Page 23 - US Bankruptcy Code Overview

ii. Priority claims including:
• selected employee claims up to $13,650.
• grain producers and fisherman up to $6,725.
• certain deposits up to $3,025.
• alimony maintenance and support for a spouse or child.
• selected governmental tax claims.
• claims for commitment by a debtor to a Federal depository institution regulatory agency to maintain capital of an insured depository institution.
iii. Secured claims - priority as to collateral and bifurcation based on value of collateral
iv. Unsecured Claims
v. Equity
- Requirement of 2/3’s vote in favor by each impaired class for approval. See 11 U.S.C. § 1126.
- Unimpaired classes do not vote. See 11 U.S.C. § 1126(f).
- Unimpaired classes are those classes of creditors/claims which will receive 100% of their claim and whose rights are not altered. These creditors are deemed to have accepted the plan.
- Those classes which will receive nothing on their claims do not vote because they are deemed to have rejected the plan.
- Absolute Priority Rule - New Value Exception. See Bank of America Nat’l Trust & Savings Assoc. v. 203 North LaSalle Partnership, 526 U.S. 434 (1999). Subordinate creditors or interest holders cannot be paid unless senior creditors are paid in full.
- Effect of conversion from chapter 11 to chapter 7 - administrative claims which arose after the order for relief pursuant to a chapter 11 case, but prior to conversion to a chapter 7 case, are treated as subordinate to the chapter 7 expenses.
- Claims for unliquidated, contingent or disputed claims may be estimated by the court for voting purposes.
- Similarly situated claims are treated similarly except for “convenience claims.”
Confirmation Requirements (see 11 U.S.C. § 1129) include:
- compliance with Bankruptcy Code;
- compliance with court orders;
- good faith and lawful;
- financially feasible; and
- acceptance by each impaired class – requirement that 2/3 of the dollar amount of claims in each class and 1/2 of the number of creditors in such class, see 11 U.S.C. § 1126(c), or permitted “cram down.”
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