Harmonizing a Debtor’s Right to File for Bankruptcy Against a Creditor’s Desire to Protect Its Financial Interests

In the United States, a debtor’s ability to seek a fresh financial start through bankruptcy is constitutionally protected. Therefore, courts routinely invalidate restrictions designed to limit a debtor’s ability to file a voluntary bankruptcy petition as void against public policy. Nevertheless, it is not uncommon for a business entity’s governing documents to contain limitations or restrictive requirements that must be satisfied before bankruptcy protection can be sought. Oftentimes, these provisions allow a single person (or entity) to block a bankruptcy filing, whether by holding a “golden share” or simply by withholding consent. How to harmonize a debtor’s right to file against a creditor’s desire to protect its financial interests in that debtor has sparked a number of different judicial opinions.