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* In re Caring Heart Home Health Corp., 380 B.R. 908 (Bankr. S.D. Fla. Jan. 2008)
(Olson, J.) Traps for the unwary small business chapter 11 debtors. 40 This small business debtor must have missed (or misread) the newly added section 1129(e) which, according to this court, gives small business debtors 45 days after filing a plan to get that plan conformed (or to obtain a signed order extending that deadline).41 In this case, the debtor filed its proposed plan three weeks before filing its disclosure statements. The court then set the disclosure statements for hearing on a date 60 days later (and thus 80 days after the plan was filed). Before that hearing, the U.S. trustee objected to the disclosure statements, arguing inter alia that the debtor missed its 45 day window to get its plan confirmed or to get a signed order extending that deadline. In what seemed like a last-ditch effort, the debtor requested an extension nunc pro tunc, but to no avail. The court found the language of the new provisions of the Code to be clear, unambiguous, and inflexible (though, admittedly, "curious"). The court thus denied the debtor's motion for an extension nunc pro tunc. Said the court, not even Rule 9006(b) allowed such an extension, as it would be a direct contradiction to the "clear meaning of a statute enacted by Congress." Regretfully, the court dismissed the debtor's case without prejudice to refiling. Curious, indeed.
* Bourne v. Northwood Props., LLC (In re Northwood Props., LLC), 509 F.3d 15 (1st Cir. Nov. 2007) (Lynch, J.)
Creditors lost their voting rights when the debtor amended the plan to place dissenting creditors into a "convenience class." The First Circuit reaffirmed the use of convenience classes to deny creditors' voting rights by paying their claims in full. In this case, the most significant unsecured claim was held by a homeowners' association (the debtor was engaged in the construction of a multi-phased condominium project). The association, as a whole, supported the plan of reorganization. Other than the association's claim, there were only three other allowed claims, which combined for a claim of approximately $400 against the estate. Because two individual homeowners objected to the plan but were out-voted by their homeowners' association, the individual homeowners purchased the other three claims , hoping to make some noise. To muffle any sounds, the debtor amended its plan to move these newly acquired claims into a separate convenience class and further proposed to pay the $400 claims in full (while paying the association only five percent of its claim). The bankruptcy court, finding that the dissenting creditors now were unimpaired by the amended plan, issued a
40
See id. n.1 ("This deadline was newly imposed upon small business debtors by [BAPCPA], legislation which is replete with odd provisions -- including a number of traps for the unwary.").
41 A court may extend the 45 day deadline of section 1129(e) "only if . . . the order extending time is signed before the existing deadline has expired." 11 U.S.C. S 1121(e)(3)(C) (emphasis added). The court recognized that it was "aware of no other provision of the Bankruptcy Code in which a critical deadline is determined by when the court signs an order, rather than when that order is entered on the court's docket. This is yet another example of the curious drafting of BAPCPA." 380 B.R. at 911 n.2 (emphasis in the original).
