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Abstract

This note concerns the ability of bankrupt companies to file Chapter 11 reorganization plans that contain provisions releasing the liabilities of parties other than the companies themselves. One such mechanism, used in conjunction with the 2010 BP oil spill in the Gulf of Mexico, is a trust releasing a financially-troubled company from liability to certain types of tort claimants. The author argues that although bankruptcy courts do have the power to approve such plans, such power should be carefully limited when companies seek to grant releases to insiders and insurance companies.

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