B. Statutory Basis
Although no specific provision of the Bankruptcy Code expressly authorizes a court to order substantive consolidation, such authority is usually derived from § 105(a), which provides that "[t]he court may issue any order, process or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code] ."7 Because the power to order substantive consolidation derives from the equitable powers of the bankruptcy courts, substantive consolidation is determined on a case-by-case basis, and the various decisions reflect a given bankruptcy court's analysis of the particular facts and circumstances presented. A court's examination requires, inter alia, a searching review of the facts and circumstances of the case, including a review of the corporate or inter-organizational structures of the entities proposed to be consolidated, their inter-corporate or inter-organizational relationships, and their relationships with their respective creditors and other third parties.8 A court will also examine the impact upon the creditors of each entity if consolidation were to be ordered, and whether they would be unfairly prejudiced or treated more equitably by substantive consolidation.9
While the overwhelming majority of courts rely on § 105(a) as authority to order substantive consolidation, the U.S. Bankruptcy Court for the Western District of Michigan has determined that substantive consolidation must be ordered only in accordance with the turnover powers found in § 542.10 The Cyberco court reasoned that if the...
