THE GREENE ROOM
The past two years have produced some of the most significant changes in bankruptcy law since the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. These developments affect corporate reorganizations, mass-tort bankruptcies, small business restructurings and cross-border insolvency proceedings.
Although some of the changes may have nominal impact on the commercial finance and equipment leasing industries, at least one major development is cause for some relief. In Harrington v. Purdue Pharma L.P, the United States Supreme Court held that Chapter 11 plans generally cannot impose nonconsensual releases of claims against non-debtors. In the context of the commercial finance business, that usually means personal guarantors. The decision confirmed what most practitioners have long believed, i.e., if you want to avail yourself of the relief afforded by the Bankruptcy Code, you should also have to bear the burden, i.e., file your own petition. However, the decision is not a model of clarity, and accordingly, has generated extensive litigation regarding what constitutes a “consensual” release. Courts across the country continue to grapple with whether opt-out mechanisms and related plan provisions satisfy the consent requirements articulated by the Supreme Court. In this lawyer’s opinion, it shouldn’t be that difficult. I believe that if you want to avail yourself of the benefit of the bankruptcy automatic stay and discharge provisions, you need to “open your kimono”, and disclose your finances to the court, trustee and creditors. In other words, you can’t have your cake and eat it too.
Another major area of development involves the controversial “Texas Two-Step” restructuring strategy. This technique allows a company to separate liabilities into a newly created entity that subsequently files for bankruptcy protection. Although the Supreme Court recently declined to review a challenge to the bankruptcy of Georgia-Pacific subsidiary Bestwall (a fitting name, in my opinion), the debate surrounding the legitimacy and fairness of this restructuring tool remains active. Businesses facing significant tort liabilities continue to explore the strategy, while creditors and claimants argue that it permits financially healthy companies to shield themselves from liability.
Cross-border insolvency practice has also evolved significantly. Courts have demonstrated an increased willingness to grant provisional relief in Chapter 15 cases before formal recognition of foreign proceedings. Recent decisions have emphasized the flexibility of Chapter 15 in protecting assets and preserving value while international insolvency proceedings are pending. These developments are particularly important as global commerce continues to expand and multinational insolvencies become more common.
Small-business reorganizations under Subchapter V of Chapter 11 remain an important area of focus. Practitioners continue to advocate for higher debt eligibility limits and other reforms designed to preserve the accessibility of Subchapter V for closely held businesses. Proposed legislative efforts have sought to restore and extend expanded debt thresholds that previously expired, reflecting ongoing concern about providing efficient restructuring options for small enterprises.
Recent Chapter 11 cases also demonstrate growing scrutiny of liability-management exercises and pre-bankruptcy debt restructurings. Creditors increasingly challenge transactions that favor certain lender groups over others, resulting in more litigation and delaying confirmation of restructuring plans. Courts are being asked to determine the extent to which these transactions comply with contractual and bankruptcy-law principles.
Finally, bankruptcy filing trends indicate that although the overall number of Chapter 11 filings has fluctuated, the cases being filed are often larger and more complex. At the same time, commercial bankruptcy filings have increased in several sectors as businesses confront higher interest rates, tighter credit markets and ongoing economic uncertainty.
Taken together, these developments reflect a bankruptcy system undergoing a substantial metamorphosis. The continuing impact of the Purdue Pharma decision, the evolution of liability-management strategies, the growth of cross-border insolvency practice and renewed attention to small-business reorganizations will likely remain central themes in bankruptcy law throughout 2026 and beyond.
The Law Offices of Kenneth Charles Greene present this article. All copyrightable text, the selection, arrangement, and presentation of all materials (including information in the public domain), and the overall design of this presentation are the property of the Law Offices of Kenneth Charles Greene. All rights reserved. Permission is granted to download and reprint materials from this article for the purpose of viewing, reading, and retaining for reference. Any other copying, distribution, retransmission, or modification of information or materials from this article, whether in electronic or hard copy form, without the express prior written permission of Kenneth C. Greene is prohibited. The materials available from this article are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any issue or problem. Use of and access to these materials does not create an attorney-client relationship between the Law Office of Kenneth Charles Greene and the user or viewer. The opinions expressed herein are the opinions of the individual author.
