The Bankruptcy Roundtable
Promoting the dissemination of academic and practitioner views of current bankruptcy issues
Latest News from the Bankruptcy Roundtable
Liability Management’s Limited Runway: Corporate Restructuring Today
By Mark Roe (Harvard Law School) and Vasile Rotaru (Harvard Law School; University of Oxford) Mark Roe and Vasile Rotaru Coercive, non-pro rata debt restructurings—now widely labeled “liability management exercises” (LMEs), just like their pro rata siblings—have become a central tool for distressed borrowers. Proponents of the non-pro rata restructuring often argue that it gives the company time to turn around and take off, reduce financial distress, and typically avoid bankruptcy. Our new paper argues that this expectation is overstated: on average, LMEs buy a shorter, more fragile runway than proponents suggest; most coercive LMEs in our sample ultimately default again or file for bankruptcy anyway. An LME, broadly, is simply an out-of-court debt renegotiation—yesterday’s “workouts.” In…
Lessons From the Silicon Valley Bank Chapter 11: Preserving Indemnification and Contribution Rights
By Shana A. Elberg, Bram A. Strochlic, and Moshe S. Jacob (Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates) Shana A. Elberg, Bram A. Strochlic, and Moshe S. Jacob Summary of the Silicon Valley Bank Bar Date Ruling Judge Glenn issued a significant decision in the Silicon Valley Bank (SVB) Chapter 11 case, clarifying that a bankruptcy bar date can extinguish indemnification and contribution rights against a debtor, even if the underlying lawsuit is filed after the bar date. This ruling underscores the importance for directors, officers, and other stakeholders to proactively assess and take steps to safeguard such potential claims in bankruptcy. Background and Context SVB’s 2021 merger with Boston Private Financial Holdings (Boston Private)…
Recharacterizing Contracts: The Sale-versus-Loan Problem of Receivables Financing
By Steven L. Schwarcz (Duke University School of Law) and Isabelle Stewart (Duke University School of Law) Steven L. Schwarcz and Isabelle Stewart This Article addresses a complex and critically important issue that lies at the intersection of contract, property, commercial, and bankruptcy law and is crucial to corporate wealth production: what constitutes the sale of intangible rights to payment, or “receivables.” Courts often recharacterize contracts that purport to sell such rights if, notwithstanding being designated a sale, some of the substantive terms of the transfer are indicative of a loan. As a highly simplified example, assume that Party A (the transferor/purported seller) contracts to sell $1,000 of receivables to Party B (the transferee/purported buyer) for $950.…
Mass-Tort Trusts and the Faustian Bargain
By Samir D. Parikh (Wake Forest University – School of Law) and Suneal Bedi (Indiana University – Kelley School of Business) Samir D. Parikh and Suneal Bedi In bankruptcy, establishing a mass‑tort trust is the final piece in structuring resolution of protracted aggregate litigation faced by a corporate debtor. As seen in cases like Purdue Pharma and Boy Scouts of America, the multibillion‑dollar aggregate settlement figure captures all the headlines. But the trust distribution provisions—which actually provide the details of how individual claimants will be treated and what they will receive—are an afterthought. This odd dynamic has allowed antiquated trust provisions that create short‑term benefits and often significant long‑term costs to proliferate. The Faustian Bargain is especially…
Florida Bankruptcy Court: Proposed DIP Financing and Sale Framework for Administratively Insolvent Debtors Did Not Violate Jevic’s Prohibition of Priority-Deviating Distributions
By Jeffrey Ellman (Jones Day) Jeffrey Ellman The U.S. Supreme Court ruled in Czyzewski v. Jevic Holding Corp., 580 U.S. 451 (2017), that the Bankruptcy Code prohibits final distributions to creditors that deviate from the Bankruptcy Code’s priority scheme as part of a “structured dismissal” of a chapter 11 case without the consent of affected creditors. Since then, courts have been called upon to determine whether the rationale of Jevic extends to other contexts, such as proposed settlements and bankruptcy asset sales. In In re Silver Airways, LLC, 671 B.R. 533 (Bankr. S.D. Fla. 2025), the U.S. Bankruptcy Court for the Southern District of Florida weighed in on this debate in an unusual context. The court approved…
The Real Effects of Bankruptcy Forum Shopping
By Samuel Antill (Harvard Business School) and Aymeric Bellon (UNC Kenan-Flagler Business School) Samuel Antill and Aymeric Bellon Many firms file for Chapter 11 bankruptcy in a court located outside of the state in which they are headquartered. Roughly half of these “forum-shopped” bankruptcies are filed in the Delaware bankruptcy court. For decades, policy makers and academics have debated whether this Delaware forum shopping is a positive or negative feature of bankruptcy. Critics argue that forum shopping reflects corrupt court incentives to attract cases. Six congressional bill proposals have sought to limit forum shopping. Several of these bills are predicated on the idea that forum shopping is harmful for employees, who cannot represent themselves in a distant…
When Tort Liability Bankrupts Labor
By Alvin Velazquez (Indiana University Maurer School of Law) The main character in 2019 Game of the Year Award winning video game Disco Elysium is an amnesiac detective with a murder and a strike by the dockworker union to solve. The strike is the result of a dispute concerning pay with a multinational corporate conglomerate. The damage arising from the economic strife between the parties is evident on the streets of the fictional city in which the game takes place. While the game is certainly entertaining and a vehicle for pondering the implications of various political philosophies, it also raises an interesting question about moral hazard—who bears the costs of a strike, and to what extent should…
Liability Management Exercises Mature
By Robert Miller (University of South Dakota Law School) Robert Miller When large, distressed entities restructure, they typically prefer liability management exercises (“LMEs”) over chapter 11 bankruptcies. Despite their contemporary nascence, LME paradigms have already evolved. First, they were binary. Now, they are inclusive, but unequal. Changes to capital markets, legal precedent, corporate control, and credit documentation drove these shifts. Guided by these catalyzing inputs, this article will examine LMEs’ genesis, explain their maturation, and forecast their future. The winner-take-all nature of the initial LME vintage met stiff resistance from excluded lenders. The widely disparate treatment of these similarly situated lenders promoted bruising litigation. The aggressors, equity sponsors and their lender-allies, attempted to launder legally questionable transactions…
Outnumbered, Not Outplayed: Minority Lenders Successfully Challenge Exclusive Backstop Agreement on Equal Treatment Grounds in ConvergeOne
By Debora Hoehne, Robert J. Lemons, Artem Skorostensky, and Katherine Lynn (Goodwin Procter) Debora Hoehne, Robert J. Lemons, Artem Skorostensky, and Katherine Lynn The District Court for the Southern District of Texas recently issued a ruling in the chapter 11 cases of ConvergeOne Holdings, Inc. and its affiliated debtors (together, the “Debtors”) prohibiting the offer of the exclusive opportunity to backstop a chapter 11 plan’s (the “Plan”) equity rights offering to select creditors while excluding creditors in the same plan class. This is the first published decision addressing this issue since the Fifth Circuit’s Serta decision, which held that chapter 11 plans must provide equal opportunities and results for creditors in the same class. The ConvergeOne decision…
Insolvency and systemic risks: The macroeconomic costs of director duties in crisis
By Adi Marcovich Gross (Reichman University & The Wharton School) Adi Marcovich Gross The traditional thinking is that insolvency duties protect creditors. In times of crisis, however, they may lead to a costly wave of bankruptcies. My article, entitled “Insolvency and Systemic Risks: The Macroeconomic Costs of Director Duties in Crisis,” challenges the assumption that director insolvency duties always serve creditor interests, arguing that they can exacerbate economic instability rather than mitigate it. When managers face personal liability for delayed filings, they may rush into bankruptcy prematurely, resulting in “congestion costs”—a surge in cases that overwhelms courts and floods markets with distressed assets at fire-sale prices. These effects transform what is meant to be a creditor-protection mechanism…
Recognition of Nonconsensual Third-Party Releases in Ch. 15 After Purdue
By George W. Shuster, Jr. (WilmerHale) and Benjamin W. Loveland (WilmerHale) George W. Shuster, Jr. and Benjamin W. Loveland The Supreme Court’s decision in Harrington v. Purdue Pharma, LP, 603 U.S. 204 (2024) has in many respects changed the landscape for nonconsensual third-party releases in chapter 11 cases. But what effect, if any, has it had on the viability of such releases in chapter 15 cases? We explore that question in light two recent post-Purdue decisions that approved third-party releases in chapter 15 cases. In In re Credito Real, No. 25-10208 (TMH), 2025 WL 977967 (Bankr. D. Del. Apr. 1, 2025), the Delaware bankruptcy court recognized a foreign debtor’s plan of reorganization that contained non-consensual third-party releases…
Bankruptcy’s Demise: The Flawed Safe Harbor
By Steven L. Schwarcz (Duke University of Law) Steven L. Schwarcz The primary goals of corporate reorganization under Chapter 11 of the federal Bankruptcy Code are to provide a structured, equitable means of resolving a firm’s financial distress while maximizing creditor recoveries. The central provisions of bankruptcy law, which include the automatic stay of enforcement, the trustee avoidance powers, and the debtor’s right to assume favorable contracts and reject unfavorable ones, serve as critical tools to try to safeguard those goals. However, an alleged competing concern—the mitigation of systemic risk in financial markets—has prompted the enactment of amendments to the Bankruptcy Code that exempt derivatives-related contracts from those provisions and other core bankruptcy protections (these exemptions collectively…
Tariffs, a Trade War, and Tumult in the Global Trading System: Yet Another Potential Economic Shock to Emerging Economies
By Steven T. Kargman (Kargman Associates) Steven T. Kargman The tariffs announced by the Trump administration are widely expected to lead to slower global economic growth in 2025 as well as slower growth for emerging markets and developing countries (EMDEs). A key question that has thus far not received adequate attention is whether the tariffs and any resulting tumult in the global trading system will adversely impact the economies of EMDEs in such a way that these countries might experience heightened sovereign debt distress (i.e., increased difficulty in their ability to service their outstanding sovereign debt). Tariffs, trade tensions, and the associated policy uncertainty could potentially make it more difficult for EMDEs to service their outstanding sovereign…
Assessing the Legitimacy of the “Texas Two-Step” Mass-Tort Bankruptcy
By Ralph Brubaker (University of Illinois College of Law) Ralph Brubaker This three-part article analyzes the innovative “Texas Two-Step” mass-tort bankruptcy phenomenon, in real time as the courts grapple with legal challenges to the fundamental legitimacy thereof. Through the Two-Step maneuver, an eminently solvent and thriving mass-tort defendant can isolate its mass-tort obligations in a newly created subsidiary that files bankruptcy. The legacy company provides a funding backstop that obligates it to pay the mass-tort liability, but the profitable business operations that must do so remain outside (and thus are not subjected to the substantial costs of) the bankruptcy process. The professed and only purpose of the bankruptcy filing, then, is to resolve the mass-tort litigation using the federal…
The Treatment of Digital Assets in Insolvency
By Nydia Remolina (Singapore Management University, Yong Pung How School of Law), Aurelio Gurrea-Martínez (Singapore Management University, Yong Pung How School of Law), and Daniel Liu (WongPartnership LLP) Nydia Remolina, Aurelio Gurrea-Martínez, and Daniel Liu The collapse of cryptoexchanges and the increasing use of cryptocurrencies in many corporate transactions have led to numerous discussions about the treatment of cryptocurrencies in insolvency. While much of the literature on insolvency and cryptoassets has primarily focused on the analysis of whether cryptocurrencies constitute property of the estate, our article, entitled “The Treatment of Digital Assets in Insolvency”, seeks to provide a comprehensive analysis of the treatment of digital assets in insolvency. The article starts by offering a general overview of…
Legal Heterodoxy in the Global South: Priority of Workers versus Secured Creditors in Insolvency
By Kevin Davis (New York University), Mariana Pargendler (Harvard Law School), and Maria Eduarda Lessa (No affiliation) Kevin Davis, Mariana Pargendler, and Maria Eduarda Lessa Our recent working paper examines how priority of workers’ claims vis-à-vis secured claims in insolvency varies across jurisdictions and over time to provide a window into the shifting treatment of distributional or social justice considerations in private law. The comparative literature has traditionally focused on the extent to which laws in the Global South are either legal transplants from European countries belonging to the same legal family or have adhered to “neoliberal” prescriptions from the United States or international organizations such as the World Bank and UNCITRAL. At the same time, recent…
Key Lessons for Aircraft Lessors from the Ukraine/Russia Conflict: A Bankruptcy Perspective
By Gulnur Bekmukhanbetova (U.C. Berkeley, graduate) and Ainur Merziyasheva (Vice President, Legal Counsel, Citibank Kazakhstan) Gulnur Bekmukhanbetova and Ainur Merziyasheva The Russia-Ukraine conflict has global significance in the aviation sector because it exposed a huge problem in leasing operations involving high-risk jurisdictions from the aircraft lessors’ standpoint. The Government of Russia has refused to honor the rights of lessors (and financiers) to exercise remedies under the leases which have breaches and are covered under the Cape Town Convention to which Russia is a party. To put a finer point on it, there is not really an enforcement mechanism available to the individual lessors as enforcement of international treaties (such as the CTC) ultimately depends on the government…
Bankruptcy as a National Security Risk
By Jason Jia-Xi Wu (Law Clerk; Harvard Law School) Jason Jia-Xi Wu Defense contractors lie at the heart of the U.S. national security regime. Each year, over half of the federal defense budget is allocated to contracts outsourcing military operations, projects, and services to private companies. However, defense outsourcing carries a ticking time bomb: mounting private debt. Today, the defense industry is among the nation’s most indebted sectors, fueled largely by the rise of private equity. Over the past two decades, more than 1,500 defense contractors have been acquired by private equity firms through leveraged buyouts (LBO)—high-risk takeovers funded almost entirely by debt. At any moment, this private debt time bomb could detonate, triggering a cascade of financial…
Sustainable Bankruptcy
By G. Ray Warner (St. John’s University) G. Ray Warner Sustainability is about consequences, and a sustainable approach to bankruptcy requires consideration of the interests of all, both present and future, who may be affected by the process. Bankruptcy theory has tilted strongly toward a single-stakeholder model in recent decades. The currently dominant “creditors’ bargain” theory of bankruptcy is a creditor primacy model that ignores the consequences imposed on others by the decisions made in a bankruptcy case. Notwithstanding its creditor orientation, the U.S. bankruptcy process leaves ample room to adopt a sustainability approach. Sustainability imposes no metric on the outcome of the decision-making process and does not require subordination of the interests of financial stakeholders. It…
A Mill of Miller: Examining the Supreme Court’s Recent Bankruptcy Jurisprudence
Editor’s Note: This is the Harvard Law School Bankruptcy Roundtable’s last scheduled post for the summer of 2025. The BRT intends to resume posting around mid-September. The BRT wishes all its readers an enjoyable remainder of the summer! By Declan R. Kunkel (Law Clerk to the Hon. Amul R. Thapar) Declan R. Kunkel In the recent Supreme Court case United States v. Miller, the Court resolved a nuanced but technical dispute in bankruptcy law: whether a trustee can use § 544(b)’s avoidance power against the government a separate, state-law waiver of sovereign immunity. In holding that a trustee does need a second waiver—apart from § 106(a)’s general waiver of sovereign immunity—the Court not only resolved a circuit split, but…
Mind the Gap: The Uncertain Status of Aircraft Lenders to Foreign Airlines in Chapter 11
By Prof. Kenneth Ayotte (University of California, Berkeley School of Law) and Gulnur Bekmukhanbetova (Winstead PC) Kenneth Ayotte and Gulnur Bekmukhanbetova On July 22, 2024, the Southern District of New York issued a decision in In Re SAS AB suggesting that certain enhanced rights of creditors and lessors of aircraft equipment should be enforceable in the U.S. against foreign air carriers that file for bankruptcy protection in the U.S. It was unclear immediately before this decision whether (and how) a U.S. court would enforce such protections of aircraft creditors vis-à-vis a non-U.S. carrier in a chapter 11 case. For domestic chapter 11 filers, §1110 of the Bankruptcy Code requires a debtor to agree to perform obligations under…
Crossing the Rubicon: Assembling a Litigation Colossus in Mass Torts
By Samir Parikh (Wake Forest University School of Law) Samir Parikh In 2021, Arizona created the alternative business structure (ABS), which allows nonattorneys to own a firm that provides legal services and actively participate in firm management. Scholars have argued that this new paradigm will erode the attorney-client relationship. This represents a legitimate concern. Conflicting fiduciary duties can complicate key moments in case resolution. But the impact of Arizona’s shift is more seismic. The true threat does not involve nonattorneys owning a law firm but, rather, private equity firms vertically integrating the entire mass-tort machinery. The endgame is a litigation colossus that rolls up law firms, marketers, claim aggregators, administrative vendors, and medical clinics; creating an apex…
Exit Consents in a Liability Management World
By Dennis Jenkins (Willkie Farr & Gallagher LLP) Dennis Jenkins As liability management exercises (LMEs) and creditor-on-creditor violence continues, many question whether drop-down, up-tier, double-dip, pari-plus, and similar transactions violate legal limits. LMEs may delay bankruptcy but do so at the expense of creditor priorities, transparency, predictability, and principles of good faith and fair dealing. They also spawn expensive and disruptive litigation, something to which stakeholders of Travelport, Revlon, TriMark, Serta, AMC, Mitel, Robertshaw, and Wesco (to name a few) can now attest. However, a simple truth is being lost. LMEs often hinge on integrating a loan amendment (or exit consent) that engineers disparate treatment within a class or tranche of lenders, benefiting majority lenders and other…
Bankruptcy Law’s Doctrinal Evolution: An Empirical Study
By Alex Huang (University of Hong Kong) Alex Huang Bankruptcy law professors often remind their students that although the Bankruptcy Code has remained largely stable, the practice of bankruptcy has been anything but static. Over time, Chapter 11 practice has undergone a paradigm shift: from debtor control to creditor control. How, then, might one document a legal paradigm shift? Two dimensions offer insight. The first is case outcomes, which record the effects of law: who wins, what is approved by judges, and what events occur. The second is case content, which captures how law is interpreted and applied. Judges are expected to articulate the legal rationales that justify case outcomes, drawing on statutes, precedents, and doctrines. In…
Judge Goldblatt Reconsiders What Constitutes“Consent” Post Purdue Pharma
By Michelle Saney (Squire Patton Boggs) Michelle Saney On June 27, 2024, the Supreme Court issued its long-awaited ruling regarding an increasingly heated debate—whether the United States Bankruptcy Code permits nonconsensual, third-party releases. In Harrington v. Purdue Pharma L.P., 144 S.Ct. 2071 (2024) (“Purdue Pharma”), the Supreme Court ruled that the Bankruptcy Code does not permit non-consensual third-party releases in a debtor’s plan of reorganization or liquidation. Such plan provisions release affiliated non-debtor individuals and/or entities from liability owed to the debtor’s creditors. However, the Supreme Court highlighted the limitations of its decision, noting that “[a]s important as the question we decide today are ones we do not.” One of the questions that remain unanswered after the Purdue…