Legal Question in Bankruptcy in Pennsylvania
Can bankruptcy court confirm the debtor's plan of reorganization?
Plan of Reorganization
Richard P. Friese (Debtor) filed a voluntary petition for
Chapter 11 bankruptcy.
In May 1989, Debtor filed a plan of reorganization that
divided his creditors
into three classes. The first class, administrative
creditors, were to be
paid in full. The second class, unsecured creditors,
were to receive 50% on
their claims. The IRS was the third class. It was to
receive $20,000 on confirmation
and the balance in future payments. No creditors voted
to accept the plan.
The unsecured creditors are impaired because their
legal, equitable, and contractual
rights are being altered. Can the bankruptcy court
confirm the debtor's
plan of reorganization? Explain.
1 Answer from Attorneys
Re: Can bankruptcy court confirm the debtor's plan of reorganization?
A court can confirm a plan if that plan proposes to pay secured and priority creditors in full and unsecured creditors an amount that is fair and equitable. Thus, even if creditors do not vote in favor of the plan, the court can confirm it as long as it is fair to those creditors. The reasoning is that the court knows what is best and will not allow creditors to thwart the ultimate purpose of the code which is to provide for creditors what is fair based upon the financial circumstances of the debtor.
I trust this answers your questions, but feel free to call or E-mail on a free initial basis.
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