I appreciate the substantive response with links and information. It's much better than the original source material from cuckoo town.
To you point, there is legitimate concern about the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 that amended the Bankruptcy laws to exempt derivatives. The reason it was enacted was there were legitimate concerns that by not allowing derivatives to close out contracts, systemically important financial institutions could not cover their positions, creating a daisy chain of collateral calls, leading to the house of cards coming down. Of course on the other side of the argument, people argue the same exact safe harbors will cause systemic risk and the house of cards coming down. (I'm not going to lie, reading about how the industry lobbied for this for a long time doesn't give me the warm and fuzzies)
These are fun reads.
https://dash.harvard.edu/bitstream/handle/1/10985175/AdamsSafe Harbors.pdf?sequence=3&isAllowed=y
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2419460
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2351025
It appears Title II of the Dodd-Frank Act (Orderly Liquidation Authority) was created to address the Lehman Brothers situation so that mess never happens again. Covered Broker-Dealer Provisions under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act
I haven't had time to dig into the entitlement holder thing.