Emergency Preferential Orders in Bankruptcy Reorganzations

This article addresses the pervasive problem in chapter 11 bankruptcy reorganizations of emergency orders entered very early in the case which confer substantive rights of uncertain legality on non-debtor parties. These orders are entered because of perceived leverage that the party demanding the preferment holds against the reorganizing business. This article urges Congress to amend the Bankruptcy Code to clarify whether the bankruptcy court does or does not have the power to enter emergency preferential orders, and urges that the better approach for Congress to take is to prohibit such preferential orders in all cases. At a minimum, such orders should be entered only on a compelling showing of necessity, when the public