This article examines the emerging trend of U.S.-based companies with Canadian ties initiating primary insolvency proceedings in Canada and seeking recognition in the United States under Chapter 15 of the U.S. Bankruptcy Code. As described herein, this two-step strategy enables debtors to take advantage of the flexibility and efficiency of Canadian restructuring regimes, while securing key U.S. bankruptcy protections.
A Strategic Shift in Cross-Border Insolvency
In keeping with the past five years, 2025 has continued to be an active time for airline restructurings and liquidations. The two largest U.S. aviation Chapter 11 proceedings that commenced during 2024, Spirit Airlines and GOL, both concluded during the first half of 2025 by successfully confirming a Chapter 11 plan of reorganization. While GOL has thrived since exiting Chapter 11, Spirit Airlines filed a second Chapter 11 case (commonly referred to as a "Chapter 22") only a few months later.
In the February 2026 edition of the Restructuring Department Bulletin, we highlight recent decisions and developments impacting the restructuring arena and share the latest news on the Paul, Weiss Restructuring Department.
Here’s a judicial estoppel hypothetical:
- debtor files Subchapter V bankruptcy and achieves a confirmed plan;
- in the bankruptcy debtor fails to disclose a pre-petition lawsuit claim;
- after plan confirmation, debtor files suit on the pre-petition lawsuit claim; and
- defendant seeks dismissal of the lawsuit, with prejudice, on grounds of judicial estoppel—i.e., for debtor/plaintiff’s failure to disclose the claim in bankruptcy.
Question: Who should be the ultimate beneficiary of a lawsuit claim that debtor fails to disclose:
The casual dining and hospitality sector is navigating a period of profound upheaval, driven by macroeconomic pressures, regulatory uncertainty, and shifting consumer preferences. In this context, private equity and credit funds also face mounting distress, divergent brand fortunes, and a growing need for legal and transactional agility.
A Petition for Writ of Certiorari has been granted by the U.S. Supreme Court in Keathley v. Buddy Ayers Construction, Inc., Case No. 25-6, on a ruling from the U.S. Fifth Circuit Court of Appeals.[Fn. 1]
The Question Presented in Kethley v. Buddy Ayers is this:
Highlights
While Chapter 11 does not require debtor insolvency, it does require good faith (applicable to the petition and the plan), which for solvent debtors seeking to reject and modify lease-counterparty rights, includes establishing some level of financial distress susceptible to resolution through the plan process.
Key takeaways
11 U.S.C. § 365(c)(2) says (emphasis added):