Public Hospital Bankruptcies and an Evolving Functional Interpretation of the Bankruptcy Code
Bankruptcy Law Letter, Vol. 39, Issue 8 (2019)
20 Pages Posted: 12 Mar 2021
Date Written: August 1, 2019
Analyzing recent hospital chapter 9 bankruptcy cases from all over the country, I argue that courts and parties appear to be using a “functional” interpretation of chapter 9 of the U.S. Bankruptcy Code to meet the unique restructuring needs of these debtors and their stakeholders. The result is a chapter 9 regime that looks increasingly like chapter 11. While this evolution in the law underscores the Code’s inherent flexibility and efficiency, it also threatens to dilute essential constitutional safeguards that are deeply embedded in chapter 9. I argue that courts should resist the functional interpretation, and that Congress should amend the Code to provide much-needed clarity.
Keywords: public hospitals, bankruptcy, municipal bankruptcy, chapter 9, hospital restructuring
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