  |
  |
  |
    
  
   |
 | |||
|
|
|
|
| |||
Holding: (1) Pursuant to plain language of provision of Chapter 11 governing claims and interests, bank whose claim was secured by lien on real property of individual Chapter 11 debtor that was included in bankruptcy estate had to be treated as holding a recourse claim, that was to be allowed or disallowed the same as if bank had recourse against debtor, notwithstanding that, due to debtor's prior Chapter 7 discharge, he had been relieved of any personal liability to bank. (2) Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) amendments to the Bankruptcy Code did not impliedly repeal "absolute priority" rule as it applied to individual Chapter 11 debtors; and (3) Even assuming that there was "new value" exception to "absolute priority" rule, and that individual Chapter 11 debtor, by means of his payment of new value, could be allowed to retain property under plan despite fact that general unsecured creditors would receive less than full payment on their claims, debtor could not unilaterally decide what new value he would provide for his retained property interests; rather, there had to be competition in form of bidding in order to ensure that the new investment made senior creditors, and estate as whole, better off.
x. In re Gerard, 495 B.R. 850 (Bankr. E.D. Wis. 2013)
Issue: Whether BAPCPA abrogated the absolute priority rule as it applies to individual Chapter 11 debtors.
Holding: The bankruptcy court held that the BAPCPA only partially abrogated the absolute priority rule as it applies to individual Chapter 11 debtors by allowing such debtors to retain estate assets obtained post-petition without paying objecting unsecured creditors in full.
xi. In re Wilson, 494 B.R. 684 (Bankr. N.D. Tex. 2013)
Issue: Whether the absolute priority rule has been abrogated in individual Chapter 11 cases.
Holding: The bankruptcy court held that the absolute priority rule has not been abrogated in individual Chapter 11 cases. Without any analysis, the court simply stated that courts were split on the issue and that it felt "the better reasoned cases" were the ones holding that the absolute priority rule still applied to individual Chapter 11 cases.
xii. In re O'neal, 490 B.R. 837 (Bankr. W.D. Ark. 2013)
Issue: Whether the absolute priority rule is applicable in individual Chapter 11 cases.
Holding: The court held that the absolute priority rule did not apply in individual Chapter 11 cases. The court reasoned that "there does not appear to be any other logical reason for all of the changes made exclusively to Chapter 11 for individuals except to make it work like Chapter 13." The court concluded that 11 U.S.C. § 1115 defined "all property of an individual Chapter 11 case (just as § 1322 does)."
©2014 William L. Norton III
