The Bankruptcy Roundtable
Promoting the dissemination of academic and practitioner views of current bankruptcy issues
Latest News from the Bankruptcy Roundtable
Proper Corporate Governance Necessary to Avoid Recharacterization and Equitable Subordination
By Chad J. Husnick, Kaitlan Donahue, and Travis Schneider (Kirkland & Ellis) Chad J. Husnick, Kaitlan Donahue, and Travis Schneider On August 14, 2026, the U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) issued a written opinion recharacterizing an intercompany loan from a parent to an indirect subsidiary as an equity contribution and, in the alternative, equitably subordinating the intercompany loan to the claims of former executives. See AIG Financial Products Corp. v. Lee Arthurs (In re AIG Financial Products Corp.), No. 22-11309, 2026 WL 2408732, at *65 (Bankr. D. Del. Aug. 14, 2026). The Bankruptcy Court emphasized the absence of arm’s-length negotiations and disinterested decision-makers as significant considerations in its evaluation.This article analyzes the…
Representing the Mass in Mass Tort Bankruptcy
By Michael Francus (University of Virginia School of Law) Michael Francus Editor’s note: Michael’s article is forthcoming in the 2027 Columbia Business Law Review.In the world of mass torts, judges, scholars, and policymakers have long expressed concerns over how plaintiffs’ attorneys represent mass-tort victims. Their concerns center on how (and how much) those attorneys are paid, what incentives those attorneys have to represent their clients well, and how those attorneys are overseen.Much scholarly work considers the descriptive, theoretical, and normative issues of mass-tort representation. Overwhelmingly, such scholarship centers on class actions and multidistrict litigation, which have long been the fora for resolving mass torts.Today, though, mass torts are often being resolved in bankruptcy. Mass-tort class actions have…
DIP Financing in Emerging Markets: Structural Constraints, Creditor Incentives, and Recovery Outcomes in Brazil
By Arthur Tomaz de Oliveira (University of São Paulo Law School) and Henrique Kasai (Mattos Filho) Arthur Tomaz de Oliveira and Henrique Kasai Debtor-in-possession financing is the device modern reorganization law uses to solve the debt-overhang problem: a distressed but viable firm needs new money precisely when no rational lender will advance it on ordinary terms, and the law responds by granting the rescue lender priority over existing claims. The U.S. version of this device, Section 364 of the Bankruptcy Code, has an extensive empirical literature behind it, and that literature has shown that even in a mature market the DIP loan is an instrument of control and carries documented rents. What that literature could not test…
Beyond the Debtor: Third-Party Releases in Chapter 15
By Ameneh Bordi, William H. Cálix, Jacob Lester, and Noah M. Noonan (Sidley Austin LLP) Ameneh Bordi, William H. Cálix, and Jacob Lester (add. authors not pictured) The Supreme Court’s decision in Harrington v. Purdue Pharma L.P. fundamentally altered the treatment of Non-Consensual Third-Party Releases (NCTP Releases) in chapter 11 by holding that, absent affected creditors’ consent, the Bankruptcy Code does not authorize a chapter 11 plan to release claims against nondebtors. However, the effect of Purdue outside chapter 11 has been markedly different. In a growing line of chapter 15 cases, bankruptcy courts have continued to recognize and enforce non-U.S. restructuring plans containing NCTP Releases, relying on chapter 15’s distinct statutory framework and its emphasis on…
Don’t Bet on Bankruptcy: Prediction Markets and the Limits of Insolvency Law
By Billy Organek (Zicklin School of Business, Baruch College, Harvard Law School Bankruptcy Roundtable) and Nizan Packin (Zicklin School of Business, European Corporate Governance Institute) Billy Organek and Nizan Packin Editor’s note: Billy and Nizan’s article is forthcoming in the American University Law Review.Prediction markets have become multibillion-dollar platforms for putting a price on uncertainty in politics, sports, finance, and even war. States and the federal government are fighting to establish regulatory authority over them. But what happens if one becomes insolvent?Prediction markets depend on contingent event contracts whose value may turn on disputed facts, manipulable information, and uncertain legal status. A court confronting a failed prediction market may therefore need to resolve not only what law…
COMI Chameleon: Is ‘COMI Manipulation’ in Chapter 15 a Ballooning Problem?
By Steven W. Golden and Brooke E. Wilson (Pachulski Stang Ziehl & Jones LLP) Steven W. Golden and Brooke E. Wilson Editor’s Note: Steven and Brooke’s article was published in the American Bankruptcy Institute (ABI) Journal (August 2025). Chapter 15 requires U.S. bankruptcy courts to recognize a foreign proceeding as a “foreign main proceeding” when it is pending in the country where the debtor has its “center of main interests” (COMI), thus, triggering powerful relief. Because some foreign regimes offer tools unavailable under chapter 11, companies may be incentivized to manufacture a COMI abroad – i.e., participate in “COMI manipulation.”The article centers on In re Mega Newco (Bankr. S.D.N.Y. Feb. 2025), where Judge Michael Wiles confronted exactly…
Bankruptcy Law Penalties and Board Independence
By Aras Canipek (Sabanci Business School & Leibniz Institute for Financial Research SAFE) Aras Canipek “for debt to be an effective source of discipline it must be backed by an appropriate bankruptcy (or insolvency) procedure, i.e. there must be an appropriate ‘penalty’ in the event of default. A bankruptcy mechanism that is ‘soft’ on management – e.g. one that, like Chapter 11, keeps creditors at bay for a long period – may have the undesirable property that it reduces management’s incentive to avoid default, thus undermining the bonding or disciplinary role of debt.” — Oliver Hart (1995) A large body of theoretical research suggests that bankruptcy law penalties can reduce agency problems. In particular, it is argued…
Subordination: A Functional and Theoretical Analysis
By Steven L. Schwarcz and Isabelle Stewart (Duke University School of Law) Steven L. Schwarcz and Isabelle Stewart Editor’s Note: Professor Schwarcz and Isabelle’s article will appear in the Journal of Corporation Law (forthcoming March 2027). There has been no serious scholarship on subordination since a 1961 Yale Law Journal article which described subordination as then utilized and discussed how it applied in practice. This Article updates and, in scope, goes beyond that earlier article, analyzing subordination not only from a functional but also from a theoretical perspective. The inquiry is important because subordinated debt is universal, representing hundreds of billions of dollars of outstanding financing domestically and trillions worldwide. The Article classifies and compares the four…
Promi$e Land: The Inside Story of the Puerto Rico Debt Crisis
By David Skeel (University of Pennsylvania Carey Law School) David Skeel This summer marked the tenth anniversary of the Puerto Rico Oversight, Management, and Economic Stability Act—PROMESA, or “promise”—Congress’s response to the Puerto Rico’s dire economic crisis. Enacted on June 30, 2016, almost exactly a year after Puerto Rico’s governor had declared the island’s debts “not payable,” PROMESA created a seven-person oversight board and set the stage for the biggest governmental debt restructuring in American history. Before PROMESA, Puerto Rico didn’t have any bankruptcy option at all, either for the Commonwealth itself or for its municipalities or government corporations. States can’t file for bankruptcy, so it’s not surprising that the Commonwealth of Puerto Rico—a U.S. territory since…
Venezuela 2.0: A Blueprint for Restructuring its Debt and Rebuilding its Economy
By Steven T. Kargman (Kargman Associates) Steven T. Kargman Editor’s Note: This post is the second in a mini-series on Venezuela’s sovereign debt restructuring. Last week’s post on this topic can be read here. There has been a certain ebullience in market sentiment toward Venezuela since the capture in early January of former Venezuelan president Nicolás Maduro by U.S. military forces. Venezuelan sovereign and PDVSA bonds rallied as investors anticipated that a political transition might finally pave the way for long-delayed debt restructuring negotiations. Yet there seems to be a major disconnect between that bullish market sentiment and the major structural challenges that continue to confront Venezuela post-Maduro. Venezuela still faces a collapsed economy and an enormous…
Venezuela’s Debt Restructuring: An Alternative Path
By Richard J. Cooper, Ignacio Lagos, and Sean O’Connell (Cleary Gottlieb Steen & Hamilton LLP)* Richard J. Cooper, Ignacio Lagos, and Sean O’Connell In the aftermath of its recent devastating earthquakes, Venezuela might well take a moment to reconsider its rapid approach to a sovereign debt restructuring announced in May of this year. The decision to pause a debt restructuring process is not necessarily a straightforward one. On the one hand, Venezuela’s desire to move ahead quickly is understandable. Venezuela’s debt is unsustainable and a clear impediment to the new investment it requires. The government wants to show prospective investors that there is a path to a restructuring and they need not wait to make critical investments…
New York District Court Affirms Narrow Scope of “Public Policy Exception” in Chapter 15 Cases
By Corinne Ball, Dan T. Moss, David S. Torborg, and Isel M. Perez (Jones Day) Corinne Ball, Dan T. Moss, David S. Torborg, and Isel M. Perez (Jones Day) Chapter 15 of the Bankruptcy Code reached its 20th year of enactment in October 2025. A legislative framework premised on international comity, it has proven to be an invaluable tool for coordinating cross-border bankruptcy and insolvency cases and providing assistance to foreign bankruptcy courts and their functionaries. One safeguard built into chapter 15 to ensure that recognition of foreign bankruptcy proceedings and related relief does not violate chapter 15’s purpose and underlying principles is the “public policy exception” set forth in section 1506 of the Bankruptcy Code. That…
When She Fails: Women Entrepreneurs and Gender Gaps in Business Bankruptcy
By Hosein Maleki (Rutgers Business School), Mahsa Kaviani (University of Delaware), Simi Kedia (Rutgers Business School), and Shaghayegh Pourvosoughi (Rutgers Business School) Hosein Maleki (Rutgers Business School), Mahsa Kaviani (University of Delaware), Simi Kedia (Rutgers Business School), and Shaghayegh Pourvosoughi (Rutgers Business School) When She Fails: Women Entrepreneurs and Gender Gaps in Business Bankruptcy studies whether the bankruptcy system delivers different outcomes to female- and male-owned firms and, if so, why. Using a large sample of U.S. small-business bankruptcy filings, we show that female-owned firms are more likely to be pushed into liquidation and less likely to emerge successfully from bankruptcy than observably similar male-owned firms. In our data, female-owned firms are 24 percent more likely to file…
Creditor-On-Creditor Violence
By Samuel Antill (Harvard Business School), Neng Wang (Columbia Business School & Cheung Kong Graduate School of Business) & Zhaoli Jiang (Hong Kong Polytechnic University) In a liability management exercise (LME), a firm raises liquidity by issuing new secured debt with a highest-priority lien on collateral that was previously pledged to existing secured lenders. Typically, a firm achieves this by convincing a majority of existing secured lenders to amend their credit agreement, allowing for new debt to obtain a higher-priority lien on the existing debt’s collateral. In return, this majority coalition gets to provide the new highest-priority loan and swap their old debt for new highest-priority debt. Thus, the firm raises liquidity, the participating majority coalition retains…
Understanding the Statutory Cap on Landlord Claims for Rejected Leases in Bankruptcy
By Brandon E. Barker, Geoffrey H. Smith, Megan Preusker & Dormie Ko (Mintz) Brandon E. Barker, Geoffrey H. Smith, Megan Preusker & Dormie Ko (Mintz) This article examines how the US Bankruptcy Code limits landlord claims when a debtor-tenant rejects a commercial lease, an issue growing in importance as corporate bankruptcy filings continue to rise. With companies increasingly using Chapter 11 to shed unprofitable real estate, landlords often face disputes over the scope of recoverable damages following lease rejection. A key controversy discussed in the article is whether the 15% limitation should be calculated based on the total remaining rent owed over the lease term (the “Rent Approach”) or based on the rent owed during the first…
Chapter 11 Plan that Abridged Non-Debtor Lessee’s Rights to Remain in Possession After Rejection Unconfirmable as Having Been Proposed in Bad Faith
By Trisha L. Mowbray & Ryan Sims (Jones Day) Trisha L. Mowbray & Ryan Sims (Jones Day) The Bankruptcy Code includes special protections for real property lessees whose lease agreements are rejected in bankruptcy by a trustee or chapter 11 debtor-in-possession by giving a lessee under a rejected real property lease the option to remain in possession of the leased premises during the remaining term of the lease. The Bankruptcy Code also provides that a chapter 11 plan must be proposed in good faith as a condition to confirmation of the plan. The interaction between these two concepts took center stage in a ruling handed down by the U.S. Bankruptcy Court for the District of Colorado. In In…
Former Celsius Customers’ Motion to Withdraw Bankruptcy Court Reference Rejected by SDNY
By Luke Barefoot & Brendan Gerdts (Cleary Gottlieb) Luke Barefoot & Brendan Gerdts Amid the 2022-23 “crypto winter”, Celsius Network filed for bankruptcy in 2022 and emerged in 2024. The Litigation Administrator appointed under Celsius’ reorganization plan has since pursued various claims and causes of action including preference claims against former Celsius Network customers who withdrew digital assets shortly before Celsius’ July 2022 bankruptcy filing. A group of 174 former Celsius customers (“the Defendants”) sought to withdraw the reference of bankruptcy avoidance proceedings from the Bankruptcy Court such that those claims would be heard by the United States District Court for the Southern District of New York (the “District Court”), one of the few venue-shifting options available…
New Jersey bankruptcy court upholds debtor-chosen venue under Asset Based Approach
By Megan Wasson & Rebecca Polinsky (HSF Kramer LLP) Megan Wasson & Rebecca Polinsky The bankruptcy venue statute, 28 U.S.C. Section 1408, allows a debtor to file in any district where its domicile, residence, principal place of business, or principal assets were located (i) during the 180 days preceding the bankruptcy filing or (ii) for a longer portion of that period than in any other district. Judge Michael B. Kaplan recently issued a letter opinion analyzing the “deliberately broad” statute. Multi-Color Corp. and its affiliates (“Multi-Color” or the “Debtors”) filed prepackaged Chapter 11 cases in the Bankruptcy Court for the District of New Jersey (the “Court”) on January 29, 2026 (the “Petition Date”). One dormant entity, Debtor…
Bankruptcy as Presidential Resistance
By Alvin Velazquez (Indiana University Maurer School of Law) Alvin Velazquez Editor’s Note: Professor Velazquez’s article was recently published with the Fordham Urban Law Journal. Litigation against President Trump for withholding federal funds from cities in his “war on woke” and sanctuary cities has taken place either in Article III courts under the Administrative Procedure Act or in the Court of Federal Claims under the Tucker Act. However, there is a third place to resolve these disputes and allocate who bears the consequences of Presidential action that no one has yet discussed: bankruptcy courts. Federal grants make up about one-third of the average city’s budget, and the President could render a city insolvent by swiftly cutting off…
Bankruptcy Redemption Options
By Richard Hynes (University of Virginia School of Law) Richard Hynes The ancient right of redemption allows a party to repurchase assets lost through default at an earlier time. Recently, multiple prominent scholars and the American Bankruptcy Institute have independently proposed granting multi-year or even “perpetual” bankruptcy redemption options to holders of a firm’s junior claims or interests, such as shareholders or unsecured creditors. These options would allow juniors to repurchase or redeem the firm’s equity or assets from whomever received them in bankruptcy. If adopted, these reforms would fundamentally change corporate reorganizations as the current absolute priority rule requires that juniors lose all rights if more senior claims are not paid in full. The reforms would…
Chapter 15 Offers Protection for Cannabis Companies
By David Cohen, Garrett Fail, Robert Niles-Weed, Alex Cohen, Max Bloom, Andrew Clarke (Weil, Gotshal & Manges LLP)* David Cohen, Garrett Fail, and Robert Niles-Weed (add. authors not pictured) The absence of a reliable path to financial restructuring under the Bankruptcy Code has long been a challenge for companies involved in the state-legal cannabis industry in the United States. This concern is particularly acute as of late: Although the legal cannabis industry has expanded rapidly in recent years, many operators have faced steep losses, heavy debt loads, challenging tax treatment, difficulty accessing the capital markets, and competitive challenges from an oversaturated market. Industry experience and empirical research have shown that without clear access to traditional restructuring tools,…
The Erie Doctrine, Code Common Law, and Choice-of-Law Rules in Bankruptcy
By Ralph Brubaker (University of Illinois College of Law) Ralph Brubaker State law pervades bankruptcy litigation, as all parties’ relative rights in bankruptcy are governed by nonbankruptcy law, except to the extent modified by federal bankruptcy law itself. Indeed, that result is constitutionally compelled with respect to parties’ substantive state-law rights and obligations, under the holding of Erie R.R. v. Tompkins. How should a federal bankruptcy court choose the applicable state law, though, when the law of two or more states could apply to a particular matter before the court? In diversity cases, the Supreme Court’s enduring decision in Klaxon Co. v. Stentor Electric, compels a federal court to choose applicable state law by employing the choice-of-law…
Bankruptcy’s Trilemma: A Unifying Framework
By Kenneth Ayotte (University of California Berkeley), Jason Donaldson (University of Southern California), and Giorgia Piacentino (University of Southern California) Kenneth Ayotte, Jason Donaldson, and Giorgia Piacentino What is the purpose of corporate bankruptcy law? What problems is the law set up to solve? In our paper, we propose an economic framework that is simple but more comprehensive than existing frameworks. We argue that there are three major problems that bankruptcy law addresses: commons, anticommons, and agency. The commons problem is sometimes called the ‘creditor run,’ or the ‘grab race’: creditors acting individually to seize a debtor’s assets can destroy value for the creditors collectively. The anticommons problem is the problem of holdout: creditors exercising rights to…
Lessons from the Convergence of Corporate Restructurings
By Robert Miller (University of South Dakota Law School) Robert Miller The two principal mechanisms for large corporate restructurings—liability management exercises (“LMEs”) and chapter 11 bankruptcies—have converged around a shared structure. Both feature transactions that are broadly participatory yet distributionally unequal, in which equity sponsors frequently benefit despite their formally subordinate position. The similarity is striking because, unlike the Bankruptcy Code, contractarian LMEs operate without a governing statutory framework. This Article uses the evolution of LMEs as a comparative lens to reassess two of the most consequential and contested features of chapter 11 practice: restructuring support agreements (“RSAs”) and debtor-in-possession (“DIP”) financing.The early winner-take-all phase of LMEs generated immense deadweight litigation costs. In response, lenders developed cooperation…
The Value And Legality Of Lender Cooperation Agreements
By Brett Seaton (The Wharton School, University of Pennsylvania) Brett Seaton Editor’s Note: At the time of writing this article, Brett Seaton was an undergraduate student at Wharton. We are pleased to share his undergraduate thesis on the BRT, and hope to periodically share more exceptional student work in the future. Liability management exercises (LME) have emerged as the latest trend in the restructuring industry due to a confluence of factors in the corporate credit market, judicial system and macroeconomy. Creditors have pursued an array of solutions to avoid LME—namely adding blocking covenants in credit agreements for newly issued debt. For debt that has already been issued, lenders have only one option to regain negotiating leverage and…