Law Commons^™

Gifting & The Absolute Priority Rule, Brianna Walsh

Bankruptcy Research Library

(Excerpt)

The absolute priority rule sets forth a hierarchical scheme for the distribution of proceeds obtained through liquidating the assets of a debtor. The scheme provides that property of an estate shall be distributed to secured creditors, then to administrative and priority unsecured creditors, then to unsecured creditors, and lastly to equity holders. Under Chapter 11, section 1129(b)(2)(B)(ii) for a dissenting class of impaired creditors, a plan is “fair and equitable” only if the allowed value of such creditors claims are paid in full, or the holder of any claim or equity that is junior to the dissenting creditors will …

From Chrysler And General Motors To Detroit, David A. Skeel Jr.

All Faculty Scholarship

In the past five years, three of the most remarkable bankruptcy cases in American history have come out of Detroit: the bankruptcies of Chrysler and General Motors in 2009, and of Detroit itself in 2012. The principal objective of this Article is simply to show that the Grand Bargain at the heart of the Detroit bankruptcy is the direct offspring of the bankruptcy sale transactions that were used to restructure Chrysler and GM. The proponents of Detroit’s “Grand Bargain” never would have dreamed up the transaction were it not for the federal government-engineered carmaker bankruptcies. The Article’s second objective, based …

The (Il)Legitimacy Of Bankruptcies For The Benefit Of Secured Creditors, Charles W. Mooney Jr.

All Faculty Scholarship

This paper explores the legitimacy—or illegitimacy—of filing and maintaining a case under the Bankruptcy Code when the sole or principal beneficiary or beneficiaries of the case would be a secured creditor or secured creditors. In the situation posited here, the application of the usual distributional priority rules would not produce any distribution for the general, unsecured creditors of the debtor. In the prototypical case virtually all of the assets of the debtor would be subject to secured claims securing obligations that exceed the value of the collateral, i.e., the secured creditor would be undersecured and there would be no equity …

Codifying Bankruptcy Law's Fastpass: New Value And The Absolute Priority Rule, David P. Hamm Jr

David P Hamm Jr

The notion behind the absolute priority rule is not novel to any of us. We all learned at a very young age that if someone is in front of you in line—they get served first. This basic notion of fairness affects our lives in several everyday contexts—including bankruptcy. The people in the “bankruptcy” line are the holders of interests in the debtor. If the interest held by party A is “senior” to that of party B, then party A is in front of party B in line. The absolute priority rule essentially provides that the party A must be paid …

Bapcpa’S Exception To The Absolute Priority Rule For Individual Chapter 11 Debtors, Christina Kormylo

Bankruptcy Research Library

(Excerpt)

Under the absolute priority rule of 11 U.S.C. § 1129(b)(2)(B)(ii), a reorganization plan that gives a junior class of creditors an interest in the estate will not be confirmed unless each senior class receives full payment or gives its consent. The absolute priority rule was amended in 2005 by the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) by adding an exception that allows individual chapter 11 debtors to retain property included in the estate under newly added section 1115. This amendment furthers the congressional intent of allowing chapter 11 to function more like chapter 13, under which there …

Bank Of America V. 203 North Lasalle Street Partnership: Cram Down Without Debtor Exclusivity--Good Or Bad For The Creditor?, Ann E. Nolan

Kentucky Law Journal

No abstract provided.

Baseline Problems In Assessing Chapter 11, Theodore Eisenberg

Cornell Law Faculty Publications

Dealing with failing businesses is like dealing with failing marriages. It is messy. The bigger the business the messier the process is likely to be. Many big business failures in the United States go through their death throes or cure their ills in reorganizations under Chapter 11 of the Bankruptcy Act. As the vehicle in which big business messes travel, Chapter 11 is viewed as unnecessarily complex, time-consuming, and costly. The justification for Chapter 11's very existence has been challenged.

This article suggests that we are blaming the vehicle for the mess that it carries. Much of what is problematic …

A Rule Unvanquished: The New Value Exception To The Absolute Priority Rule, Clifford S. Harris

Michigan Law Review

This Note examines whether the new value exception remains part of the revised Bankruptcy Code. Part I discusses the background of the new value exception. Part II traces the development of the conflict concerning the survival of the new value exception subsequent to the adoption of the Code. It then discusses the Supreme Court's opinions in Mid/antic National Bank v. New Jersey Department of Environmental Protection and its progeny, which established the methodology for determining the impact of the revised Bankruptcy Code on preexisting bankruptcy law. Based on an analysis of the Midlantic doctrine, Part II concludes that Congress did …

Owners, Auctions, And Absolute Priority In Bankruptcy Reorganizations, Bruce A. Markell

Articles by Maurer Faculty

No abstract provided.

Absolute Priority And New Value, James J. White

Articles

This paper is based on a lecture given on December 6, 1990 ast the Second Annual Robert E. Krinock Lecture. The absolute priority rule is a specific application of the broader doctrine that reorganization plans must be "fair and equitable." Both have their origins in the railroad reorganization cases of the early 20th century. The general doctrine is now codified in section 1129(b)(2) of the Bankruptcy Code and the rule is codified in subsection 1129(b)(2)(B)(ii) which provides that the debtor must pay a nonconsenting class of unsecured creditors in full or "the holder of any claim or interest that is …