Can bankruptcy courts approve settlements that bypass statutory creditor priority?

Verified source milestones

1. 2026-08-29 — An official oral-argument transcript was verified.
2. 2026-08-29 — An official oral-argument transcript was verified.

A citizen's guide to the whole case

What this case is about

This case tests the limits of bankruptcy court power. The dispute centers on whether a court can approve a settlement that distributes funds outside the statutory priority order. the sides that brought the case seek to reverse the lower court approval. the opposing sides seek to affirm that approval.

How the case got here

The Supreme Court heard oral argument in this case on December 7, 2016.

What each side wants

the sides that brought the case want the Supreme Court to reverse the lower court approval of the settlement.

the opposing sides want the Supreme Court to affirm the lower court approval of the settlement.

What each side says

the sides that brought the case argue Section 363(b) does not allow courts to distribute assets in violation of priority.

the opposing sides argue the bankruptcy court had discretion to approve the settlement structure.

What the justices asked

Justice Alito asked if the parties only want the law followed.

Justice Alito asked if the Court should decide the broad question of structured dismissals.

Why it matters

This case defines the scope of bankruptcy court authority. It determines how courts handle settlements that conflict with statutory priority rules. Creditors rely on clear rules for asset distribution. The outcome shapes future bankruptcy proceedings nationwide.

What happens next

This article currently covers the argument record. Use the official docket link for later case activity.

Official Court provenance

Official docket and case history · Official Supreme Court oral-argument detail page

Title and summary sources

• Official Supreme Court Transcript — file page 18, lines 42-12 — Transcript, file page 18, lines 42-12
• Official Supreme Court Transcript — file page 3, lines 20-50 — Transcript, file page 3, lines 20-50
• Official Supreme Court Transcript — file page 30, lines 18-34 — Transcript, file page 30, lines 18-34
• Official Supreme Court Transcript — file page 59, lines 6-24 — Transcript, file page 59, lines 6-24
• Official Supreme Court Transcript — file page 63, lines 8-32 — Transcript, file page 63, lines 8-32
• Official Supreme Court Transcript — file page 18, lines 42-12 — Transcript, file page 18, lines 42-12
• Official Supreme Court Transcript — file page 3, lines 20-50 — Transcript, file page 3, lines 20-50
• Official Supreme Court Transcript — file page 30, lines 18-34 — Transcript, file page 30, lines 18-34
• Official Supreme Court Transcript — file page 59, lines 6-24 — Transcript, file page 59, lines 6-24
• Official Supreme Court Transcript — file page 63, lines 8-32 — Transcript, file page 63, lines 8-32

Revision history

1. Revision 1 · Official Transcript · 2026-08-30 18:48:22.787923+00:00

   Correction: Rewritten to the concise citizen-facing editorial standard.

2. Revision 2 · Official Transcript · 2026-09-05 03:22:24+00:00

   Correction: Migrated to the dated official Court activity contract without model use.