Personal Legal Perspectives of Two Cases Involving Bankruptcy
...r must have an unsecured claim of at least $10,000, which is not subject to a bona fide dispute. It must be shown that the debtor is not generally paying its debts as they become due. In the case of this partnership, the creditors are less than twelve, and the debts owed are more than the $10,000 minimum requirement, and the partners are not paying their debts as they become due. Based on the initial facts, Beren was within his rights to file an involuntary bankruptcy to prevent further losses, and most likely would have the debt discharged. The partners may resist the involuntary petition by filing an opposition, and if they demonstrate that they are generally paying debts as they become due, the court could dismiss the involuntary petition. In the case for Chapter 11 bankruptcy for reorganization, Richard P. Friese filed a voluntary petition that divided his creditors into three classes. The administrative creditors were to be paid in full, the 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 were impaired because their legal, equitable, and contractual rights were being altered. The legal rule is the reorganization plan may place a claim in a particular class only if such claim is substantially similar to the other claims of the class. If the holder of a particular claim agrees to a less favorable treatment of such particular claim, the plan may be approved. A class of claims is impaired under a plan if the plan modifies the legal, equitable, and contractual rights of the holder of such claim. The plan can be confirmed if the entire class of claims has accepted a plan. Otherwise, the “cram down” of the plan can be implemented if the plan has been accepted by creditors that hold at least two-thirds the total debt amount and more than one-half in number of the allowed claims of the class. If the creditors reject the plan, the court cannot confirm a plan unless it has been accepted by at least one class of non-insiders who hold impaired claims. The bankruptcy court cannot con...