Absolute Priority Rule

The Fifth Circuit has joined the Fourth and Tenth Circuits in applying the absolute priority rule to individual debtors in chapter 11 bankruptcy. In re Lively, No. 12-20277 (5th Cir. May 29, 2013). See also In re Stephens, 704 F.3d 1279 (10th Cir. 2013); In re Maharaj, 681 F.3d 558 (4th Cir. 2012). But see In re Friedman, 466 B.R. 471 (B.A.P. 9th Cir. 2012) (finding that the rule does not apply to individual debtors). [Read more…] about Fifth Circuit Deals Blow to Individual Debtors in Chapter 11

The Tenth Circuit joined the Fourth Circuit in finding that BAPCPA did not abrogate the absolute priority rule with respect to individual debtors in chapter 11 bankruptcy. In re Stephens, No. 11-6309 (10th Cir. Jan. 15, 2013) (agreeing with In re Maharaj, 681 F.3d 558 (4th Cir. 2012)). [Read more…] about Absolute Priority Rule Found to Apply to Individual Debtor

The Fourth Circuit Court of Appeals has dealt a blow to debtors on the issue of whether the absolute priority rule applies in individual chapter 11 cases. In re Maharaj, No. 11-1747 (4th Cir. June 14, 2012). The decision turned on the court’s finding that the reference in section 1129(b)(2)(B)(ii) to “property included in the estate under section 1115,” and the words “in addition to” as found in section 1115 were amenable to differing interpretations. Having found the meaning ambiguous, the court went on to base its decision on its view of congressional intent. [Read more…] about Fourth Circuit Finds Absolute Priority Rule Applicable to Individual Debtors

In a thoughtful and comprehensive opinion, the BAP for the Ninth Circuit held yesterday that the absolute priority rule does not apply to individual debtors filing chapter 11 bankruptcy.  In re Friedman, Nos. 11-1149, 11-1105 (B.A.P. 9th Cir. March 19, 2012).

Daniel Press is to be congratulated on his fine oral argument on behalf of NACBA in this case.

Friedman opinion

[Read more…] about Win for Debtors on Absolute Priority Rule in Chapter 11

NACBA has filed an amicus brief in the case of In re Maharaj, No. 11-1747 (4th Cir.) challenging the application of the absolute priority rule to individual debtors in chapter 11.
Brief

NCBRC’s Tara Twomey has filed an amicus brief on behalf of NACBA in the case of In re Friedman, No. 11-1149 (9th Cir. BAP) arguing that the absolute priority rule in chapter 11 does not apply to individual debtors. NCBRC’s brief argues that when Congress enacted the 2005 amendments it made significant amendments to chapter 11 in order to steer debtors toward reorganization rather than liquidation. Application of the absolute priority rule would have the contrary effect. This case presents one of the first opportunities for an appellate court to address whether the 2005 amendments to the Code abrogate the absolute priority rule for individuals. Other cases addressing this issue that are currently in the courts include: In re Maharaj, No. 11-217 (4th Cir.); In re Kamell, No. 11-1246 (9th Cir. BAP); In re Stephens, No. 11-29 (10th Cir. BAP); and In re Cobb, No. 09-25620 (Bankr. C.D. Cal.). Click here for the brief.