Emory Bankruptcy Developments Journal


In most situations, the Bankruptcy Code prohibits insiders of businesses from seeking preferential treatment from a bankrupt debtor. One way the Code does this is through excluding an insider's vote from the plan approval process in a chapter 11 bankruptcy cramdown. But, if an insider can find a way to escape the narrow statutory insider definition in the Code, then the usual prohibitions on insider conduct may not apply. In addition to the narrow, specified list of statutory insiders in the Code, courts have crafted various definitions of non-statutory insiders as well. This lack of uniform and predictable application has thwarted one of bankruptcy's main goals: the equitable treatment of creditors. The author examines courts' conflicting applications of insider rules, with a focus on chapter 11, and recommends a change to how insiders are defined in the Code to prevent inequitable outcomes for creditors.