On the Optimization of Rules of Executory Title Retention Contracts in Bankruptcy

The changes about atypical security rules in the Chinese Civil Code, such as title retention contracts, highlight the modernization of civil law system, but the bankruptcy law fails to harmonize with it. The treatment of executory title retention contracts suffers from an imbalance in fairness, a mishmash of procedures and an inconsistent application. The way to improve them, should be based on the general rules for dealing with executory contracts, distinguish formalism and functionalism in the nature of title retention rights, and provide different combinations under the consideration of registration, type of bankruptcy, which contract party is bankrupt. In the buyer's bankruptcy, the buyer's trustee can make an option free, but shall not prevent the seller from exercising the exemption right or recall right due to the discharge of the contract. In the seller's bankruptcy, it is fundamental to realize the seller's right of payment claim, so that the seller's trustee's right to discharge the contract and recall right should be restricted. In the case of a registered title retention, the subject matter constitutes the property of the buyer who is under the rules of movable property priority. To the contrary, unregistered retention-of title can’t be against the other parties in the bankruptcy proceedings. The ownership is transferred by delivery, and the seller is only entitled to ordinary bankruptcy claims.