As with other areas of the law, bankruptcy case law and practice are constantly evolving, forcing interested parties to adapt. Creditors, both secured and unsecured alike, are always on the lookout for novel strategies to gain an edge. Given the inherent leverage and control the Bankruptcy Code vests in a debtor in possession, creditors have certain tools to overcome this leverage in the early stages of a bankruptcy case, when courts often afford debtors wide latitude and a “breathing spell” to get their affairs in order and propose a chapter 11 plan.
Recently, creditors have deployed certain early-stage strategies with varying degrees of success. These strategies include moving to transfer a case to a less debtor-friendly venue or to dismiss a case based on the debtor’s ineligibility for chapter 11 relief. While some creditors have recently been successful in these challenges, courts have not uniformly granted these early-stage motions.
