When the current iteration of the Bankruptcy Code was enacted by the Bankruptcy Reform Act of 1978, its drafters envisioned a mechanism that would facilitate a consensus for reorganization between bankruptcy constituents. For two decades, this theory often reflected reality as reorganizations tended to exhibit a balance of power between the stakeholders: debtors‐in‐possession, secured creditors, and general unsecured creditors (including trade creditors and bondholders). While these bankruptcies were often ridiculed for taking extraordinary amounts of time, such delay reflected the fact that each party at the table had notable bargaining power and influence.
To read the full article, click below.
Reprinted with permission from Bloomberg Law Reports.