Although it has been described as an “extraordinary remedy,” the ability of a bankruptcy court to order the substantive consolidation of related debtor-entities in bankruptcy (if circumstances so dictate) is relatively uncontroversial, as an appropriate exercise of a bankruptcy court’s broad (albeit nonstatutory) equitable powers. By contrast, considerable controversy surrounds the far less common practice of ordering consolidation of a debtor in bankruptcy with a nondebtor.

When a bankruptcy court calculates the "projected disposable income" in a repayment plan proposed by an above-median-income chapter 13 debtor, the court may "account for changes in the debtor's income or expenses that are known or virtually certain at the time of confirmation," the U.S. Supreme Court held in Hamilton v. Lanning on June 7. Writing for the 8-1 majority, Justice Samuel A.

The ability of a chapter 11 debtor-in-possession (“DIP”) or bankruptcy trustee to assume or reject unexpired leases or contracts that are “executory” as of the bankruptcy filing date is one of the most important entitlements created by the Bankruptcy Code. It allows a DIP to rid itself of onerous contracts and to preserve contracts that can either benefit its reorganized business or be assigned to generate value for the bankruptcy estate and/or fund distributions to creditors under a chapter 11 plan.

Recently, in Travelers Casualty & Surety Co. of America v. Pacific Gas & Electric Co., the U.S. Supreme Court resolved a conflict among the circuit courts of appeal by overruling the Ninth Circuit’s Fobian rule, which dictated that attorneys’ fees are not recoverable in bankruptcy for litigating issues “peculiar to federal bankruptcy law.” In reaching its decision, the Supreme Court reasoned that the Fobian rule’s limitations on attorneys’ fees find no support in either section 502 of the Bankruptcy Code or elsewhere.

Recent Developments in Bankruptcy and Restructuring
Volume 13 l No. 3 l May–June 2014 JONES DAY
Business
Restructuring
Review
Eighth Circuit Expands Subsequent New Value
Preference Defense in Cases Involving Three-Party
Relationships
Charles M Oellermann and Mark G. Douglas
A bankruptcy trustee or chapter 11 debtor-in-possession has the power under section
547 of the Bankruptcy Code to avoid a transfer made immediately prior to
bankruptcy if the transfer unfairly prefers one or more creditors over the rest of

Recent Developments

One of the primary fights underlying assumption of an unexpired lease or executory contract has long been over whether any debtor breaches under the agreement are “curable.” Before the 2005 amendments to the Bankruptcy Code, courts were split over whether historic nonmonetary breaches (such as a failure to maintain cash reserves or prescribed hours of operation) undermined a debtor’s ability to assume the lease or contract.

U.S. federal courts have frequently been referred to as the “guardians of the Constitution.” Under Article III of the Constitution, federal judges are appointed for life by the U.S. president with the approval of the Senate. They can be removed from office only through impeachment and conviction by Congress. The first bill considered by the U.S. Senate—the Judiciary Act of 1789—divided the U.S. into what eventually became 12 judicial “circuits.” In addition, the court system is divided geographically into 94 “districts” throughout the U.S.

Bankruptcy headlines in 2007 were awash with tidings of controversial developments in the chapter 11 cases of Northwest Airlines and its affiliates that sent shock waves through the "distressed" investment community. A New York bankruptcy court ruled that an unofficial, or "ad hoc," committee consisting of hedge funds and other distressed investment entities holding Northwest stock and claims was obligated under a formerly obscure provision in the Federal Rules of Bankruptcy Procedure—Rule 2019—to disclose the details of its members' trading positions, including the acquisition prices.

For the third time in as many years, the Delaware Chancery Court has handed down an important ruling interpreting the interaction between federal bankruptcy law and Delaware corporate law. The thorny question this time was whether a bankruptcy court’s determination that the directors of a corporation acted in good faith when they authorized a chapter 11 filing precluded a subsequent claim that the directors breached their fiduciary duties by doing so. The Delaware Chancery Court concluded that it did, ruling in Nelson v.