In re Martin
497 B.R. 349
Bankr. M.D. Fla.2013Background
- Martin filed an individual Chapter 11 on Jan. 18, 2013 with $170,531 unsecured claims; Cadies holds about 40% of those claims.
- Martin’s Plan proposes paying unsecured creditors about $8,500 (roughly 5%).
- Cadies voted against the Plan, preventing two-thirds of the amount in Class XIV from accepting the plan.
- Martin’s Plan would allow her to retain three investment properties post-confirmation despite not paying unsecureds in full.
- Martin stripped down or stripped off certain mortgages on the investment properties and negotiated terms to continue rental income and service secured debt; the core issue is whether absolute priority bars confirmation when an dissenting unsecured class is unpaid and the debtor retains non-exempt pre-petition property.
- Court adopts a narrow view of the absolute priority rule post-BAPCPA and denies confirmation on these facts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the plan violate absolute priority if unsecureds aren’t paid in full and debtor retains property? | Cadies | Martin | No—see narrow view analysis; denied based on plan terms? (see full ruling) |
| Did BAPCPA abrogate the absolute priority rule for individual debtors? | Cadies | Martin | No; court adopts narrow view; ABPA amendments do not abrogate the rule. |
Key Cases Cited
- SPCP Grp., LLC v. Biggins, 465 B.R. 316 (M.D. Fla. 2011) (adopted narrow vs broad view discussion in context of cramdown for individual debtors)
- In re Lively, 717 F.3d 406 (5th Cir. 2013) (endorses narrow view; confirms continued application of absolute priority in individuals)
- In re Stephens, 704 F.3d 1279 (10th Cir. 2013) (confirms narrow view across circuits; interpretation of BAPCPA amendments)
- In re Maharaj, 681 F.3d 558 (4th Cir. 2012) (alternative plausible constructions; supports narrow view disposition)
- Ransom v. FIA, 131 S. Ct. 716 (2011) (statutory interpretation guidance for BAPCPA amendments)