Extinguishing Security Interests: Secured Claims in Japanese Reorganization Law and Some Policy Implications to the U.S. Law

摘要

This Article examines how secured claims are treated in Japanese business reorganization law, especially in the Civil Rehabilitation Act (Minji saisei ho), which was enacted in 1999 as the new general reorganization regime in Japan. Unlike the U.S. Bankruptcy Act, the Civil Rehabilitation Act does not have automatic stay on secured claims, nor does it allow any modification of secured claims by the rehabilitation plans. However, the Civil Rehabilitation Act has a unique procedure to restrict the rights of secured creditors, which is called “the procedure of extinguishing security interests (tanpo-ken shometsu seikyu tetsuzuki).” This procedure permits a debtor to cancel security interests in any property she owns that is necessary for continuation of her business, just by paying the secured creditors the liquidation value of such property. I analyze how this procedure can reduce the transaction costs which would arise if the debtor had to bargain with the secured creditors in order to avoid foreclosure sales. I also compare this procedure with the way how secured creditors are treated in Chapter 11of the U.S. Bankruptcy Act, and discuss some policy implications to the U.S. law. Keywords: business reorganization, Chapter 11, secured claims, Japanese law.