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individual debtors. Of course in chapter 13, unsecured creditors do not get to vote on the plan. They can only object to confirmation under § 1325(b)(1). The BAPCPA amendment to § 1129(a) (15) mirrors this treatment in chapter 11 where creditors holding claims in impaired classes have the right to vote on the plan as well as to object to confirmation. The drafter's failure to anticipate this nuance does not provide a reason to destroy the symmetry between chapters 11 and 13. The possibility that all unsecured creditors voting against the plan would simultaneously fail to object to confirmation is a theoretical figment squarely opposed to reality." The dissent raised the following arguments in opposing the court's opinion: The dissent first examined the language of section 1115, stating "the key phrase for interpretation is contained in the preamble of the statute:
'property of the estate includes, in addition to the property specified in section 541.'" The dissent noted that while Shat had concluded that "section 1115 absorbs and then supersedes section 541 for individual chapter 11 cases," other courts had read section 1115 more narrowly as supplementing section 541 "by adding only the debtor's post-petition earning and other property acquired after the commencement of the case." The dissent then offered several reasons for favoring the narrower view. First, the dissent argued that the panel's reading of "included" as "not a term of limitation" was strained because section 1129(b)(2)(B)(ii)'s use of the word was not as a preface for representative or illustrative example. Rather, it required further inquiry by the cross-reference to section 1115. The dissent argued that "the word 'included' in section 1129(b) (2)(B)(ii) means that property 'added to' the estate under section 1115." Next, the dissent maintained that "the broad construction the Panel advocates causes parts of the Code to become superfluous. For example, § 103(a) makes § 541, which states that an estate is created upon the filing of a petition, applicable in chapter 11 cases. Section 103(a) was not amended by BAPCPA. But the broad view [of the majority] makes § 103(a) inapplicable in individual chapter 11's." The dissent also argued that the majority's conclusion likely made section 1129(b)(2)(B)(i) an absurdity. The court then pointed out (as discussed by the majority above) that section 1129(a) (15) is only triggered by an objection, and that it was possible that creditors could vote against the plan but not object, and thus not trigger section 1129(a)(15). Finally, the dissent argued that the majority opinion ignored the larger structure and purpose of BAPCPA, which was to make debtors pay more, not less.
vi. In re Lindsey, 2012 WL 4854718 (E.D. Tenn. Oct.. 11, 2012), vacated 726 F.3d 857 (6th Cir. 2013), and remanded to bankruptcy court by 2013 WL 5436968 (E.D. Tenn. Sept. 27, 2013).
Issue: Whether the absolute priority rule applies in individual chapter 11 cases.
Holding: The District Court affirmed the Bankruptcy Court decision in 453 B.R. 886 (Bankr. E.D. Tenn. 2011) (Judge Stair) and denied confirmation, holding that BAPCPA did not abrogate the absolute priority rule with respect to individual Chapter 11 debtors.
©2014 William L. Norton III
