Random
What’s the reasoning behind doing a ch. 11 reorganization plan instead of liquidation?
The goal is to capture a going concern surplus.
(aka hopefully making more money from keeping the business than you would from doing a piecemeal liquidation)
If the DIP files a plan within the initial 120 days, 1121(c)(3) allows the debtor more breathing room; another ____ days.
60 days
What test guarantees that chapter 11 will yield no worse an outcome as to each creditor than a chapter 7 would?
Best interest of creditors test
The plan may discriminate as long as it’s not ____.
Unfair
If the creditor doesn’t consent to the plan, then the plan must provide for one of three options. FIRST, the plan can let the creditor retain its lien and provide for it to be paid its claims full value as of the effective date of the plan.
This means that if you pay the lien over time, what must you provide?
Interest
What does a class of creditors do to get “crammed down”?
Dissent from the plan
In no way may the 120 day filing period be extended more than ___ months from the day of filing the petition.
18 months
In order to confirm a plan, the court must find that the confirmation is not likely to be followed by the liquidation, or the need for further financial reorganization. What is this requirement called? (one word)
Feasibility
No equity holder should receive anything of value unless all dissenting classes of creditors have received payment in full for their claims. This is known as the ______.
Absolute priority rule
If the creditor doesn’t consent to the plan, then the plan must provide for one of three options. SECOND, the plan can provide for the creditors collateral to be sold, with the creditor retaining a lien on the proceeds of the sale and having the right to ______ the amount of its claim in the sale.
The code deems a class to have accepted a plan if the accepting creditors represent at least ____ in the amount of voted claims, and more than ____ of the number of voting creditors.
1/3 and 1/2
What must the debtor pay in full at the moment the plan is confirmed?
Administrative expenses
Under the classification requirement, a plan may place a claim in a particular class only if such claim is ________ to the other claims in that class.
Substantially similar
How can equity holders evade the full adverse consequences of the absolute priority rule?
By satisfying the “new value corollary”
If the creditor doesn’t consent to the plan, then the plan must provide for one of three options. THIRD, the plan can provide the creditor with the “_____ ______” of its claims. Meaning, consideration that’s not cash, but has a sufficiently reliable and recognized value that is truly protective of the creditor.
Indubitable equivalent
Some claims could take many years to determine (ex. asbestos). For these reasons, 502(c) of the code permits a court to estimate, “for purposes of allowance,” almost any ______ or ______ claim where failure to do so “would unduly delay the administration of the case.”
Contingent or unliquidated
Section 1125 forbids the DIP or anyone proposing a plan from soliciting acceptance of the proposal until those who will vote are given a court-approved ________ .
Disclosure statement
(containing adequate information about the debtors history, finances, and plans)
Only ____ classes need to be given a vote on the plan. What does this one word mean?
Impaired; means that they are not getting the full rights under contract that they would’ve been entitled to outside of bankruptcy.
Why is sweat equity (aka the blood sweat and tears put into the business) NOT “new value”?
It’s not money or moneys worth.
Hypo: a secured creditor made a non-recourse (aka not personally liable) loan worth 500k to the debtor. The loan was secured by a building worth 600k. Over the past year, the market got fricked up so the building’s value went down to 400k. If the debtor files a ch. 11 bankruptcy, can the secured creditor participate in the bankruptcy for both the secured and now unsecured portion?
Yes, 1111(b). Non-recourse becomes recourse in bankruptcy.
When does discharge occur in a Ch. 11?
Plan confirmation! It discharges the debtor immediately from all debts, vests the property of the estate in the debtor, and sweeps away all liens not protected by the plan. The debts discharged in the plan are replaced by new rights and obligations. (and if the plan fails then creditors can go seek judgements against the debtor or repossess)
What is the main code section that deals with plan requirements?
1129
One specific type of class HAS to vote to accept the plan for it to be confirmed. What type?
Non-insider impaired class
What are the five components of the “new value corollary”?
The new value must be 1) new, 2) substantial, 3) money or money’s worth, 4) necessary for a successful reorganization, and 5) reasonably equivalent to the value or interest received
Under a 1111(b) election, this means that the creditor will give up ________, BUT the plan must pay ___________ .
Any rights to participate in ch. 11 as an unsecured creditor, BUT the plan must pay the entire debt owed as if it were all secured.
(This means the plan must pay the creditor enough over the years so that they get the present value of the collateral (w interest), BUT the unsecured portion without interest.)