Bankruptcy's Quiet Revolution

Over the last few years, reorganization practice has undergone a massive change. A new device — the restructuring support agreement — has transformed Chapter 11 negotiations. This puts reorganization law at a crossroads. Chapter 11’s commitment to a nonmarket restructuring with a rigid priority system requires bankruptcy judges to police bargaining in bankruptcy, but the Bankruptcy Code gives them relatively little explicit guidance about how they should adjust when a new practice alters the bargaining environment. This essay shows that long-established principles of bankruptcy should lead judges to focus not on how these agreements affect what each party receives, but rather on how they can interfere with the flow of information needed to apply Chapter 11’s substantive rules.