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2015 University of Illinois Law Review Slip Opinions 1


Scholars increasingly assume that most businesses enter Chapter 11 with a high percentage of secured debt, which leads to a high percentage of cases ending in the sale of the debtor’s assets under section 363 of the Bankruptcy Code rather than with confirmation of a reorganization plan. However, evidence and discussions about “the end of bankruptcy” center on secured creditors’ role in the reorganizations of very large corporations. The few analyses of cross-sections of Chapter 11 proceedings suggest that secured creditor control is not nearly as omnipresent as asserted and that 363 sales are not as dominant as assumed.

This Essay adds original empirical evidence to the debate by highlighting how one subset of debtors — religious organizations — whose main creditors typically are secured lenders have used the reorganization process. By focusing on 363 sales and other indices of creditor control, plan proposal and confirmation rates, recoveries to creditors, and post-bankruptcy survival rates, this Essay establishes that the traditional negotiated Chapter 11 case is alive and thriving among these debtors. The data suggest that these cases preserved significant value for secured creditors, while distributing value to unsecured creditors. The results show that further empirical examinations of secured creditors’ role in Chapter 11 cases may yield insights that diverge from current understandings of how creditor control impacts modern reorganization, and what that control means for reforms of Chapter 11.