Page 120 - Bankruptcy Volume 1

Plan Modification

After confirmation — but before substantial consummation of the plan (for example, the effective date)
— a proponent of a plan may modify the plan if said plan would meet the requirements of 11 USC 1122
and 1123. fn 3 The court must confirm the plan as modified, and any holder of a claim that has accepted
or rejected a plan is deemed to have accepted or rejected the plan as modified, unless the holder changes
its vote within the time prescribed by the court after the plan modification.

Formal Procedural Steps to Closing a Bankruptcy Case

The procedural steps to closing a bankruptcy case include both specific bankruptcy case law and busi-
ness operations. A final decree entered by the bankruptcy court is required to formally close the bank-
ruptcy case. fn 4 The motion to close the case may be made by the U.S. Trustee, but it is more commonly
filed by the debtor or trustee. A case can be reopened by the court if the debtor or another interested par-
ty files a motion. fn 5

Postconfirmation Trusts

There are various types of postconfirmation liquidation vehicles, but the two most commonly used are
liquidating trusts and litigation trusts. Creation of trusts expedites the confirmation of the plan by allow-
ing the reorganized debtor’s operating assets to emerge from the case while bankruptcy issues such as
litigation and distributions are resolved by the trustee. A litigation trust is most often used to separate the
recovery on certain assets from the balance of the estate for the benefit of a certain group of claimants.
Trusts are normally run by a liquidating trustee, litigation trustee, plan administrator or wind down of-
ficer. Trustee agreements and trust formation agreements are typically publicly available and examples
from other cases are easily obtainable to use as examples of common practice. There may also be an
oversight committee appointed that could consist of creditor representatives or independent parties to act
as a board of directors to the trustee. The trustee or plan administrator may be named in the plan as an
estate representative. fn 6 The plan must define the duties and responsibilities of the trustee or plan ad-
ministrator and provide for adequate funding for the trust’s activities, including professional fees and
expenses.

Typical purposes for forming a trust include the following:

 To liquidate, sell, or otherwise dispose of the trust property

 To cause all property or proceeds of the trust property to be distributed in accordance with the
plan and trust agreement (to the trust beneficiaries, professionals, and so on)

fn 3 11 USC 1127.

fn 4 Fed. R. Bankr. P. 3022.

fn 5 11 USC 350(b).

fn 6 11 USC 1123(b)(3).

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