Chapter 11 bankruptcy cases generally conclude in one of three ways: a plan, conversion to a liquidation under Chapter 7, or dismissal. Classically, dismissal restores the debtor to its financial condition as of the date it filed bankruptcy, but “for cause” Bankruptcy Courts can order a “structured dismissal” effecting the distribution of some or all of the debtor’s assets and affording other related relief.

Structured dismissal orders are often comprehensive, complex documents with provisions mirroring those typically found in Chapter 11 plans. Because structured dismissals offer...

For more than a decade, make-whole premiums, also referred to at times as prepayment premiums, prepayment fees, yield maintenance premiums, or similar terms, have been a common feature in bond indentures and credit agreements. The basic purpose of a make-whole premium is to compensate the investor or lender if the debt is paid prior to its maturity date for the loss of the bargained-for return that the investor or lender would have otherwise received. Debtor-borrowers often benefit from such provisions by obtaining lower interest rates and/or fees than they would otherwise pay absent such...

As part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Congress amended how certain claims for the sale of goods would be treated in Chapter 11 cases by establishing a new category of administrative priority claim under Section 503(b)(9) of the U.S. Bankruptcy Code. Section 503(b)(9) provides an administrative expense claim for the value of goods (as opposed to services) sold and delivered to the debtor in the ordinary course of business within the 20 days immediately prior to the commencement of the debtor’s bankruptcy case.1

Having the...

In distressed situations and workouts, lenders often trade forbearance and additional funding for concessions that make it easier to foreclose if the debtor commits new defaults or files a bankruptcy. Two recent Bankruptcy Court decisions refused to enforce provisions in forbearance agreements that aimed to block bankruptcy filings by the debtors.1  In both cases, the Bankruptcy Courts ruled that the appointment of the lender as a “special member” with veto power over a bankruptcy filing was void as contrary to federal public policy.

In Lake Michigan Beach,...

For a distressed company running low on capital, an investment from insiders may represent a last best hope for survival. Insiders may be willing to risk throwing good money after bad for a chance to save the company even when any third party would stay safely away.

Insiders of a failing company may also have an ulterior motive for making an eleventh-hour capital infusion, as they may use their control over a distressed company to enhance their position relative to the company’s other creditors. The line between a good-faith rescue and bad-faith self-dealing is often a hazy one....