The distinction between recourse to Chapter 11 protection as a legitimate means to maximize the value of a company's assets and/or to restructure its financially troubled yet otherwise viable operations, on the one hand, and clear bankruptcy abuse, on the other, is sometimes murky.
Making the Case for a 'Good Faith' Chapter 11 Filing
The distinction between recourse to Chapter 11 protection as a legitimate means to maximize the value of a company's assets and/or to restructure its financially troubled yet otherwise viable operations, on the one hand, and clear bankruptcy abuse, on the other, is sometimes murky. A court called upon to make such a distinction is obliged to "get into the debtor's head" and investigate the board's motives for commencing a bankruptcy case and, in some cases, to decide whether the debtor's otherwise permissible use of the powerful provisions of federal bankruptcy law is impermissible because the debtor's motives are antithetical to the basic purposes of bankruptcy.
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