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The Bankruptcy Courts Fight Back?

posted by Stephen Lubben

My latest thoughts on chapter 11 are now up on Dealbook.

October 19, 2010 at 2:26 PM in Corporate Bankruptcy

Comments

Expediting a non-plan sale outside the protection to creditors afforded by the rest of chapter 11 ought to be seen as a clear violation of the intent and language of the Code.

Section 1106 (a)(5) requires that a trustee shall -
as soon as practicable, file a plan under section 1121 of this title, file a report of why the trustee will not file a plan, or recommend conversion of the case to a case under chapter 7, 12, or 13 of this title or dismissal of the case;

Every expedited non-plan sale I know of skips the report why no plan will be filed and jumps to the sale without giving the rest of chapter 11 protections (like absolute priority) to non-lienholders.

My point is that the careful balance of benefits and protections struck between debtors and creditors in chapter 11 is completely sacrificed in an expedited non-plan sale.

Once you try to justify why junior vs senior secured creditors ought to control the expedited bidding procedures you have already violated the code.

Posted by: Robert White | November 04, 2010 at 05:43 PM

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