ABI Commission Proposes Chapter 11 Reform | Practical Law

ABI Commission Proposes Chapter 11 Reform | Practical Law

On December 8, 2014, the American Bankruptcy Institute's Commission to Study the Reform of Chapter 11 released an extensive report which detailed over 200 recommended changes to Chapter 11 of the Bankruptcy Code.

ABI Commission Proposes Chapter 11 Reform

Practical Law Legal Update 6-591-9167 (Approx. 4 pages)

ABI Commission Proposes Chapter 11 Reform

by Practical Law Bankruptcy and Practical Law Finance
Published on 11 Dec 2014 • USA (National/Federal)
On December 8, 2014, the American Bankruptcy Institute's Commission to Study the Reform of Chapter 11 released an extensive report which detailed over 200 recommended changes to Chapter 11 of the Bankruptcy Code.
On December 8, 2014, the American Bankruptcy Institute's Commission to Study the Reform of Chapter 11 (ABI Commission) released an extensive 400-page report to Congress on proposed reforms to Chapter 11 of the Bankruptcy Code. The 23-member ABI Commission was formed in 2012 in response to concerns that the high costs of filing a Chapter 11 bankruptcy were deterring companies from filing. The report was the result of a three-year effort by the ABI Commission, together with about 140 practitioners, academics and judges appointed to various topic-related sub-committees (see Article, A New Chapter for Chapter 11?).
The report contains over 200 recommended proposals, many of which are debtor-friendly and may come at an expense to secured creditors. Some significant recommendations include:
  • New rules for valuation of collateral of secured creditors.
  • Clarification that secured creditors are entitled to a market rate of interest in a cramdown.
  • The creation of a new provision (§ 363x) which will limit "rush sales" by establishing a 60-day moratorium on section 363 sales of substantially all of the debtor's assets.
  • New restrictions on DIP financing.
  • Elimination of the requirement that at least one impaired class must accept the plan of reorganization in order for the plan to be confirmed.
  • Various reforms to encourage reorganization among small and medium enterprises (SMEs).
In anticipation of the report's release, the LSTA issued a press statement and will produce a response to the report during the first quarter of 2015 which will express the LSTA's views on the recommendations.
Practical Law Finance will provide greater detailed coverage on the ABI Commission's proposals in early 2015.