Liposome-encapsulated Daunorubicin-Cytarabine, Fludarabine Phosphate, Cytarabine, and Filgrastim in Treating Younger Patients With Relapsed or Refractory Acute Myeloid Leukemia

Patients must have had histologic verification of AML at original diagnosis

Patient must have one of the following:

* Recurrent disease with \>= 5% blasts in the bone marrow (M2/M3 bone marrow), with or without extramedullary disease.

* Recurrent disease with an absolute blast count greater than 1,000 per microliter in the peripheral blood with or without extramedullary disease

To be eligible for the dose-finding phase: (the dose-finding phase completed in 12/2016)

* Relapsed patients

* Patients must be in first relapse, and

* Patients must not have received prior re-induction therapy

* Refractory patients

* Patients must not have received more than one attempt at remission induction, which may consist of up to two different therapy courses; Children Oncology Group (COG) AAML1031 de novo therapy including induction I and induction II is an example

* Treatment-related AML (t-AML)

* Patients must be previously untreated for secondary AML

To be eligible for the phase 2 efficacy phase:

* Relapse patients:

* Patients must be in first marrow relapse, and

* Patients must not have received prior re-induction therapy; donor lymphocyte infusion (DLI) is considered a re-induction attempt

Patients must have the status of CNS1 or CNS2 only, and no clinical signs or neurologic symptoms suggestive of CNS leukemia, such as cranial palsy

Patients must have a performance status corresponding to an Eastern Cooperative Oncology Group (ECOG) scores of 0, 1 or 2; use Karnofsky for patients \> 16 years of age and Lansky for patients =\< 16 years of age; Note: patients who are unable to walk because of paralysis, but who are up in a wheelchair, will be considered ambulatory for the purpose of assessing the performance score

Patients must have recovered from the acute toxic effects of all prior chemotherapy, immunotherapy, stem cell transplant or radiotherapy prior to entering this study; all prior treatment-related toxicities must have resolved to =\< grade 2 prior to enrollment

Myelosuppressive chemotherapy: must not have received myelosuppressive chemotherapy within 3 weeks of entry onto this study (excluding hydroxyurea)

* Cytoreduction with hydroxyurea can be initiated and continued for up to 24 hours prior to the start of CPX-351

Biologic (anti-neoplastic agent): at least 7 days since the completion of therapy with a biologic agent such as steroids, retinoids; Note: for agents that have known adverse events occurring beyond 7 days after administration (i.e. monoclonal antibodies), this period must be extended beyond the time during which acute adverse events are known to occur

Radiation therapy (RT): \>= 2 weeks for local palliative RT (small port); \>= 6 months must have elapsed if prior craniospinal RT or if \>= 50% radiation of pelvis; \>= 6 weeks must have elapsed if other substantial bone marrow (BM) radiation; Note: patients must have received =\< than 13.6 Gray (Gy) prior radiation to the mediastinum

Stem cell transplant (SCT): no evidence of active graft vs. host disease for at least 4 weeks; for allogeneic SCT patients, \>= 3 months must have elapsed since transplant

* Must have received no more than 1 prior autologous or allogeneic stem cell transplant.

* Patients must be off all systemic immunosuppressive therapy for at least 2 weeks, excluding hydrocortisone for physiologic cortisol replacement

Intrathecal cytotoxic therapy:

* No waiting period is required for patients having received intrathecal cytarabine, methotrexate, and/or hydrocortisone

* At least 14 days must have elapsed since receiving liposomal cytarabine (DepoCyte) by intrathecal injection

Growth factors:

* Patients must not have received growth factors for 7 days prior to CPX-351

* Patients must not have received pegfilgrastim for 14 days prior to CPX-351

Creatinine clearance or radioisotope glomerular filtration rate (GFR) \>= 70 mL/min/1.73 m\^2 or a serum creatinine based on age/gender as follows:

* Age 1 to \< 2 years: maximum serum creatinine 0.6 mg/dL (males and females)

* Age 2 to \< 6 years: maximum serum creatinine 0.8 mg/dL (males and females)

* Age 6 to \< 10 years: maximum serum creatinine 1.0 mg/dL (males and females)

* Age 10 to \< 13 years: maximum serum creatinine 1.2 mg/dL (males and females)

* Age 13 to \< 16 years: maximum serum creatinine 1.5 mg/dL (males) and 1.4 mg/dL (females)

* Age \>= 16 years: maximum serum creatinine 1.7 mg/dL (males) and 1.4 mg/dL (females)

Direct bilirubin \< 1.5 x upper limit of normal (ULN) for age and institution

Serum glutamate pyruvate (SGPT) (alanine aminotransferase \[ALT\]) =\< 3.0 x upper limit of normal (ULN) for age and institution (unless it is related to leukemic involvement)

Shortening fraction of \>= 27% by echocardiogram, or

Ejection fraction of \>= 50% by radionuclide angiogram or echocardiogram

Corrected QT (using Bazett's formula \[QTcB\]) interval \< 500 msecs

Patients with seizure disorder may be enrolled if on anticonvulsants and if seizures are well controlled

Central nervous system (CNS) toxicity =\< grade 2

Patients with a known history of human immunodeficiency virus (HIV) are eligible, if they meet all of the following conditions:

* No history of HIV complications with the exception of cluster of differentiation (CD)4 count \< 200 cells/mm\^3

* No antiretroviral therapy with overlapping toxicity such as myelosuppression

* HIV viral loads below the limit of detection

* No history of highly active antiretroviral therapy (HAART)-resistant HIV

All patients and/or their parents or legal guardians must sign a written informed consent

All institutional, Food and Drug Administration (FDA), and National Cancer Institute (NCI) requirements for human studies must be met

What this study is about