Czyzewski v Jevic Holding Corp.: Some “Priority” Rules for “Structuring” Bankruptcy Dismissals (2017)

Summary:

• The US Bankruptcy Code sets forth a basic system of priority, which ordinarily determines the order in which the bankruptcy court will distribute assets of the debtor’s bankruptcy estate.
• The Code makes clear that distributions of assets in a Ch 7 liquidation must follow this prescribed order. It provides somewhat more flexibility for distributions pursuant to Ch 11 plans, which may impose a different ordering with the consent of the affected parties.
• In Czyzewski v Jevic Holding Corp., the US Supreme Court considered whether certain creditors and representatives of the debtor’s estate could, effectively, contract around the Bankruptcy Code’s statutory priority scheme to dispose of assets of the debtor’s estate via a so-called “structured dismissal,” all over the objections of non-consenting creditors.
• While not disapproving of “structured dismissals” per se, the court held that “structured dismissals” may not be used to effect non-consensual, priority-violating distributions.
• The article is accessible here.  Republished by kind permission of Butterworths Journal of International Banking and Financial Law.