The Purdue Pharma decision is just the latest case to address the constitutional and statutory authority for third-party releases in bankruptcy plans. Shortly thereafter, a New Jersey bankruptcy court dismissed LTL’s second attempt to commence a bankruptcy case using the Texas two-step. These cases and other recent decisions all focus on methods and tools to resolve complicated mass-tort matters in Chapter 11, which two professors recently argued is an appropriate tool to resolve these types of cases.
Recent cases involving structured dismissals and the dischargeability of corporate debts in Subchapter V demonstrate the evolving nature of Subchapter V and its ability to remain an efficient and cost-effective process for small businesses.
With Chapter 11 bankruptcy filings on the rise in the first six months of 2023, including Subchapter V filings, it is important to understand the advantages and challenges of Subchapter V and its stream-lined reorganization process.