My article on Friedman and the Absolute Priority Rule, “Ninth Circuit BAP Confirms: No Absolute Priority Rule in Individual Chapter 11 Cases,” has been published in the Norton Bankruptcy Law Advisor and can be found at 2012 No. 4 Norton Bankr. L. Adviser 2.
Friedman v. P&P, LLC (In re Friedman), —- B.R. —- (9th Cir. BAP, March, 2012)
Issue: Does the absolute priority rule still apply, after BAPCPA, in individual chapter 11 cases?
Judges Philip Brant and James Marlar, Tucson, AZ
Jury, Kirscher, Clarkson
Opinion by Scott Clarkson, Dissent by Meredith Jury
The debtors filed chapter 11 to stop a foreclosure sale on real property they owned although not their principle residence. The debtors filed a plan proposing to pay unsecured creditors $634 per month. The largest unsecured creditor filed an objection to the plan on various grounds including that the plan violated the absolute priority rule. The bankruptcy court conducted a hearing on the plan limited to the issue of whether it was unconfirmable because it violated the absolute priority rule. The court ruled that it did and ordered the debtors to file an amended plan. The debtors did not do that and the case was converted to chapter 7. The debtors moved for a stay pending appeal which was granted by the bankruptcy court given the split on the issue.