An element of Ch. 11 is that through the Plan the sorting of creditor claims into a particular class, with other substantially similar claims is allowed.  A legitimate business purpose must be shown to warrant creation of a separate class of claims though.  If the Plan changes a claim holder’s legal or contract rights this is an impaired claim.  It’s permitted, to propose making up overdue payments to a secured creditor, without this becoming an impaired claim.  Each impaired claim class gets to vote on confirming the Plan.  Further, only one impaired class needs to vote in favor of the Plan, providing it “doesn’t discriminate unfairly, and that it’s fair and equitable”. In the bankruptcy of Christian Love Fellowship Ministries creditor ECCU objected to the…

A Bankruptcy Appellate Panel of the 6th Circuit affirmed a Bankruptcy Court Order made regarding Southeast Waffles LLC.  This Debtor had sought to avoid and recover penalty payments made to the IRS. After the Ch. 11 Plan was confirmed, an appointed Liquidating Agent sold assets accordingly, as Debtor S.E. Waffles operated business as a debtor-in-possession.  Debtor S.E. Waffles had failed to file taxes and make proper payments to the IRS.  Eventually several payments were made, but the IRS applied these funds to penalties only, rather than toward tax amounts due.  The Debtor alleged fraudulent conveyances from that practice. The Debtor’s argument under a constructive fraud theory (from its perspective) that payments made to the IRS “were for less than reasonably equivalent value” was rejected by…

Moohaven Dairy LLC filed bankruptcy in the Eastern District of MI, Northern Division, requesting legal representation from Attorney Dale Cubitt. The primary secured creditor Bank of America was granted relief from automatic stay, which permitted them to get an Order against non-debtors in the County Circuit Court. Under 11 U.S.C. Sec. 327 the Bankruptcy Court found Attorney Cubitt ineligible to represent Debtor Moohaven. Following that the Court determined “this bankruptcy estate required the appointment of a Chapter 11 Trustee”, effectively removing Debtor’s ability to hire any counsel during the bankruptcy. Upon the Court’s denial of his appointment Attorney Cubitt was immediately stopped from representing Debtor, even to volunteer services.  Attorney Cubitt was otherwise not restricted from representing any other individuals in the local Circuit Court,…