How are OPEB Obligations Terminated in Bankruptcy?
OPEB obligations generally represent unsecured claims against the debtor. Prospective OPEB obligations can be modified or cancelled in bankruptcy, but the debtor must comply with Section 1114 of the Bankruptcy Code. Specifically, Section 1114 requires that retirees’ previously earned benefits may be terminated only upon the consent of the appointed retiree representative or by order of the bankruptcy court. The procedure for obtaining a court order authorizing modification of retiree benefits is similar to that which is required to reject a collective bargaining agreement under Section 1113. The debtor must prove to the court that (i) the debtor has made a proposal to the authorized representative of the retirees that is based upon the most complete and reliable information available at the time of the proposal, (ii) the modifications are necessary to permit reorganization of the debtor and all affected parties are treated fairly and equitably, (iii) the debtor has met with the authori
