NC Rulings Show Bankruptcy Isn’t Only For Insolvent Debtors

April 18, 2024 | Stuart I. Gordon | Alexandria E. (Tomanelli) Vath | Bankruptcy

Recent bankruptcy rulings upended the notion that bankruptcy protections are only for insolvent debtors.

In two different cases, two U.S. bankruptcy judges from the U.S. Bankruptcy Court for the Western District of North Carolina reached the same conclusion: Lack of financial distress is not a requirement for bankruptcy protection, and the court has constitutional subject matter jurisdiction over cases where financial distress is lacking.

The fact that a debtor is not in financial distress would not deny it the opportunity to use the bankruptcy court to restrict or settle its obligations. A debtor may have the means to pay its claims and still be entitled to Chapter 11 protection.

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  • Stuart I. Gordon
  • Alexandria E. (Tomanelli) Vath

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