In recent years, debtors that have filed for Chapter 11 with heavily debt-laden balance sheets and few if any residual assets available for distribution to unsecured creditors have increasingly looked to “structured dismissals” in lieu of a traditional plan process at the conclusion of their cases. Although no clear authorization for structured dismissals can be found in the Bankruptcy Code, such dismissals have concluded a number of recent Chapter 11 cases, and are particularly attractive when, following a sale of all or substantially all of a debtor’s assets under Bankruptcy Code §363, an estate lacks the necessary liquidity to confirm a Chapter 11 plan to distribute sale proceeds.
Notably, the U.S. Court of Appeals for the Third Circuit recently affirmed approval of a controversial settlement agreement and structured dismissal order that resolved the case In re Jevic Holding Corp.1 The majority opinion, discussed in detail below, is the first federal circuit court of appeals opinion recognizing the ability of bankruptcy courts to conclude a Chapter 11 case through a structured dismissal.
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