According to an article that was published by two University of Illinois experts in bankruptcy law, the bankruptcy reorganizations of General Motors and Chrysler embodied a sea change in corporate restructuring. It was an event that could herald that end of the current system of bankruptcy reorganization.
Ralph Brubaker and Charles Tabb, two law professors from the University of Illinois, argue that the legal principles that were applied in the Chrysler and GM bankruptcies, were ill-advised and eventually undermined the distributional models of bankruptcy reorganizations. Chrysler and GM bankruptcies are two of the biggest in U.S. history at $83.5 and 39.9 billion, respectively.
Traditionally, bankruptcy reorganizations have been effectuated by a Chapter 11 plan of reorganization, with complex prerequisites for disclosure, creditor voting and allotment of stakes among owners and creditors. In the case of Chrysler and GM, however, it was done by sale and not by plan.