October 06, 2015 Articles

Is Structured Dismissal a Dismissal of Structure?

Jevic is the first circuit court decision to affirmatively rule on the issue of whether the Bankruptcy Code allows for structured dismissals.

By Edward Clarkson III

The Bankruptcy Code, 11 U.S.C. §§ 101–1532, explicitly provides three ways for a debtor under Chapter 11 to exit the bankruptcy case: confirmation of a plan of reorganization, conversion to a Chapter 7 liquidation, or dismissal. However, recently, the United States Court of Appeals for the Third Circuit held that a “structured dismissal” may be a viable fourth exit option for a Chapter 11 debtor under certain circumstances. Official Comm. of Unsecured Creditors v. CIT Group/Bus. Credit Inc. (In re Jevic Holding Corp.), 787 F.3d 173 (3d Cir. 2015).

A structured dismissal is “a disposition that winds up the bankruptcy with certain conditions attached instead of simply dismissing the case and restoring the status quo ante.” Jevic, 787 F.3d at 177. Structured dismissal orders often include mutual releases, claim reconciliation protocol, “gifting” of funds from secured lenders to creditors of lower priority, and provisions for a bankruptcy court’s continued retention of jurisdiction over certain post-dismissal matters.

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