In re Lively
466 B.R. 897
Bankr. S.D. Tex.2011Background
- Lively’s case began as Chapter 13 and was converted to Chapter 11; amended plan filed Aug. 19, 2011.
- At confirmation, court preliminarily announced denial for violating the absolute priority rule; briefing on BAPCPA abrogation followed.
- Lively’s plan forecast 7.38% distribution to unsecured creditors.
- Debtor would retain the mortgage note receivable, nine railroad car leases, and a recreational boat consignment lot; these assets are proposed to secure long-term payments.
- Unsecured claims total about $731,000 and would be paid partially over 5 years at $1,000 per month, effectively transferring ~$670,000 to creditors while debtors retain assets.
- Court held that BAPCPA did not abrogate the absolute priority rule for individual Chapter 11 cases and denied confirmation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BAPCPA abrogated the absolute priority rule for individuals | Lively argued BAPCPA broadens the exception | Court evaluated, finding no abrogation | BAPCPA did not abrogate the rule. |
| How to interpret the phrase ‘included in the estate under section 1115’ | Lively urged broad interpretation | Court adopts narrow interpretation | Phrase unambiguous; means property added by §1115. |
| Whether the plan can be confirmed under §1129(b) given dissent by unsecureds | N/A specified; focus on plan’s cram-down viability | Plan fails §1129(a)(8) due to dissenters | Plan cannot meet §1129(a)(8); cram-down under §1129(b) required but not satisfied. |
| Does the hypothetical example show constructive impact of the §1115 exception | Lively argued potential broad impact on debtors | Court considered statutory coherence | Exception effect remains coherent; does not change conclusion. |
| Is the interpretation consistent with the statutory scheme | Narrow vs broad; court’s choice reflects coherence | N/A beyond ruling | Statutory scheme remains coherent; BAPCPA does not abrogate. |
Key Cases Cited
- In re Williams, 850 F.2d 250 (5th Cir.1988) (mandatory independent duty to assess §1129 standards)
- In re Holthoff, 58 B.R. 216 (Bankr.E.D.Ark.1985) (Bankruptcy court must apply §1129 standards)
- In re Shat, 424 B.R. 854 (Bankr.D.Nev.2010) (debtor’s interpretation of §1115 broad vs narrow contested)
- In re Roedemeier, 374 B.R. 264 (Bankr.D.Kan.2007) (broad vs narrow interpretation discussed)
- In re Johnson, 402 B.R. 851 (Bankr.N.D.Ind.2009) (analysis of §1115 and estate concepts)
- In re Maharaj, 449 B.R. 484 (Bankr.E.D.Va.2011) (illustrates §1115 interpretation arguments)
- In re Kamell, 451 B.R. 505 (Bankr.C.D.Cal.2011) (alternative interpretations of §1115)