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This paper examines how a firm’s financial distress and the legal environment regarding the ease of bankruptcy reorganization can alter product market competition and supplier–buyer relationships. We identify three effects—predation, bail-out, and abetment—that can change firms’ behavior from their actions in the absence of financial distress. The predation effect increases competition before potential bankruptcy as the nondistressed competitor behaves as if it has some first-mover advantage that could benefit a supplier with price control. The bail-out effect reflects the supplier’s incentive to grant the distressed firm concessions to preserve competition, improving supply chain efficiency and providing support for the exclusivity rule in Chapter 11 of the United States Bankruptcy Code when the supplier and the distressed firm are financially linked. The abetment effect is that the supplier may deliberately abet the competitor’s predation, leading to increased operational disadvantages for the distressed firm before bankruptcy. Together these effects stress that a firm’s bankruptcy potential can hurt its competitors and benefit its suppliers/customers. They also provide guidelines for firms’ operational decisions in such situations, a rationale for observed firm actions surrounding bankruptcies, and motivation for policies supporting reorganization and relaxing broad enforcement of nondiscriminatory pricing regulations. This paper was accepted by Serguei Netessine, operations management .

Chapter 11 of the Bankruptcy Code is often justified by vague assertions that reorganizing troubled companies is in the \"public interest.\" There has, however, been surprisingly little effort to consider seriously what this public interest is, how it should be operationalized, or who should pay for it.

Prior scholarship points to valuation disputes and valuation error as key drivers of Chapter 11 outcomes. Avoiding valuation disputes and errors is also the underlying driver of most proposed reforms, from Baird's auctions to Behchuk's options. In this paper, we undertake a detailed examination of bankruptcy court opinions involving valuation disputes. Our paper has two goals. The first is to understand how parties and their expert witnesses justify their opposing views to judges, and how judges decide between them. The second is to provide practical guidance to judges in resolving valuation disputes. We document surprisingly pervasive (and often self-serving) errors in expert testimony. This is particularly true when valuation experts apply the discounted cash flow (DCF) method. With respect to key elements of that method, such as the discount rate, we observe stark inconsistency between expert testimony and finance theory and evidence. We propose simple strategies based in finance theory that judges can employ (such as avoiding the use of company-specific risk premia in discount rates) to reduce the scope for valuation disagreements in Chapter 11. We also recommend that judges rely on the peer-reviewed finance and economics literature to assess the scientific reliability of discount rates.

Does social enterprise end with insolvency? Is bankruptcy all about the bottom line? The answer to these questions begins with understanding the estate in bankruptcy and the fiduciaries that control its fate. Yet the law of fiduciary duties in bankruptcy is undertheorized, conflicted, and muddled. After almost fifty years of confusion, this Article provides the first comprehensive examination of the nature and source of fiduciary duties in bankruptcy. Although the Supreme Court has intoned \"maximize the value of the estate\" as a shorthand, this Article argues that the trustee's duty of obedience in reorganization cases gives rise to a \"duty to facilitate a plan\" or, as I call it, a \"duty to clear runway.\" It also concludes, based on 28 U.S.C. [section] 959, that the trustee must observe state law fiduciary duties that would otherwise have governed the debtor outside of bankruptcy. Trustees of benefit corporations, for example, must not pursue money-maximization above all else but must balance pecuniary interests against the public benefit set forth in the debtor's articles, such as preserving employment, protecting the environment, or supporting the local economy. For their part, creditors and debtors alike have opportunities to advocate for public-minded goals in bankruptcy cases as part of official committees or, in a novel twist, a \"benefit committee.\" And indeed, some creditors, like debtor-in-possession (\"DIP\") lenders, may step into a fiduciary relationship with the bankruptcy estate if they wield extraordinary control over the estate's decision-making. The timing is right for a rethinking: As the social enterprise ecosystem finds itself caught up in bankruptcy proceedings, creditors and debtors alike may wish to press for their vision of value. This vision for bankruptcy law is both capacious and controversial: It would allow for a wider range of values to be pursued during the plan negotiation process and could reshape bankruptcy practice for social enterprises.

One of the most important debtor protections provided by bankruptcy law is the automatic stay, which stops creditors from pursuing collection actions against the debtor. Over time, however, debtors began to abuse the stay by repeatedly filing for bankruptcy each time a creditor tried to foreclose upon them. In response, Congress amended the Bankruptcy Code and added 362(c)(3)(A), which terminated the stay after 30 days for debtors who had one prior bankruptcy case dismissed within a year of filing. Although the intent of the section is clear, courts have struggled to interpret how it should operate and two main approaches have emerged. The majority approach holds that under 362(c)(3)(A) the automatic stay terminates only with respect to some creditor actions, which provides a relatively weak deterrent to abusive debtors, while the minority approach calls for total termination of the stay despite the adverse effects on creditors and the chapter 7 trustee. Because both current approaches are unsatisfactory, this Note proposes a novel solution that calls for a legislative redrafting of 362(c)(3)(A) to clarify ambiguous language and terminate the automatic stay except with respect to property of the estate, but create a presumption in favor of relief from the stay that is rebuttable by a party in interest. This solution would best accommodate all parties involved in a bankruptcy case while also accomplishing Congress's goal of deterring repeat-filing debtors.

[...]the article explains the key issues that arise during a bankruptcy that are relevant to the franchise industry, including the automatic stay and the contract assumption and rejection process. [...]there is an intersection of state franchise law with bankruptcy law. [...]it is important for a potential debtor to understand its filing options. [...]a franchisor may contest a franchisee's bankruptey, either by proving a discharge exception or seeking dismissal of the bankruptcy case.

In June 2024, the United States Supreme Court ruled in Harrington v. Purdue Pharma that nonconsensual releases for nondebtors are unconstitutional. The decision marked a key development in mass tort litigation involving Purdue Pharma, the company at the center of the opioid crisis. The Sackler family sought to use Purdue's bankruptcy proceedings to shield themselves from liability, but the Court's ruling invalidated the use of nondebtor releases to protect third parties from claims without the full consent of affected parties. While the ruling strengthens creditor protections, it creates uncertainty regarding how mass tort bankruptcies can efficiently compensate victims, particularly in public health crises with long-term effects.