To those familiar with both U.S. and Australian insolvency regimes, Australia's creditors' scheme of arrangement (Scheme) may appear, at first glance, to resemble a Chapter 11 restructuring in disguise. This is because both regimes facilitate creditor compromise, allow incumbent management to remain in control, involve court supervision and rely on class-based voting structures to approve a restructuring outcome.
In Insight Terminal Solutions, LLC v. Cecelia Financial Management (In re Insight Terminal Solutions, LLC), 148 F.4th 869 (6th Cir. 2025), the Sixth Circuit reversed a bankruptcy court’s exclusion of deposition testimony in a debt-versus-equity recharacterization dispute. While the majority resolved the appeal on evidentiary grounds, Judge Eric Murphy’s concurrence questioned whether bankruptcy courts have any federal authority to recharacterize loans as equity.
Before the US Supreme Court’s landmark decision in Purdue Pharma,1 it had become common practice for Chapter 11 debtors to include a consensual or nonconsensual non-debtor third-party release in their plans of reorganization.