Absolute Priority Rule does NOT apply to individual Chapt=

Yahoo Bot · Wed Mar 03, 2010 6:45 pm

Not necessarily. Even if the class had accepted (by 2/3 amount and 1/2 number of claims "voting" in favor of the Plan) and anyONE member of the class holding a general unsecured claim had "objected" to the Plan, then the debtor would still have been required to committ5 years of PDI, pursuant to 1129(a)(15) and that 1115(a)(2) property would not have vested in the debtor at confirmation.
It was the failure to "object" distinguished from a yes or not "vote" that was focused on in the ruling.
Here is the mental gymnastics: The onlyvoteof the general unsecured creditor class (of many creditors)voted "no" but did not "object" toconfirmation.The failure to"object"was deemed to result in no requirement to pay 60 months of PDI into the Plan by the debtor [(1129(a)(15) which is analogous to 1325(b)(1)(B)'s requirement of 60 months of PDI if Class 5 objects), of course in Chapter 13 there is a standingobjection by the Chapter 13 Trustee so this result never happens in Chapter 13] so the Plan could be confirmed under 1129(b)(2)(B)(ii) as being "fair and equitable" without paying the unsecured creditors in full.Due to the failire to object,all of the property (1115 post-petition earning of the debtor during the5 years fromthe effective date of thePlan and 541 property) vested in the debtor at confirmation except the 10% paymentprovided to the general unsecured creditors, as ifthe Planwas "accepted" by thegeneral
unsecured class.
Law Office of Peter M. Lively * Personal Financial Law Center I
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Telephone: (310)391-2400 * (800)307-3328 * Fax: (310)391-2462
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________________________________
To: cdcbaa@yahoogroups.com
Sent: Wed, March 3, 2010 5:53:11 PM
Subject: RE: [cdcbaa] Absolute Priority Rule does NOT apply to individual Chapter 11 Debtors (Judge Markell Opinion; In re Shat)
Peter:
Doesn't this case also establish the proposition that those who abstain are nottreated as "yes" votes? If those abstaining had been counted as yes votes, this plan would have been confirmed consensually. See f.n. 3.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale , CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
* Bankruptcy specialist cert. by State Bar of CA Bd of Legal Specialization.
ication
f P L
Sent: Tuesday, March 02, 2010 10:38 AM
To: cdcbaa@yahoogroups. com
Subject: [cdcbaa] Absolute Priority Rule does NOT apply to individual Chapter 11 Debtors (Judge Markell Opinion; In re Shat) [1 Attachment]
Law Office of Peter M. Lively * Personal Financial Law Center I
11268 Washington Blvd, Suite 203, Culver City, CA 90230-4647
Telephone: (310)391-2400 * (800)307-3328 * Fax: (310)391-2462
A-Bankruptcy- Attorney. com
Personal Financial Law Center II
1706-B Newport Boulevard, Costa Mesa, CA 92627-3073
Telephone: (949)650-3328
THIS MESSAGE IS INTENDED ONLY FOR THE USE OF THE INDIVIDUAL OR ENTITY TO WHICH IT IS ADDRESSED, AND MAY CONTAIN INFORMATION THAT IS PRIVILEGED, CONFIDENTIAL AND EXEMPT FROM DISCLOSURE UNDER APPLICABLE LAW. IF THE READER OF THIS MESSAGE IS NOT THE INTENDED RECIPIENT, OR THE EMPLOYEE OR AGENT RESPONSIBLE FOR DELIVERING THE MESSAGE TO THE INTENDED RECIPIENT, YOU ARE HEREBY NOTIFIED THAT ANY DISSEMINATION, DISTRIBUTION OR COPYING OF THIS COMMUNICATION IS STRICTLY PROHIBITED. IF YOU HAVE RECEIVED THIS COMMUNICATION IN ERROR, PLEASE NOTIFY US IMMEDIATELY BY E-MAIL OR BY TELEPHONE. THANK YOU.
Not necessarily. Even if the class had accepted (by 2/3 amount and 1/2 number of claims "voting" in favor of the Plan) and any ONE member of the class holding a general unsecured claim had "objected" to the Plan, then the debtor would still have been required to committ 5 years of PDI, pursuant to 1129(a)(15) and that 1115(a)(2) property would not have vested in the debtor at confirmation.

It was the failure to "object" distinguished from a yes or not "vote" that was focused on in the ruling.

Here is the mental gymnastics: The only vote of the general unsecured creditor class (of many creditors) voted "no" but did not "object" to confirmation. The failure to "object" was deemed to result in no requirement to pay 60 months of PDI into the Plan by the debtor [(1129(a)(15) which is analogous to 1325(b)(1)(B)'s requirement of 60 months of PDI if Class 5 objects), of course in Chapter 13 there is a standing objection by the Chapter 13 Trustee so this result never happens in Chapter 13] so the Plan could be confirmed under 1129(b)(2)(B)(ii) as being "fair and equitable" without paying the unsecured creditors in full. Due to the failire to object, all of the property (1115 post-petition earning of the debtor during the 5 years from the effective date of the Plan and 541 property) vested in the debtor at confirmation except the 10% payment provided to the
general unsecured creditors, as if the Plan was "accepted" by the general unsecured class. Peter M. Lively, JD/MBALaw Office of Peter M. Lively * Personal Financial Law Center I11268 Washington Blvd, Suite 203, Culver City, CA 90230-4647Telephone: (310)391-2400 * (800)307-3328 * Fax: (310)391-2462 A-Bankruptcy-Attorney.com
Personal Financial Law Center II1706-B Newport Boulevard, Costa Mesa, CA 92627-3073Telephone: (949)650-3328
THIS MESSAGE IS INTENDED ONLY FOR THE USE OF THE INDIVIDUAL OR ENTITY TO WHICH IT IS ADDRESSED, AND MAY CONTAIN INFORMATION THAT IS PRIVILEGED, CONFIDENTIAL AND EXEMPT FROM DISCLOSURE UNDER APPLICABLE LAW. IF THE READER OF THIS MESSAGE IS NOT THE INTENDED RECIPIENT, OR THE EMPLOYEE OR AGENT RESPONSIBLE FOR DELIVERING THE MESSAGE TO THE INTENDED RECIPIENT, YOU ARE HEREBY NOTIFIED THAT ANY DISSEMINATION, DISTRIBUTION OR COPYING OF THIS COMMUNICATION IS STRICTLY PROHIBITED. IF YOU HAVE RECEIVED THIS COMMUNICATION IN ERROR, PLEASE NOTIFY US IMMEDIATELY BY E-MAIL OR BY TELEPHONE. THANK YOU.
From: David A. Tilem <DavidTilem@TilemLaw.com>To: cdcbaa@yahoogroups.comSent: Wed, March 3, 2010 5:53:11 PMSubject: RE: [cdcbaa] Absolute Priority Rule does NOT apply to individual Chapter 11 Debtors (Judge Markell Opinion; In re Shat)
Peter:

Doesn't this case also establish the proposition that those who abstain are not treated as "yes" votes? If those abstaining had been counted as yes votes, this plan would have been confirmed consensually. See f.n. 3.

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