CLS Blue Sky Blog

Cleary discusses American Bankruptcy Institute’s Proposed Chapter 11 Reforms

On December 8, 2014, the American Bankruptcy Institute (“ABI”) Commission to Study the Reform of Chapter 11 (the “Commission”) issued its Final Report and Recommendations (the “Report”). The Report proposes a number of important changes to Chapter 11.[1]

The Commission was formed in 2012 to respond to shifts in the financial markets, corporate structures and credit and derivatives products since the Bankruptcy Code’s adoption in 1978 and is comprised of leading bankruptcy practitioners, professors and judges. The Report is the result of an in-depth, two-year review of Chapter 11 by the Commission and 13 separate Advisory Committees. The “Recommended Principles” proposed in the Report — if enacted by Congress — would alter significantly the U.S. bankruptcy process for all debtors, creditors and parties in interest.

The most notable Recommended Principles include the following:

DIP Financing

Section 363 Sales

Securities Contracts and Safe Harbor Provisions

Adequate Protection for Secured Creditors

Plan Confirmation and Distributions

Intellectual Property

Case Administration and Claims Evaluation

The Report’s Importance

To the extent Congress considers future revisions to Chapter 11, which is uncertain, the Report will provide a comprehensive starting point for those conversations. It is also possible that courts could take the Report into account in the meantime when considering issues addressed in the Report.
Two Cleary Gottlieb partners served on Advisory Committees to the Commission. The Report was a collaborative effort and should not be considered to reflect the views of those partners or the firm generally.

[1]  The Report is accessible at the ABI website at and is available for download.

The full and original memorandum was published by Cleary Gottlieb on December 15, 2014 and is available here

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