Keeping Secured Lending Secure: The Limited Legacy of Chrysler's (Section) 363 Bankruptcy

I. INTRODUCTION In 2009, as the United States economy was in a deep recession, fear over a collapse of the secured lending markets proliferated (1) As auto sales dwindled, dealers shut their doors, and leading parts manufacturers filed for bankruptcy, Chrysler, LLC (Chrysler) (2) and General Motors (GM) accepted government loans (3) When these loans proved insufficient to restore Chrysler and GM to financial health, the companies filed for bankruptcy. (4) The government's role in both Chrysler's and GM's bankruptcies raised significant concern from secured lenders and market observers alike. (5) Many investors were outraged that the government not only would invest in these companies but also would lead bankruptcy negotiations that supposedly improperly subordinated the interests of secured creditors to those of unsecured creditors. (6) Yet, contrary to popular criticism, Chrysler's recent bankruptcy proceeding did not impermissibly subordinate the interests of secured creditors to those of the unsecured creditors. Most importantly, Chrysler's bankruptcy proceeding did not alter substantive bankruptcy law in a way that hampers secured lending in the United States.