1. 1123
    Plan may allow debtor, trustee, or by a representative of the estate appointed for such a purpose, to pursue, inter alia, avoidance actions
  2. 548
    trustee has power to avoid fraudulent transfers made on or within 2 years before filing for Ch. 11

    - if performed transaction over 2 years ago but wasn't perfected until 1.5 year ago, it's subject to 548. (i.e. transfered real estate 28 months before filing Ch. 11 but wasn't recorded until 21 months before filing Ch 11)
  3. 547

    when a trustee may avoid any transfer just cause (Code wants to discourage creditors from racing to dismember debtor and facilitate equality of distribution among creditors of the debtor)
  4. Official Committee of Unsecured Creditors of Cybergenics Corp v. Chinery
    Ps argue its debtor, Cybergenics had a fiduciary duty to pursue fraudulent transfer claims relating to LBO of D. Brought derivate action to avoid the transfers to a third party. 

    creditors may have standing to pursue an avoidance action
  5. unperfected transfers
    544(a) DIP
  6. 101 (5)(A)

    a "right to payment..."
  7. if the claim arose prepetition it is __1___. if it arose postpetition it may be __2__
    • 1. a claim against the estate
    • 2. either be an administrative expense or a claim against the debtor's postbankruptcy estate.
  8. types of postpetition claims
    • -administrative expenses
    • -postpetition debt
    • - performance due by the estate under an executory contract
  9. tort claims
    put into a trust . want to provide compensation for victims while permitting the rehabilitation of the debtor. 

    the debtor is discharged from liability. an issue though is if trust will provide enough money for the victims since size of the fund is estimated. unclear if future victims who have not proved claims should be bound by the discharge 

    524 g deals with it some but only with asbestos..what about other mass claims?
  10. a claim comes into existence as soon as ____
    the act giving rise to liability takes place
  11. a proof of claim
    the creditor's formal submission of a claim against the estate
  12. even though the debtor's personal liability is ___ in bankruptcy the ____
    • discharged
    • lien survives the discharge.
  13. a secured claim encumbers ____
    specific property of the estate
  14. Allowance of claims or interests

    • 502(a) claims are deemed allowed unless a party in interest [debtor, creditors, trustee, etc] objects
    • 502(c). if a claim is disputed, resolution can be either by a determination on the merits or, if that would cause undue delay, by estimation of the amount (see Bittner v. Borne, where value of claim estimated at $0 is okay)
  15. Most payments begin ___
    after confirmation of the plan, and continue over time as provided for in the plan but payments could be made earlier if appropriate. i.e. administrative expenses are often paid for when incurred, and payments to a secured party may be needed to ensure adequate protection
  16. secured claims are satisfied by ___.
    the collateral or its proceeds. IF there is more than one lien on a pice of property, the secured claims are ranked in accordance with prioirty prescribed by non-bankruptcy law.
  17. All 507 priority claims must be
    paid in full unless holders of the claims agree to the contrary. A plan *cannot* be confirmed f it odes not propose to pay priority claimants in full (in the absence of an agreement otherwise).
  18. undersecured debt
    when the value of collateral that secures a debt becomes lower than the debt owed; so if a creditor wanted to foreclose on the collateral, he would not be getting the full debt 

    - the court may determine the value of the collateral at some time before foreclosure
  19. while secured claims are satisfied by the collateral or its proceeds, all other claims are paid___
    from the general fund of the estate
  20. Ranking of claims
    • 1secured debt
    • 2administrative expenses
    • 3 gap admin expenses
    • 4 salary and wages unpaid at the time of bankruptcy
    • 5 contributions to employee benefit plans
    • 8 taxes
    • .
    • .
    • general unsecured claims--usu get no payment at all since bankrupt estates are usually insolvent
  21. General unsecured claims must receive at least___
    as much as they would have been paid if the company was liquidated. If priority claims would have consumed all or a significant portion of the fund, the payment required for unsecured claims would have been correspondingly lessened. **But usually nothing in bankruptcy cases since firms usually don't have the money and it gets used up on priority claims**
  22. Determining Secured Claims- cases
    • United States v. Ron Pair Enterprises-
    • Matter of Terry Limited Partnership-
    • Premier Entertainment Biloxi -
  23. adminstrative expenses statute
    • 503(a)- seek payment
    • 503 (b)- allowance
  24. Two questions regarding administrative expenses
    • 1. Did the claim arise prepetition?
    • ---1141(d)(1)(A) discharges debts from claims that arose before the date of confirmation; courts have had difficulty articulating standard for when claims arise

    2. Was the incurring of liability on the claim necessary to preserve the estate?
  25. Administrative Expenses-cases
    • Hartford Underwriters Ins. Co
    • In re Ames
    • U.S. v. Noland
  26. equitable subordination
    most common basis to subordinate a higher priority claim below a lower priority claim is inequitable or dishonest conduct by the claimant that results in unfair advantage or prejudice to other creditors. must have:

    • -wrongful conduct AND
    • - prejudice
  27. Creditor misconduct
    • Benjamin v. Diamond
    • In re SI Restructuring
  28. Insider Trading
    In re Washington Mutual
  29. claims trading general discussion
    claims may be acquired, sold for different reasons (acquire- profit from subsequent sale of claim, etc; sell- let go of claim that may deteriorate in value)

    - securities laws are most relevant
  30. Claims trading- rule, code, and cases
    • Rule 3001(e)- transferred claims
    • In re Revere Copper and Brass, Inc

    • some code provisions apply indirectly:
    • 1145(b)(1)(A)
    • 502(j)
    • 1126(e)
  31. Filing plan- exclusivity/multiple plans, implementation and confirmation basic statutes
    • 11 USC 1121(a): who may file a plan
    • 1121 (b) debtor may file a plan at any time
    • 1121 (c)- parties other than the debtor cannot file a plan unless:- a trustee is appointed OR- debtor failed to file plan within 120 days after the order for relief OR- debtor failed to obtain acceptances of its plan from all impaired classes w/in 180 days after the order for relief

    1121 (d)- Exceptions:120, 180 day "exclusivity periods" can be reduced or extended by court "for cause" 

    • 1123(a)(5) a plan must have adequate means of implementation
    • 1129- confirmation of plan
    • 1129(c) Once relevant periods expire, anyone can file plan (confirmation multiple plans)
  32. Court's factors when considering extending deadline to file Ch 11 plan :
    • In re Express One
    • 1. size and complexity of the case
    • 2. necessity of sufficient time to permit the debtor to negotiate a plan of reorganization and prepare adequate information
    • 3. the existence of good faith progress toward reorganization
    • 4. the fact that the debtor is paying its bills as they become due
    • 5. whether the debtor has demonstrated reasonable prospects for filing a viable plan
    • 6. whether the debtor has made progress in negotiations with its creditors
    • 7. the amount of time which has elapsed in the case
    • 8. whether the debtor is seeking an extension of exclusivity in order to pressure creditors to submit to the debtor's reorganization demands
    • 9. whether an unresolved contingency exists

    [Dow Corning notes that 7th and 2nd factor essentially the same]
  33. In re All Seasons
    Filing Chapter 11 plan-extensions as per 11 USC 1121

    Two secured creditors objected to debtor's motion  to extend period it could file its Ch 11 plan. Party seeking a change bears burden of proving requisite cause exists. No cause exists when the "size, nature, and complexity" of a case do not call for an extension.  

    Note: if debtors do not use period of exclusivity well, undersecured creditors likely to be successful in obtaining relief from the automatic stay under 362(d)(2)
  34. Filing plan- limited Exclusivity Rights cases
    • In re Lehman
    • All Seasons- (boat building biz) party seeking change bears burden of proving requisite cause. no cause exists when the "size, nature and complexity" of a case do not call for an extension
    • Express One- (airline) 9 factor test for extensions
    • Asarco LLC- 1129(c) four factor test when multiple plans confirmable
  35. Multiple plans--general discussion
    Even the possibility of creditors forming alternate plans puts pressure on debtor to finalize and file a plan; it doesn't want a plan that would be less favorable to its interests and this affects its negotiations with creditors to file something that creditors would confirm
  36. Asarco 1129 (c) four factor test for confirmability of a plan
    • 1. type of plan
    • 2. treatment of creditors and equity (i.e. equity owners can retain equity, creditors can be fully paid) 
    • 3. feasibility (i.e. legal commitments of support from parent's parent company upon confirmation, presence of collective bargaining agreements) 
    • 4. preferences of creditors and equity holders
  37. Disclosure statement
    1125 requires the proponent of the plan to craft a disclosure statement containing adequate information that court must approve. It is then distributed to all creditors and equity holders

    Prohibits the postpetition solicitation of acceptance or rejections of a plan prior to the dissemination of the plan and the court-approved disclosure statement

    adequate information is defined loosely to give court discretion in evaluating disclosure statement
  38. 1126(e)
    allows the court, on request of a party in interest, to exclude from the vote any entity whose acceptance or rejection was not in good faith
  39. Two situations where no actual voting takes place
    • - a class that is unimpaired- it is conclusively deemed as having accepted the plan (1126(f))
    • - a class that will receive or retain no property under the plan is deemed as having rejected the plan
  40. Classification of claims statutes and general discussion
    Classification has significant impact on voting rights of parties, so debtor's discretion in establishing classes is controlled to prevent unfair discrimination

    1123(a)(1)-- plan must designate classes of claims and interests

    1122- claims and interests in a class must be substantially similar (i.e. of same priority and quality so no unsecured and secured claims in same class)

    In order to vote on the plan, parties with claims and interests must be divided into classes. A class of claims accepts the plan if at least 2/3 in amount and more than half in number of the voting creditors with allowed claims in that class have accepted the plan.

    • debtor controls how the claims and interests are classified
    • --if most general unsecured creditors support plan, debtor may draft plan so that all general unsecured claims are in one class--> plan supporters can outvote plan opponents so that class accepts plan
    • --if too many general unsecured creditors oppose the plan, a single class made up of all general unsecured claims would reject the plan --> debtor will want to create at least one impaired class that will accept the plan

    - debtor can use power to create classes to gain support from creditors because allows debtor to give creditors types of payments they'd want or be okay with

    - 1122b- one group of dissimilar may be together but only if court approves--> based on if classification is necessary for administrative convenience

    - can have similar claims in different classes, but based on reasonable basis (can't gerrymander just to dilute votes of creditors)

    - claims or interests in the same class must be treated equally (1123(a)(4))
  41. Classification of claims cases
    Teamsters v. US Truck-debtor attempted approval via cramdown. Teamsters objected; court argues the employees represent by Teamsters have a unique interst in the ongoing biz of the debtor and substantially different interest; court affirms classification but holds there must be a legit biz reason to put substantially similar claims in different classes

    Phoenix Mutual- anticipating Greystone (creditor) would reject plan, Phoenix classified them separately from trade creditors so Greystone wouldn't control the class's vote (Greystone was owed much more money than trade creditors); 

    -Holding: may put substantially similar claims in different classes, but must be for motive independent of gerrymander
  42. JP Morgan Chase v. Charter
    Charter sought to reinstate senior credit facility (keep the same loan they had before filing for bankruptcy). JP represented senior lender and objected saying there were 3 provisions in agreement with debtor that were incurable.

    1) default=debtor couldn't pay debts as they became due. Court argues that this provision relates to actual inability to pay  debts that become due not the anticipation that they will default--> not  impaired

    2) no other "group" may hold a greater voting percentage than PAul Allen. Court: bondholder's committe, though greater voting percentage, not a "group" under the sec law b//c an ad hoc commttee brought together by circumstances of bankruptcy

    3) JP: cross default provision not an ipso facto provision (outlawed by Code) because referred to holding co. not charter ; Court: it is. charter is linked with its affiliates and lender had long linked them together
  43. statute that describes impairment of claims or interests

    a claim or interest is not impaired under the plan if the legal, equitable, and contractual rights of the holder are left unaltered.

    generally, almost every deviation from the nonbankruptcy rights results in an impairment
  44. artificial impairment
    conn. gen. life ins
  45. confirmation of a plan statute, general discussion

    two methods: 

    1129(a)- prereqs for confirmation when plan accepted by all impaired classes

    1129(b) confirmation when no universal acceptance=cramdown 

    • for a AND b
    • plan must:
    • - be lawful and in good faith
    • - give distribution to a dissenter of a value that is at least equal to what she would receive if debtor liquidated
    • - apply absolute priority rules in paying creditors and pay them in full
    • - have a reasonable prospect of success

    if not all classes accept plan, 1129(b)- cramdown
  46. when every class doesn't accept plan

    court will still confirm, but plan:

    • - must satisfy all of 1129(a) except a(8)
    • - must not discriminate unfairly against any impaired class that has not accepted the plan
    • - must be fair equitable
  47. unfair discrimination
    if discrimination has some reasonable basis, it is not motivated by bad faith, and it is necessary to the success of the reorganization it likely is not unfair
  48. fair and equitable for secured claims under 1129(b)
    -liens must be preserved to the full allowed amount of their secured claims and claimants receive deferred cash payments 


    sell the property free and clear of all liens so claimant can bid on it


    claimant receives the indubitable equivalent of the claim
  49. fair and equitable for unsecured claims
    - each holder of a claim in the class receives property of value--based on present value


    - any junior class retains nothing if the senior dissenting class is not paid in full (absolute priority) and equity wiped out.

    --equity can only retain if they contribute new capital to the debtor that is equal to or greater than the value of their interest (new value exception) must be money or money's worth--BUT not all courts follow
  50. undersecured creditors and 1111(b)
    creditor has secured claim only to the extent of the collateral's value, so 1111(b) gives the creditor a deficiency claim

    if creditors elect for 1111(b) protection, will lose distribution as unsecured creditors and right to vote under that class, but their claims will be fully secured and will be paid the greater of the face value of the allowed secured claim or the present value of the collateral.
  51. 1129 (b)(1)
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  52. Case v. Los Angeles Lumber Products
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  53. 1129 (b)(2)(B)
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  54. 3 tests for fair and equitable for secured claims under 1129 (b)(2)(A)
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  55. 105(a) & cases
    -gives the court broad powers to issue any judgment that it believes is necessary to carry out provisions of the code

    A.H. Robins- tort victims of debtor who filed Ch.11 (manufactured contraceptive devices) sought to proceed against Robins' co-defendants including debtor's products liability insurance company; Court extends stay against tort victims since, if successful, would reduce  the debtor's property to the detriment of its creditors.

    • In re Kmart- Kmart sought to pay some critical vendors in full above others; Court holds that availability of 105(a) does not override priority rules and the equal treatment of classes
    • -105(a) implements, not overrides
    • - if wanted to treat differently, have to prove:
    • 1) but for immediate full payment, vendors would cease dealing and
    • 2) the business would gain enough from continued transactions with the favored vendors to provide some residual benefit to the remaining, disfavored creditors.

    Lyondell- debtor sought preliminary injunction against guarantee creditors from pursuing remedies against debtor's nondebtor parent; court holds automatic stay doesn't apply to parent using 105(a). applies modified preliminary injunction test (see outline)
  56. For property to be necessary under 362(d)(2)___.
    It must be "essential for an effective reorganization that is in prospect"
  57. 1129 (b)(2)
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  58. Section 1129(b) codifies the ____.
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Card Set
BK part II