Empowering States to Set the Priority of Environmental Claims in Bankruptcy

Research output: Contribution to journalArticleResearch

Abstract

The bankruptcy code allows individuals and companies to receive
a fresh start through a discharge of debts. When entering into
business relationships, creditors are able to factor the risk of the
debtor defaulting and discharging the debts. However, unlike debts
to specific creditors, the cost of environmental damage is externalized
onto all of society. Credit scores are not designed to address
environmental impact and creditors are not directly impacted by
such externalizations; therefore, the credit structure does not
motivate individuals or companies to avoid risk of environmental
damage. Because environmental concerns vary from state to state
and the bankruptcy code primarily operates by changing outcomes
under state law, states should be responsible for setting standards of
liability for environmental damage (or risk of damage) under the
bankruptcy code.
If states are given the opportunity to set the priority at which
environmental claims are paid, they could either leave the structure
as is and spread the cost to all of society or assign higher priority to
claims that have a particular impact on the state's ecosystem. For
example, Florida may set a higher claim priority for the storage of
chemicals that have been shown to harm organisms in marshlands,
whereas Oklahoma, being relatively free of marshland, may be
willing to shoulder a greater degree of risk in the storage of the same
chemicals.
Original languageEnglish
Pages (from-to)55-68
Number of pages14
JournalJournal of Land Use and Environmental Law
Volume31
Issue number1
Publication statusPublished - 2015

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