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vii. In re Brown, 505 B.R. 638 (E.D. Pa. 2014).
Issue: Creditors moved to dismiss individual Chapter 11 case, based on debtors' alleged inability to propose confirmable plan that satisfied "absolute priority" rule.
Holding: The language of § 1115 is not ambiguous. Reading the words "includes, in addition to" together means that what follows (post-petition earnings and property) is included in the definition of the property of the estate as defined in § 541. The provision makes clear that property that otherwise would be excluded under § 541(a)(6) and (7) is now included. FN14 The phrase "included in the estate under section 1115," in turn, refers only to the property that was added to the bankruptcy estate by § 1115. Even if the language of § 1115 were ambiguous and subject to two reasonable interpretations--one that allows debtors to keep all property of the estate, both pre-petition and post-petition; and one that al-lows debtors to retain only post- petition property, we would conclude that the absolute priority rule still applies in individual Chapter 11 debtor cases. If the language were ambiguous, we would discern Congress's intent by examining extrinsic evidence, including pre-BAPCPA practice, policy and the legislative history. Reading the amended language of § 1129(b)(2)(B)(ii) in the context of the statute as a whole rather than in isolation, In re Friedman's, 738 F.3d at 554, the more sensible interpretation is that Congress did not intend to abrogate the absolute priority rule. If Congress meant to exempt an individual debtor's entire estate, it would have referred to both §§ 541 and 1115 in § 1129(b)(2) (B) (ii). It did not. The phrase "included in the estate under section 1115" refers only to the post- petition property added to the estate under § 1115. It does not supplant the definition of estate property in § 541.
viii. In re Surma, 504 B.R. 770 (Bankr. D.N.J. 2014).
Issue: Mortgagee objected to individual Chapter 11 debtor's proposed plan and disclosure statement, and specifically to debtor's use of rents that were the subject of absolute and unconditional prepetition assignment to pay only the secured portion of mortgagee's bifurcated claim under plan.
Holding: Individual Chapter 11 debtor's proposed use of rents that were the subject of absolute and unconditional prepetition assignment in mortgage to pay only the secured portion of mortgagee's bifurcated claim, thereby forcing mortgagee to accept allocation of rents that was contrary to its financial interests, was use of rents contrary to mortgagee's ownership rights therein, though, without bifurcation of mortgagee's claim, the application of rents to pay only mortgagee's claim would not have violated its New Jersey state law rights in rents.
ix. In re Batista-Sanechez, 505 B.R. 222 (Bankr. N.D. Ill. 2014).
Issue: Creditor objected to confirmation of individual Chapter 11 debtor's proposed reorganization plan.
©2014 William L. Norton III
