Legal Definitions - substantive consolidation

Substantive consolidation is a legal term used in bankruptcy cases. It refers to the merging of two or more bankruptcy cases that involve the same debtor or related debtors into one estate for the purpose of distributing assets. This usually results in the sharing of assets and liabilities between the two estates and the elimination of duplicate claims and claims between the debtors.

For example, if two companies owned by the same person file for bankruptcy, the court may order substantive consolidation to combine the two cases into one. This would allow for a more efficient distribution of assets and liabilities and prevent any unfair advantage one company may have over the other.

Substantive consolidation can also refer to the unification of two or more corporations or organizations by dissolving the existing ones and creating a single new corporation or organization. This is sometimes called consolidation of corporations.

Overall, substantive consolidation is a legal tool used to simplify and streamline complex bankruptcy cases involving multiple debtors or organizations.