Using Substantive Consolidation and Similar Remedies to Consolidate the Bankruptcy Estate

This CLE course will address substantive consolidation which allows the bankruptcy court to treat two or more debtors as one entity, pool the assets and claims of all entities, and eliminate inter-company claims for purposes of administration and distribution of assets.

What creditor would not feel abused if the debtor's non-bankruptcy affiliate has substantial assets but will not join the case? Often the creditor may have dealt with the debtor and the non-debtor as a single enterprise, or the debtor may have even indicated that assets of the non-debtor were available to satisfy claims. Can the asset-rich non-debtor be pulled into bankruptcy against its will?

Substantive consolidation allows the bankruptcy court to disregard the separateness of the debtor and one or more entities--often subsidiaries or sister companies--pool the assets and claims of all entities, and eliminate inter-company obligations for purposes of voting and distribution. Consensual substantive consolidation is a reasonably common feature of corporate Ch. 11 cases.

Listen as our authoritative panel of attorneys discusses how trustees and creditors can reach beyond the debtor's estate to assets of related entities and insiders with substantive consolidation, piercing the veil, and alter ego liability. The panel will also discuss best practices for opposing these equitable remedies.