A. Where We Left Off
As noted in Part I, movants seeking approval of a structured motion to dismiss must generally prove that: (1) the court has the power to enter an order approving a structured dismissal; (2) “cause” exists to approve the structured dismissal; and (3) the structured dismissal is in the best interest of the debtor’s creditors. Part I addressed courts’ authority to enter orders approving structured dismissals under section 105(a) of the Bankruptcy Code. This section will address how movants can prove that “cause” exists to dismiss a bankruptcy case.
B. How it Works
The term “cause” is not defined in the Bankruptcy Code. Even so, section 1112 of the Bankruptcy Code provides a non-exhaustive list of examples of “cause” for conversion or dismissal. Among those examples of cause for dismissal are the debtor’s gross mismanagement of the bankruptcy estate, unauthorized use of cash collateral, and failure to comply with court orders. In the context of structured dismissals, however, movants more often set forth one of the two following grounds for cause to dismiss a case: (1) there is a substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation; and/or (2) the debtor has no possibility of proposing a feasible plan of reorganization.