In re Lee Min Ho Chen
482 B.R. 473
Bankr. D.P.R.2012Background
- Debtor Lee Min Ho Chen filed a voluntary Chapter 11 petition on September 26, 2011.
- Debtor’s first amended disclosure statement was approved July 20, 2012.
- Debtor filed a second amended plan of reorganization on October 10, 2012.
- Doral Bank opposed the second amended plan on October 24, 2012.
- The court denied confirmation of the second amended plan and ordered show cause within 14 days to convert or dismiss.
- Debtor proposed new value from the sale of two vehicles to fund plan obligations, which the court evaluated under §1115 and the absolute priority rule.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the absolute priority rule applies to individual Chapter 11 debtors post-BAPCPA | Chen argues a broad reading of §1115 exempts more property from the rule | Doral argues the rule remains narrow; prepetition property cannot be retained | Absolute priority rule applies; debtor cannot retain prepetition property without full payment or consent |
| Whether the new value exception permits retention of prepetition assets | Debtor claims new value from her assets funds the plan | New value must come from an outside source | New value not from an outside source; exception not satisfied |
| Whether the Plan complies with §1129(a) and cramdown requirements | Plan satisfies cramdown by providing value and broad interpretation of §1129(a)(15) | Plan lacks fair and equitable treatment and proper disclosures | Plan failed to meet §1129(a) requirements and cramdown standards |
| Whether the Debtor’s acceptance was tacit or active for §1129(a)(8) cramsdown | Debtor contends sufficient disclosure and plan going forward | Unimpaired class acceptance required active acceptance | Court found issues with acceptance; plan could not be confirmed under §1129(a)(8) or 1129(b) |
Key Cases Cited
- In re Arnold, 471 B.R. 578 (Bankr.C.D.Cal.2012) (narrow view of the absolute priority rule; prepetition assets limited under §1115)
- In re Roedemeier, 374 B.R. 264 (Bankr.D.Kan.2007) (debates broad vs narrow interpretation of §1115)
- In re Friedman, 466 B.R. 471 (9th Cir. BAP 2012) (discussion of BAPCPA effects on absolute priority rule)
- In re Kamell, 451 B.R. 505 (Bankr.C.D.Cal.2011) (advocates narrow reading; policy considerations)
- In re Gbadebo, 431 B.R. 222 (Bankr.N.D.Cal.2010) (supports narrow interpretation)
- In re Maharaj, 681 F.3d 558 (4th Cir.2012) (rejects broad abrogation of absolute priority; cites policy)