Chapter 11 plans that propose to extinguish existing equity interests because the estate does not have any value remaining after the payment of creditor claims are common. The Bankruptcy Code's "absolute priority rule"...more
Section 510(b) of the Bankruptcy Code provides a mechanism designed to preserve the creditor/shareholder risk allocation paradigm by categorically subordinating claims asserted against a debtor by equity holders arising from...more
If a business engages in bad behavior like intentional interference with contract and tortious interference with business relations, then it may not use Subchapter V of Chapter 11 to discharge debts based on that bad...more
MODIFICATION OF SECURED LOAN UNDER CRAMDOWN CHAPTER 11 PLAN WARRANTED DUE TO PLAN FEASIBILITY THREAT - Many recent court rulings concerning the treatment of secured creditors under a chapter 11 plan have focused on...more
When existing interest holders attempt to retain ownership of a chapter 11 debtor after confirmation of a nonconsensual plan of reorganization, the Bankruptcy Code's plan confirmation requirements, including well-established...more
In Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973 (2017), the U.S. Supreme Court held that the Bankruptcy Code does not allow bankruptcy courts to approve distributions to creditors in a "structured dismissal" of a chapter...more
Postpetition financing provided by pre-bankruptcy shareholders or other "insiders" is not uncommon in chapter 11 cases as a way to fund a plan of reorganization and allow old shareholders to retain an ownership interest in...more
The COVID-19 pandemic has already caused numerous companies to file for bankruptcy relief and will likely cause many more to do so. In this environment, it is particularly important for both licensees and licensors of...more
For many years, people associated with the bankruptcy system in the United States recognized the process didn’t work well for small business owners. Corporate reorganizations through the Chapter 11 process were cumbersome and...more
A recent case from the Western District of Wisconsin, In re Schroeder Brothers Farms of Camp Douglas LLP, may raise a new issue for the bankruptcy treatment of tax attributes in flow-through entities. The court in Schroeder...more
Recently, we discussed In re CHL, a case involving a real estate developer in Chapter 11. We focused on the importance of the Disclosure Statement as a prerequisite to a debtor's ability to move forward with a plan of...more
The Situation On January 17, 2019, the Fifth Circuit strongly suggested that claims for make-whole damages be characterized as "unmatured interest" and that claims for postpetition interest on unsecured debt be limited in...more
In the case In re Lehman Brothers Holdings Inc., 855 F.3d 459 (2d Cir. 2017), the U.S. Court of Appeals for the Second Circuit affirmed a district court order subordinating the claims of former Lehman Brothers employees for...more
Section 510(b) of the Bankruptcy Code provides a mechanism designed to preserve the creditor/shareholder risk allocation paradigm by categorically subordinating most types of claims asserted against a debtor by equityholders...more
The Bankruptcy Code contemplates that a Chapter 11 bankruptcy case will be concluded in one of three ways: a confirmed Chapter 11 plan, a conversion to Chapter 7 for liquidation of remaining estate assets, or a dismissal of...more
In 2015, Distressing Matters reported on the Third Circuit’s decision in In re Jevic Holding Corp., wherein that panel ruled that, in rare circumstances, bankruptcy courts may approve the distribution of settlement proceeds...more
The United States Supreme Court recently decided a case that impacts lenders and other creditors in Chapter 11 bankruptcy proceedings. The Supreme Court held that a bankruptcy court may not approve a “structured dismissal” of...more
In a 6-2 decision on March 22, 2017, the U.S. Supreme Court determined that bankruptcy courts may not approve a structured dismissal of a Chapter 11 case that provided for distributions of estate funds that do not follow...more
On March 22, 2017 the Supreme Court issued its long-awaited ruling regarding the legality of structured dismissals of Chapter 11 bankruptcy cases that would make final distributions of estate assets to creditors in a manner...more
A potential threat to the Code’s priority scheme is the allowance of “structured dismissals,” which include a settlement as part of the dismissal of the chapter 11 case that would distribute estate assets in a manner that...more
The U.S. Supreme Court ruled on March 22, 2017, in Czyzewski v. Jevic Holding Corp., that without the consent of affected creditors, bankruptcy courts may not approve "structured dismissals" providing for distributions that...more
In a highly anticipated bankruptcy opinion, the United States Supreme Court, in Czyzewski v. Jevic Holding Corp., held that courts may not approve structured dismissals providing for distributions that deviate from the...more
On November 28, 2016, the Supreme Court is scheduled to hear oral arguments in the appeal of Official Committee of Unsecured Creditors v. CIT Group/Business Credit Inc. (In re Jevic Holding Corp.), 787 F.3d 173 (3d Cir....more
It is a fundamental rule of bankruptcy that the claims of junior creditors cannot be satisfied until the claims of more senior creditors are paid in full, absent the senior creditors’ consent. In a chapter 7 liquidation case,...more
To the extent authorized by a State, Chapter 9 of the Bankruptcy Code allows municipalities (defined as a “political subdivision or public agency or instrumentality”) of that State – including public hospitals – to reorganize...more