Disclosure Statement Rejected When Plan Could Not Be Confirmed
An undersecured bank who held a lien in all the debtor’s assets opposed a debtor’s plan of reorganization. The bank, however, expected that creditors would vote to accept the plan, because after the bank foreclosed on the assets (which was the bank’s desired result), creditors would receive nothing. The debtor proposed a plan that separated general unsecured creditors from the bank’s unsecured deficiency claim, which was by far the largest unsecured claim against the debtor. As a result, if the bank’s unsecured deficiency claim was grouped with the other general unsecured claims, the bank could control the vote of that class and defeat confirmation.
The debtor filed a disclosure statement that contained substantial information. However, Drescher & Associates argued on behalf of the secured creditor that the disclosure statement should not be confirmed because the debtor improperly classified the bank’s deficiency claim in violation of controlling law. As a result, even though the disclosure statement contained adequate information, the plan was unconfirmable on its face. Creditors and the court should not undergo the effort and expense of a confirmation process when the plan could clearly not be confirmed.
The bankruptcy court agreed and therefore refused to approve the disclosure statement. As a result, the debtor was forced to negotiate on favorable terms with the secured creditor.
A Track Record of Success in Maryland, Virginia, Pennsylvania, & Delaware Commercial Litigation & Bankruptcy Cases
DISCLAIMER: Please note that every case is different and these verdicts and settlements, while accurate, do not represent what we may obtain for you in your case.
