Supreme Court Leaves Third Circuit’s Hertz Solvent Debtor Ruling Intact

The Supreme Court denied cert in Hertz’s bankruptcy case, upholding the Third Circuit’s solvent debtor ruling.

The U.S. Supreme Court’s April 11, 2026 decision to deny certiorari in the high-profile Hertz bankruptcy case cements the Third Circuit’s interpretation: solvent debtors must pay out full contractual claims—including make-whole premiums and post-petition interest—even when such claims would typically be disallowed under 11 U.S.C. § 502(b)(2).

• In September 2024, the Third Circuit required Hertz to pay noteholders around $270 million in make-whole premiums and post-petition interest at the contractual rate, despite § 502(b)(2) generally disallowing unmatured interest.
• The court reasoned that the so-called solvent-debtor exception—a long-standing bankruptcy principle—requires solvent debtors to satisfy all contractual creditor claims in full before making distributions to equity, even if the Bankruptcy Code would otherwise disallow those claims.
• Judge Thomas L. Ambro summarized, "The solvent-debtor exception is alive and well," and emphasized that, "Creditors who are unimpaired cannot be treated any worse than impaired creditors, who at least get to vote."
• The Third Circuit’s opinion now stands as binding precedent within its jurisdiction, providing clarity for bankruptcy courts and practitioners navigating creditor-debtor disputes when the debtor can fully pay its debts.

Practically, this decision solidifies creditor protections in solvent debtor cases and sets clear expectations for claim prioritization under § 502(b)(2). However, the ruling’s impact is currently limited to courts within the Third Circuit, leaving room for divergence elsewhere.

Yes, but: The decision binds only the Third Circuit; other circuits may interpret the solvent-debtor exception or § 502(b)(2) differently.

What's next: Watch for potential circuit splits or future Supreme Court review as solvent-debtor disputes continue in other jurisdictions.