Turning Lead into Gold: The Uncertain Alchemy of All Obligations Clauses

Authors

  • Roderick J. Wood

DOI:

https://doi.org/10.29173/alr1305

Abstract

This article examines the use of all obligation clauses in security agreements and their potential to transform an unsecured claim into a more valuable secured claim upon an assignment of the unsecured claim or the security agreement. The author addresses three arguments that have been levelled against the use of all obligations clauses: unfairness to the debtor, distortion of the pro rata sharing principle of bankruptcy law, and the disruption of the Personal Property Security Act priority regime. The author also examines two analogous transactions and explains why these do not create similar problems.

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Published

2004-04-01

Issue

Vol 41, No 4

Section

Articles

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