Instead of a short chain secured creditors, unsecured creditors and shareholders now there are senior or first-lien creditors (who have first dibs on a company's assets), second-lien creditors (who also have claims over the assets of a company, but who get paid only after first-lien creditors), mezzanine creditors, senior subordinated debt holders and subordinated debt holders.
Debtors are still charged for the services of the credit counselor who is filing bankruptcy in the debtor's name without permission, instead of working with creditors.
Creditor protection is best delivered via a board friendly bankruptcy system instead of with a creditor friendly system that includes a wrongful trading rule.
In his letter to the Senate, Lew warned that in case of the default or a successful creditor lawsuit, Puerto Rico could be forced to pay creditors instead of using funds on health, education and public safety, which could result in laying off police and shutting down hospitals and public transportation.
One of the biggest changes the plan would make, he said, is that instead of being controlled by creditors, the process is controlled by the government.
A Treasury Department official objected to the decision by the Energy Department that allowed company investors to get first in line among creditors, instead of the federal government, for part of their investment.
He said he would have had to put the money into Piquant's operating account, where it could have been tapped by creditors, instead of into a shielded holding company.
The economic "benefit" of default gains is that losses are partially borne by creditors instead of by the investors' equity.
Lehman not shown, since it stopped reporting losses after Q3 2008; subsequent losses accrued to creditors instead of shareholders.
The public has an interest in ensuring that judgments issued by courts and affirmed on appeal are enforced, and in preventing judgment debtors from unlawfully transferring and otherwise dissipating assets instead of paying their judgment creditors.
