely online, with no “brick-and-mortar” presence to anchor them to any particular physical location. Companies today increasingly amass substantial, valuable assets, including vast amounts of consumer information, which they may sell in bankruptcy to other entities. A bankrupt company’s assets may now include intangibles that defy easy categorization or valuation, including social media accounts, domain names, and electronic data.

Technological change has also dramatically altered traditional theories of U.S. bankruptcy law. Location has historically played a significant role in bankruptcy, and in practice, a bankruptcy case’s location can significantly affect how the case proceeds. From a theoretical standpoint, concerns over the determination of a bankruptcy case’s location contribute to perceptions of the legitimacy and fairness of the bankruptcy system. Advances in technology may at first appear to moot many of these concerns; with increased technological capabilities, the argument goes, a bankruptcy case’s physical location becomes less important.

This Article counteracts claims that location is no longer a key consideration in bankruptcy law and emphasizes the significant role location should continue to play when considering bankruptcy venue. Bankruptcy law faces significant challenges in adapting to technological change, and this Article argues that bankruptcy venue must continue to receive careful consideration in order to ensure the integrity of the bankruptcy system in the face of technological change. Indeed, technological change makes it more critical to reform the venue rules now so that parties may take into account the various benefits and drawbacks stemming from technological advances. As technology improves, it will become increasingly necessary to precisely identify rules that facilitate appropriate access to bankruptcy courts for all parties in interest.

Through exploring technology’s impact on bankruptcy venue, this Article raises several broader questions, including how technology has changed bankruptcy theory, why a bankruptcy case’s location remains relevant in light of technological advances, and how to approach changes to the bankruptcy venue rules. Technological change has the capacity to fundamentally alter the nature of the businesses that may enter bankruptcy, as well as the number and type of stakeholders that are affected when a business experiences financial distress. While exploring some of the changes technology has wrought upon the bankruptcy system, this Article posits that a mechanism for deliberately determining the physical location of a bankruptcy case is more necessary than ever if bankruptcy is to continue to meet the needs of all stakeholders in a case.

Keywords: bankruptcy, technology, venue

Suggested Citation

Coordes, Laura, New Rules for a New World: How Technology and Globalization Shape Bankruptcy Venue Decisions (September 15, 2017). 17 Asper Review of International Business and Trade Law 85 (2017), Available at SSRN: https://ssrn.com/abstract=3088810

Laura Coordes (Contact Author)

Arizona State University - Sandra Day O'Connor College of Law ( email )

Box 877906
100 S. McAllister Ave.
Tempe, AZ 85287-7906
United States

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