Chapter 11 liquidating trust
In other words, a chapter 11 debtor is generally allowed to operate in the same manner it operated outside of bankruptcy. Section 523 of the Bankruptcy Code, however, excepts certain pre-bankruptcy debts from being discharged. Instead, such action merely determines whether an underlying claim is dischargeable in bankruptcy.
Adkins Corp.’s case, however, three months after the case was converted to chapter 11, the Bankruptcy Court appointed a trustee to take over the control and operations of the Corporation, pursuant to 11 U. The chapter 11 plan defined retained claims as “all estate causes of action belonging to the Debtor and estate based on federal or state law, and any claims, counterclaims, rights, defenses, setoffs, recoupments, and actions in law or equity arising under the Bankruptcy Code or applicable non-bankruptcy law.” The plan then illustrated a number of claims that were retained claims, including claims for breach of fiduciary duty and common law actions. The purpose of an individual chapter 7 bankruptcy case is to distribute all non-exempt assets of the debtor to his or her creditors and allow the debtor to obtain a discharge of all of his or her pre-bankruptcy debts. While the plan did not specifically reserve a non-dischargeability action, the Bankruptcy Court found that such an action did not amount to a claim (i.e., a right to payment), as defined in section 101(5)(A) of the Code.
Considering quarterly fees to be an "administrative expense for which the liquidation trust was responsible," the court found that "imposing post-confirmation quarterly fees upon the liquidation trust [was] neither an attempt to modify the plan nor a violation of separation of powers...." Id. Although liquidation trustees have not generally been held personally liable for environmental damage, the potential exists under federal and state law.
Specifically, if a liquidation trustee engages in activities that could constitute managing or operating of trust property under 28 U.
In Hemmen, the Ninth Circuit held a chapter 7 trustee personally liable for failing to honor an IRS notice of levy against the allowed administrative expense claim of a corporate debtor's president.
Ohio 1998); see, also, In re Hudson Oil Co., 200 B.
at issue is bar date notice sufficiency and were borrower-homeowners considered creditors Inte...2015 -The Appellant's brief to the Third Circuit in the Ralph White matter (a pro se homeowner).
at issue is bar date notice sufficiency and were borrower-homeowners considered creditors Interesting to read the cross-examination of Uhland by Ralph White (pro se) will there be a new creditor plan?
will the bankruptcy trustee Alan Jacobs have to claw back distributions?
The United States Bankruptcy Court of the Northern District of Texas recently held that a confirmed chapter 11 plan of a liquidated company, R. In the non-dischargeability action, the principal moved to dismiss the liquidating trustee’s claims for lack of subject matter jurisdiction, based on the fact that the Corporation’s confirmed plan did not specifically mention that non-dischargeability claims under the Bankruptcy Code were included as retained claims. In Spicer, the Fifth Circuit held that a plan properly reserved avoidance claims when it reserved “claims under Chapter 5 of the Bankruptcy Code” and the related disclosure statement described “various potential avoidable transfers that can be recovered under Chapter 5.” at 549, 552. This enables creditors to properly vote on the chapter 11 plan, a requirement for plan confirmation. Thus, some may wonder why having an underlying claim, like breach of fiduciary duty, deemed non-dischargeable is not a valuable “interest” that belongs to a debtor or its bankruptcy estate.
(the “Corporation”), was not required to specifically preserve bankruptcy-created rights of the Corporation against its former principal. In a chapter 11 case, the management of a debtor normally maintains control and operations of the company during the reorganization process, subject to certain restrictions under the Bankruptcy Code. These claims revolved around the principal’s alleged breach of fiduciary duty to the Corporation. The policy underlying the proper reservation of claims is grounded on “the nature of a bankruptcy, which is designated to secure prompt, effective administration and settlement of all debtor’s assets and liabilities within a limited time.” Creditors are entitled to notice either because the claims would enlarge the bankruptcy estate (and thus provide a higher recovery) or the creditors might be targets under the plan. While the Bankruptcy Court was correct in determining that section 1123(b)(3) uses the term “claim” and does not expressly require reservation of non-dischargeability actions pursuant to section 523 of the Bankruptcy Code, arguably the Court ignored that section 1123(b)(3) provides for the reservation of both “claims” and “interests.” Unlike the term “claims,” the term “interests” is not defined in the Bankruptcy Code and generally is understood to have a broader meaning. Unfortunately, these questions were not addressed in the Bankruptcy Court’s opinion, but hopefully they will be addressed in future opinions. Categories: Recent News Tags: Gulf States Long Term Acute Care of Covington LLC, Laguna Madre Oil & Gas II LLC, liquidating trust, LLC, permissive plan provisions, plan reservation of claims, R.