Section 363 Sales and Their Blind Faith in the Markets

Authors

Jacob DeSelms, Southern Methodist University, Dedman School of LawFollow

Abstract

Airlines tend to go bankrupt. In fact, all the so-called legacy carriers have gone bankrupt at one time or another. What leads these airlines into financial distress varies from case to case. Sometimes they are overrun by costs, and other times they lack sufficient demand. The concern of this paper, though, is not why airlines file bankruptcy—it is assumed that, from time to time, airlines will face financial distress and will require the protection of the U.S. Bankruptcy Code (the Code). Instead, this paper will examine how large firms such as airlines are navigating bankruptcies today.

After providing some overview of the current landscape of large Chapter 11 cases—specifically in the realm of § 363 asset sales and the debates surrounding these sales—this paper will argue that the theories supporting the continued use of these sales are suspect and should be met with skepticism by the courts and by policymakers, and, additionally, that these sales often undermine the policy objectives of the Code in general. Finally, this paper will look at how these debates are shaping future bankruptcy policy and will argue in favor of proposed legislation from Senator Manchin of West Virginia amending § 363 of the Code.

Recommended Citation

Jacob DeSelms, Section 363 Sales and Their Blind Faith in the Markets, 77 SMU L. Rev. F. 26 (2024)