July 21, 2022
Rewarding Good Behavior: Courts Should Approve Exculpation for the Pre-Petition Conduct of RSA Parties
The rationale for exculpation is straightforward: if you contribute to or participate in the debtor’s reorganization efforts, you should not face liability for your good-faith efforts. This protection fosters a fair, transparent restructuring process by reducing barriers to entry and incentivizes stakeholders to play a part in the development of a confirmable plan. Without exculpation, key creditors and competent professionals may shy away from the bankruptcy process, which would undermine the main purpose of chapter 11–achieving a successful restructuring.