In 2025, Chapter 11 practice pivoted around two central forces: the constraint of judicial power to grant broad non-debtor relief, and the continued expansion of financial and procedural complexity within distressed business contexts. The accelerating trend toward the use of non-bankruptcy alternatives also continued throughout the year, with the coup de grace perhaps being the Uniform Law Commission’s release of the Uniform Assignment for Benefit of Creditors Act on October 20th.²

Key Developments in 2025: Judicial Constraint and Mass Tort Resolution

The most significant legal constraint impacting Chapter 11 reorganization efforts remained the June 27, 2024, Supreme Court decision in Harrington v. Purdue Pharma, L.P.³ This 5-4 majority ruling held that the Bankruptcy Code does not authorize a plan of reorganization under Chapter 11 to discharge claims against a non-debtor without the consent of affected claimants. 

The Purdue Pharma ruling effectively limited the use of broad involuntary third-party releases, shifting litigation efforts in this regard toward exploring alternative mechanisms to resolve mass tort and complex claims. The Supreme Court specifically identified mechanisms such as "class actions, multi-district litigation, [and] consensual settlements" as tools that may address collective-action problems. In 2025, increased focus was placed on:

• Mandatory Class Action Settlements: Practitioners explored leveraging existing federal procedural rules that allow a court to certify a mandatory class action without opt-out rights and subsequently approve a mandatory settlement of the claims over class member objections. Precedents crafting Chapter 11 plans in connection with settlements of related class action claims against third parties continue to develop.
   
• Consensual Releases: The Purdue Pharmaruling emphasized that nothing in the opinion should call into question consensual third-party releases. However, the opinion avoided addressing what constitutes a "consensual release," leading to post-2024 controversy over whether implied consent (such as failure to opt out) remains permissible.⁴ Some courts now find it inappropriate to require creditors to object or be deemed to have consented to a third-party release.
   
• Plan Exculpation: While the Purdue Pharmadissent questioned whether the lack of an explicit statutory basis that undermined releases also removed the legal basis for plan exculpation provisions, courts generally remain willing to approve exculpatory clauses, provided they establish a standard of care that triggers future liability and do not unlawfully exculpate non-fiduciaries or claims involving gross negligence or willful misconduct.
   
• Bad Faith and Alternatives:Courts continued to address the legitimacy of bankruptcy filings deemed to be primarily tactical, such as the innovative, but controversial, "Texas Two-Step" mass-tort bankruptcies.

On remand, Purdue itself became a proving ground for post-Purdue Pharma settlement architecture. In late 2025, the bankruptcy court approved a revised plan featuring approximately $7 billion in Sackler contributions and a public-benefit successor, while significantly narrowing the scope of non-debtor protections. That outcome will likely serve as a template in 2026 for how far plan-based resolutions can go without running afoul of Purdue Pharma.⁵

Alongside Purdue Pharma, the Supreme Court’s 2024 decision in Truck Insurance Exchange v. Kaiser Gypsum Co., et al.⁶ continued to reshape the mass-tort landscape. There, the Court unanimously held that insurers with financial responsibility for bankruptcy claims qualify as ‘parties in interest’ under § 1109(b), reinforcing insurers’ standing to object to Chapter 11 plans that may impair their contractual and economic interests.

Financial, Operational, and Procedural Themes in 2025

Chapter 11 practice in 2025 was further defined by persistent economic pressures and procedural litigation surrounding creditor rights and asset management:

Asset Disposition and Financing

Distressed companies often sought expedited paths to monetize assets. For example, in November 2025, US Realm Powder River sought court approval for the sale of substantially all of its assets for $300 in cash plus the assumption of certain liabilities and significant creditor claim waivers pursuant to a Sale Support Agreement under which creditors agreed to waive and release over $150 million in unpaid post-petition expenses and additional pre-petition claims against the debtors.⁷ Similarly, TPI Composites sought emergency court approval by November 24^th, to secure specialized materials for 2026 manufacturing and access production-based bonus payments.⁸

In financing cases, securing cash flow remained critical. Debtors often rely on cash collateral subject to a lender’s security interest, requiring court authorization or a creditor's agreement for its use.⁹ Issues involving DIP financing often include securing carve-outs for professional fees or for the benefit of unsecured creditors, though whether a secured creditor must make concessions to unsecured creditors (the "toll charge" or "pay to play" debate) remains an ongoing uncertainty.¹⁰

Unsettled Recovery Issues and Jurisdiction

• Recharacterization: Litigation frequently arose over whether a creditor’s purported debt claim should be recharacterized as an equity interest. Courts commonly use multi-factor tests, such as the 11-factor framework from In re AutoStyle Plastics, Inc., to determine whether an advance was debt or equity.¹¹
   
• Solvent Debtor Interest: A significant circuit split persisted in 2025 regarding post-petition interest for unsecured creditors in solvent Chapter 11 cases. The Fifth and Ninth Circuits have held that unsecured creditors whose claims are unimpaired have an equitable right to contractual post-petition interest, while the Second and Third Circuits have been more inclined to limit interest to the federal judgment rate.¹²
   
• Jurisdictional Constraints: The Supreme Court’s rulings in Northern Pipeline Construction Co. v. Marathon Pipe Line Co.and Stern v. Marshall continue to define the constitutional limits of bankruptcy courts (which are non-Article III courts), particularly restricting their ability to enter final judgments on certain state law claims absent consent. However, the subsequent ruling in Wellness International Network, Ltd. v. Sharif clarified that bankruptcy courts can adjudicate these "Stern claims" with the knowing and voluntary consent of the parties, lessening the practical impact of Stern.¹³

Looking Ahead to 2026: Predictions

Several trends are likely to dominate commercial bankruptcy litigation in 2026:

Definitional Battles over Digital Asset Perfection (UCC Article 12)

The perfection of security interests in digital assets is governed by the relatively new UCC Article 12 amendments.¹⁴ Litigation in 2026 will undoubtedly test the requirements for perfection by "control" versus perfection by filing a UCC-1 financing statement for controllable electronic records. The revised definition of "Money" in UCC Article 9-102 now includes "Electronic Money," which aims to capture virtual currencies within its meaning.¹⁵ This intersection of new technology and updated UCC articles is ripe for interpretive case law in the near term.¹⁶

Intensified Scrutiny of Consent in Mass-Tort Resolutions

Following Purdue Pharma, the lack of Supreme Court guidance on what constitutes "consensual release" will drive new litigation. Expect renewed challenges regarding implied consent mechanisms (such as failure to opt out of a release provision) as courts determine whether such practices are viable post-Purdue. The shift away from involuntary releases means settlements will increasingly rely on careful structuring that explicitly achieves consent or falls within accepted procedural alternatives like mandatory class action settlements.¹⁷

Litigation Over Solvent Debtor Post-Petition Interest

The continuing circuit split regarding the appropriate rate of post-petition interest for unsecured creditors in solvent Chapter 11 cases is an issue that significantly affects distributions and remains unsettled. This issue is likely to move closer to a definitive resolution in 2026, either through further appellate action or Supreme Court intervention.¹⁸

Increased Focus on Asset Maximization in Liquidations

Even in liquidations, operational challenges remain, requiring employee incentive packages. For example, in late 2025, Hansen-Mueller Co. sought a $700,000 employee incentive package to navigate an orderly liquidation process.¹⁹ This emphasis on maximizing value even in wind-downs, coupled with the ongoing pressure for DIP financing and the use of cash collateral, suggests that disputes over operational spending and the valuation of collateral (which may be a going-concern valuation if the debtor is sold as an operating business) will continue in 2026 cases.

* This article is an advanced version of the “Highlights” section of the forthcoming 2026 edition of Commercial Bankruptcy Litigation 2d, published annually by Thomson Reuters (“Treatise”). Most, if not all, of the issues referenced in this article are analyzed at length in the Treatise. 

² The Act was approved by the ULC at its July 2025 annual meeting, with the final text released publicly on October 20th. See Coordes & Friedland, Brought to You by the Makers of the UCC: The Uniform Assignment for Benefit of Creditors Act (DailyDAC, October 30, 2025) (available at ). 

The success of some debtors in using Subchapter V of Chapter 11 to deal with companies saddled with contingent and unliquidated claims far in excess of the ostensible Subchapter V limits is also, in a word, noteworthy. E.g. In re Velsicol Chemical LLC (23 B 12544); In re Flix Brewhouse Texas V LLC (3:21-bk-30526) (both cases in which one of the authors of this article represented the debtor). See also Friedland, et al., Subchapter V of Chapter 11: A User’s Guide).

³ See, Treatise generally at Section 21 infra.

⁴ For a detailed discussion of this issue, see Jackson E. Fisher, The Validity of Consensual Third-Party Releases Post-Purdue Pharma, 29 N.C. Banking Inst. 517 (2025).

⁵ 603 U.S. 204 (2024).

⁶ 602 U.S. 268 (2024).

⁷ Stretto, US Realm Powder River Seeks Court Approval for $300 Sale With Over $150 Million in Creditor Claim Waivers (November 21, 2025).

⁸ Stretto, TPI Composites Seeks Emergency Approval for GE Agreements as Cash Dwindles (November 21, 2025) .

⁹ See Treatise at Chapter 1, infra.

¹⁰ In a chapter 11 case, where general unsecured creditors have minimal likelihood of any recovery after the secured creditors are paid, a recurring question is whether the case may be administered exclusively for the benefit of the secured creditor or whether the secured creditor must make some concession to benefit general unsecured creditors for the case to remain in chapter 11. See Treatise at 23:1, infra. 

¹¹ See Treatise at Chapter 20, infra.

¹² See Treatise at Section 9:20, infra. 

¹³ See Treatise at Section 3:2, infra.

¹⁴ As of December 1, 2025, the 2022 amendments to the UCC, including Article 12, have been enacted by 31 states and the District of Columbia and have been introduced in the legislatures of 6 additional states.

¹⁵ For a discussion of the 2022 UCC amendments and cryptocurrency, see Elizabeth M. Wagenbach, Emerging Technologies and Perfection of Security Interests: A Financial Universe of Uncertainty, 89 Brook. L. Rev. 609 (2024).

¹⁶ A specific area likely to generate early disputes is the transition regime for states that adopted Article 12 and the related 2022 amendments to the UCC with delayed ‘flip’ dates. Several early-adopting states, including Washington, provided that until July 1, 2025, a secured party could continue to perfect a security interest in a controllable electronic record by traditional Article 9 filing, even though “control” becomes the exclusive (or at least superior) method of perfection thereafter. These transitions create fertile ground for litigation: creditors who relied on filings made before the flip date may find themselves unexpectedly subordinate to a later creditor who achieved control, while debtors and purchasers may challenge whether a purported control arrangement actually satisfies the statutory requirements. The interplay between grandfathered filings, amended control agreements, and the new priority rules is almost certain to produce some of the first wave of Article 12 case law in 2026. See Treatise at Section 17:32, infra.

¹⁷ See Treatise at Section 21:4, infra.

¹⁸ See Treatise at Section 9:32, infra.

¹⁹ Stretto, Hansen-Mueller Co. Seeks $700,000 Employee Incentive Package to Navigate Grain Business Liquidation (November 21, 2025).