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means of enhancing the estate and "augmented the Debtors' property rights at the expense of third parties." Additionally, the workers' compensation laws are health and safety laws, which are not preempted. Thus, the court held that the plan was not confirmable because it violated applicable nonbankruptcy law.
ii. In re Neogenix Oncology, Inc., 508 B.R. 345 (Bankr. D. Md. 2014.)
Issue: Corporate Chapter 11 debtor, with support of committee of equity security holders, sought confirmation of plan of liquidation.
Holding: Corporate debtor's proposed Chapter 11 plan could not be confirmed, due to provision releasing shareholder claims against debtor's former and current officers and directors, who held indemnification claims against debtor; plan was liquidating plan, and third-party releases were not necessary for reorganization or for sale of debtor's assets, which had already closed. Furthermore, alternative plan, albeit one that was less preferred, was available to be confirmed, and there was insufficient information to permit conclusion that releases were fair and reasonable to releasing parties, who were not given choice to opt out and pursue their claims.
iii. In re Wages, 508 B.R. 161 (9th Cir. BAP 2014).
Issue: Mortgage lender whose claim was secured by real property that individual Chapter 11 debtors used as principal residence, and out of which they operated their trucking business, objected to modification of its claim in debtors' plan in order to reduce rate of interest and extend payment term.
Holdings: Three distinct requirements must be met in order for secured claim to be protected from modification in individual Chapter 11 plan by antimodification provision of Chapter 11: (i) the security interest must be in real property; (ii) that real property must be the only security for claim; and (iii) the real property must be debtor's principal residence.
(1) As matter of first impression in the Circuit, the antimodification provision of Chapter 11 applies to any claim secured only by real property that the debtor uses as principal residence property, even if that real property also serves additional purposes, and
(2) Debtors could not use their plan to modify the rights of mortgage lender whose claim was secured only by real property that was the site of debtors' principal residence, though debtors also used property to park truck tractors and trailers used in debtors' trucking business.
iv. In re Graham, 506 B.R. 745 (Bankr. W.D. Mich. 2014).
Issue: Secured creditor objected to disclosure statement filed by Chapter 11 debtors, contending that underlying plan was unconfirmable due to proposed modification of creditor's rights as holder of claim secured only by debtors' residence.
©2014 William L. Norton III
