An Indepth Look at Environmental Liability Transfers During Corporate Bankruptcy
A corporation striving to exit Chapter 11 bankruptcy with an improved balance sheet, may be hindered from doing so if they retain environmental liabilities after they emerge, which are considered by North American bankruptcy courts as non-dischargeable environmental obligations.
For post-bankruptcy companies, failure to resolve environmental obligations can be a burden during the recovery phase and an obstruction for new growth. This not only reflects poorly on balance sheet recovery, but also creates environmentally-contaminated sites stuck in a perpetual condition of stagnation and decay. A properly formed Environmental Liability Transfer (ELT) can benefit corporations, state regulatory agencies, and creditors by creating an off-balance sheet pathway to environmental remediation and redevelopment.