A Legal Roadmap through Bankruptcy History
Hertz contends the Third Circuit erred by allowing common law principles to override the Bankruptcy Code’s prohibition on unmatured interest, arguing that Congress intended to limit such creditor recoveries during its 1978 revamp of the Bankruptcy Code. But Wells Fargo pushed back, asserting the solvent debtor exception was baked into the code and remains valid.
According to Wells Fargo, the noteholders were impaired creditors under the bankruptcy plan because they didn’t receive their contractual interest and premiums, thus entitling them to compensation under long-standing precedents.
Implications Reach Far Beyond Hertz
While this legal saga began with a Hertz bankruptcy amid pandemic chaos, the broader implications of the case stretch deep into the fabric of corporate restructuring law. At stake is not only the fate of $272 million but also the judicial latitude bankruptcy courts may have when dealing with financially solvent debtors emerging from reorganization.
Legal observers now await the Solicitor General’s take—a signal that the nation’s highest court may be preparing to rewrite the rulebook on post-bankruptcy creditor entitlements.
