Bankruptcy Law

Nego­ti­at­ing a plan of reor­ga­ni­za­tion is the most con­se­quen­tial aspect of a Chap­ter 11 bank­rupt­cy process for both debtors and cred­i­tors. The bal­ance of pow­er in that nego­ti­a­tion process is prin­ci­pal­ly defined by the require­ments for vot­ing and plan approval which are laid out in sec­tion 1129(a) of the Bank­rupt­cy Code. Courts are divid­ed as to whether, in a case where a class of claims is pro­posed to be impaired under a joint, mul­ti­debtor plan, sec­tion 1129(a)(10) of the Bank­rupt­cy Code re-quires accep­tance from at least one impaired class of claims of any one debtor (the “per plan” approach) or, alter­na­tive­ly, accep­tance from one impaired class of claims of each debtor (the “per debtor” approach). In this Con­tri­bu­tion, Elaine Ander­sen (’21) argues that the “per plan” approach bet­ter com­ports with the text, con­text, and pur­pose of the section.

Observers gen­er­al­ly agree that the assump­tion of execu­to­ry con­tracts by debtors in pos­ses­sion in Chap­ter 11 pro­ceed­ings pro­motes the pur­pos­es of the Bank­rupt­cy Code and accords with Con­gress’ intent. Yet courts have been riv­en by the ques­tion of whether the plain text of sec­tion 365 allows the prac­tice. This Con­tri­bu­tion argues that courts for­bid­ding assump­tion of execu­to­ry con­tracts by debtors in pos­ses­sion have mis­di­rect­ed the focus of their tex­tu­al analy­sis. Close exam­i­na­tion of an over­looked phrase with­in sec­tion 365 and of the inter­ac­tions between sec­tions 365 and 1107 pro­vides two inde­pen­dent tex­tu­al bases for courts to read the Code in keep­ing with con­gres­sion­al intent.