Third Circuit: Only In A ‘Rare Case' May A Case Arising Under Chapter 11 Be Resolved In A ‘Structured Dismissal' That Deviates From The Bankruptcy Code's Priority System

The Court of Appeal has just decided a "novel question of bankruptcy law: may a case arising under chapter 11 ever be resolved –in a 'structured dismissal' that deviates from the Bankruptcy Code's priority system?" In its May 21, 2015, Opinion, it held in a "rare case, it may." In re Jevic Holding Corp. (3d Cir. May 21, 2015) (Case No. 14-1465). Because the court determined that there was no prospect of a plan being confirmed, conversion to chapter 7 would have resulted in the secured creditors taking all that remained of the estate, and there was no support in the record for the proposition that a viable alternative to the Settlement (defined below) existed that would have better served the estate and the creditors as a whole, the court affirmed the structured dismissal that skipped a priority afforded class of creditors in favor of junior creditors.