Page 22 - US Bankruptcy Code Overview

Limitations for Avoidance Actions. See 11 U.S.C. § 546(a).
- A preference action/fraudulent conveyance action may not be commenced after the earlier of:
i. The later of:
• 2 years after the entry of the order for relief (same date as the petition date in a chapter 11 voluntary filing); or
• 1 year after the appointment or election of an independent trustee if such appointment occurs before the expiration of the 2 year period after the petition date; or
ii. The time that the case has been closed or dismissed.
> PLAN PROCESS: THE DISCLOSURE STATEMENT AND PLAN Disclosure Statement and Plan
- 120 day exclusive period for debtor to file plan and 180 day exclusive period to solicit acceptance, often extended upon application to the court. Exclusive period for filing plan may not be extended beyond 18 months after commencement of the bankruptcy, and solicitation of acceptance may not be extended beyond 20 months. See 11 U.S.C. §1121.
- “Exclusivity” means that only the debtor-in-possession or operating trustee, as the case may be, may file and solicit votes on a plan during that time period.
- After the exclusive periods, and any court approved extensions, have ended, any party may file a competing plan.
- Plan may be for reorganization or orderly liquidation.
Disclosure Statement Approval
- “Adequacy” threshold – the disclosure statement must contain adequate information such that a voter (i.e. a typical hypothetical creditor of the debtor) can make an informed decision on whether to vote in favor of or against a plan. See 11 U.S.C § 1125.
- Disclosure Statement subject to court approval on notice to all creditors and interested parties.
- Creditors and parties-in-interest may object to disclosure statement based on adequacy threshold, not based on the actual terms of the plan of reorganization or liquidation.
Chapter 11 Plan
- General Classification of Claims. See 11 U.S.C. §507 (priorities).
i. Administrative claims must receive full payment (paid from unencumbered assets) or plan
cannot be confirmed, see 11 U.S.C §§ 507(a)(2), 1129(a)(9)(A); they include:
• post-petition vendors
• post-petition professionals
• non-debtor parties to assumed executory contracts
> UNITED STATES BANKRUPTCY CODE OVERVIEW | 19