7. The Need for Cost Control
The bankruptcy fee control system has been in existence for more than seventy-five years. This chapter explains why. Part I presents a brief overview of the bankruptcy process. Part II explains why market forces are inadequate to control bankruptcy professional fees. In short, market forces can't control bankruptcy professional fees because those who hire bankruptcy professionals are spending other people's money. Part III elaborates on one aspect of the other-people's-money problem. It describes the system of creditor and shareholder priorities that balkanizes the interests of those investors and distorts their incentives. Part IV explains why even legislation can't fix the market failure. Fee regulation is necessary.
Keywords: bankruptcy fee control system, bankruptcy costs, professional fees, fee regulation, bankruptcy professionals
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