June 6,2015
The Third Circuit recently affirmed a bankruptcy court’s approval of a joint settlement and structured dismissal of a chapter 11 case that did not comply with the priority scheme under the Bankruptcy Code by providing payment to a lower class of settling trade creditors, over the objection of a higher class of priority creditors—former employees of the debtor. The court ruled that the structured dismissal did not need to comply with the priorities established in the Bankruptcy Code if the proponents of the structured dismissal “have specific and credible grounds to justify the deviation.”

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