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Third Circuit Holds Structured Dismissal Deviating from Bankruptcy Code Priority Scheme May Be Utilized in Appropriate Circumstances

On May 21, 2015, the United States Court of Appeals for the Third Circuit answered the long-asked question of whether structured dismissals are permissible under the Bankruptcy Code with a resounding yes.  In so ruling, the Third Circuit stated: “[W]e believe the Code permits a structured dismissal, even one that deviates from the § 507 priorities, when a bankruptcy judge makes sound findings of fact that the traditional routes out of Chapter 11 are unavailable and the settlement is the best feasible way of serving the interests of the estate and its creditors.”  The opinion provides much awaited guidance on the availability of structured dismissals as a mechanism to conclude a case.

 Click here to download the Morris Nichols analysis of the opinion.


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