The explanation of the situation on the Indiana Teachers website was absolutely correct in both definition and explanation of the situation.

There are two problems that I see in the way the bankruptcies of Chrysler and GM were "pre-packaged". First, the creditors of both companies had made no progress in negotiating a Plan of Reorganization acceptable to all of them, even after trying for more than two months. Had the companies filed without the pre-agreement achieved with pressure from the government--and without any source of financing so they could continue to operate in bankruptcy--the creditors would almost certainly fail to reach agreement on a Plan, which would have lead to the companies having to shut down. At that point, liquidation would be the only alternative.

The second problem was the form of the Plan that was forced on the creditors by the government. As noted on the Teachers website, as a member of the class of secured creditors, they are getting far less than the unsecured creditors, principally the UAW, who are legally junior to them in the way a Plan of Reorganization is supposed to be structured. I've noted in other threads here that the UAW made out like bandits, moaning on how much they have been forced to give up, yet somehow elevating themselves far above other creditors with senior, secured positions in the way they were treated within the creditor group.

In addition, as Steve points out, however the ruling of the Second Court of Appeals is worded, that becomes the case law that will be used by generations of lawyers and judges adjudicating similar cases in the future. If that ruling failed to give proper recognition to the established contractual rights of lenders like the Indiana Teachers, there will likely be dozens or even hundreds of future creditors in other cases whose rights will be weakened by a SCOTUS "non- decision". As a retired banker, I can tell you with absolute certainty that such a development will constrain the willingness of banks and other lenders from making corporate loans. If lenders can't be assured that their contracts will be adjudicated properly, they will simply avoid that type of lending.

The need for the government to become involved was clear. The creditors simply were not going to reach agreement without the outside pressure of a third party. The Plan that was arrived at would probably have been criticized however it was finally structured. But the manner in which the UAW, with all its voter/workers and political contributions, was vaulted above other creditors who had substantially better contractual rights makes the Plan that was strongarmed by the government look like it was politically motivated. I find that offensive and I still do.

The problem now is that if SCOTUS agrees to hear the case, and if they rule in favor of the Indiana claimants, there's a possibility that the bankruptcy cases of both companies will fall apart, reverting to the re-opening of negotiations among the creditors themselves, with no government involvement to strongarm a solution. There is absolutely no indication that the creditors are any closer to agreeing on a Plan than they were when they began negotiations almost 90 days ago. The effect of two failed bankruptcies would have a devastating impact on the U.S. economy, deepening and lengthening the already dire economic circumstances. And in the end, the Indiana teachers would likely not get any more, maybe even less, from the liquidation proceeds from selling Chrysler's assets.

There is no answer that satisfies the rights of all parties under existing law. So, does SCOTUS avoid the application of written and deep and well-formed case law by simply refusing to hear the case and walking away? Or do they fulfill their Constitutional responsibility by hearing the case, even though the financial outcome on the country will almost certainly be devastating?

I guess we'll find out soon.