The commencement of a bankruptcy case is a common event of default under executory contracts. To allow debtors to retain contract rights necessary to consummate an effective reorganization, however, the Bankruptcy Code prohibits the enforcement of a default based upon the bankruptcy filing—so called ipso facto defaults—with limited exceptions. These exceptions, or “safe harbors,” allow non-debtor counterparties to certain types of executory financial contracts, including swap agreements, to exercise rights after the commencement of a bankruptcy […]

In a recent opinion, Honorable Colleen McMahon of U.S. District Court for the Southern District of New York, ruled that non-consensual releases of creditors’ direct claims against non-debtors in a Bankruptcy reorganization plan are not allowed under the provisions of the United States Bankruptcy Code. In Re: Purdue Pharma LP. This ruling reverses the Bankruptcy Court’s order approving Purdue Pharma’s Chapter 11 Plan of Reorganization which, among other things, provided for the release of the […]