Some Confirmed Chapter 11 Plans Fail. So What?

Abstract

Critics of the feasibility requirement set forth in 11 U.S.C. § 1129(a) (11) contend that the current bankruptcy system inadequately prevents repeat Chapter 11, or "Chapter 22," filings. Undoubtedly, there are instances of confirmed Chapter 11 plans that turn out to be unfeasible despite court findings to the contrary. Given the uncertainties of investment projections and capital markets, however, the occasional failure of Chapter 11 plans is not necessarily a greater evil than alternatives such as liquidation or excessively conservative capital structures. Chapter 11 is, by its very definition, a hit-or-miss venture; thus, it misses occasionally. Some confirmed Chapter 11 plans fail. So what?