Consumer Warranty Claims Against Companies in chapter 11 Reorganizations

This article examines the rights of individuals who have purchased warranted goods from a business that subsequently undergoes reorganization under Chapter 11 of the Bankruptcy Reform Act of 1978. Part I establishes that warranty rights are claims in bankruptcy and outlines the procedure that must be followed by a creditor for distribution from the debtor’s estate. Part II focuses on how warranty claims are treated in Chapter 11. Part III discusses ways to alleviate the warranty creditor’s representational burden, particularly through the intervention and aid of public interest groups. This article concludes that . warranty creditors will receive favorable treatment in a reorganization plan, but recommends that claims arising after bankruptcy proceedings commence be treated as administrative expenses or as claims arising in the ordinary course of business. Finally, to assure adequate representation of warranty creditors, a public interest group should be allowed to participate in the creditor’s committee if it can meet the standards for intervention under the Federal Rules of Civil Procedure.