The United States Bankruptcy Court of the Northern District of Texas recently held that a confirmed chapter 11 plan of a liquidated company, R. In the non-dischargeability action, the principal moved to dismiss the liquidating trustee’s claims for lack of subject matter jurisdiction, based on the fact that the Corporation’s confirmed plan did not specifically mention that non-dischargeability claims under the Bankruptcy Code were included as retained claims. In Spicer, the Fifth Circuit held that a plan properly reserved avoidance claims when it reserved “claims under Chapter 5 of the Bankruptcy Code” and the related disclosure statement described “various potential avoidable transfers that can be recovered under Chapter 5.” at 549, 552. This enables creditors to properly vote on the chapter 11 plan, a requirement for plan confirmation. Thus, some may wonder why having an underlying claim, like breach of fiduciary duty, deemed non-dischargeable is not a valuable “interest” that belongs to a debtor or its bankruptcy estate. (the “Corporation”), was not required to specifically preserve bankruptcy-created rights of the Corporation against its former principal. In a chapter 11 case, the management of a debtor normally maintains control and operations of the company during the reorganization process, subject to certain restrictions under the Bankruptcy Code. These claims revolved around the principal’s alleged breach of fiduciary duty to the Corporation. The policy underlying the proper reservation of claims is grounded on “the nature of a bankruptcy, which is designated to secure prompt, effective administration and settlement of all debtor’s assets and liabilities within a limited time.” Creditors are entitled to notice either because the claims would enlarge the bankruptcy estate (and thus provide a higher recovery) or the creditors might be targets under the plan. While the Bankruptcy Court was correct in determining that section 1123(b)(3) uses the term “claim” and does not expressly require reservation of non-dischargeability actions pursuant to section 523 of the Bankruptcy Code, arguably the Court ignored that section 1123(b)(3) provides for the reservation of both “claims” and “interests.” Unlike the term “claims,” the term “interests” is not defined in the Bankruptcy Code and generally is understood to have a broader meaning. Unfortunately, these questions were not addressed in the Bankruptcy Court’s opinion, but hopefully they will be addressed in future opinions. Categories: Recent News Tags: Gulf States Long Term Acute Care of Covington LLC, Laguna Madre Oil & Gas II LLC, liquidating trust, LLC, permissive plan provisions, plan reservation of claims, R. Please click below to view and download the Debtors' First Day Motions, the First Day Orders and all documents related to the Plan and Disclosure Statement: First Day Motions First Day Orders Plan & Disclosure Statement The Bankruptcy Court has established July 12, 2016 at p.m. (ET) as the Limited Bar Date for certain types of claims. The purpose of the liquidating trust was to liquidate all of the assets of the Corporation, including prosecuting the retained claims, and ultimately make a distribution to creditors from those liquidated assets. Adkins Corp.’s bankruptcy, the owner of the Corporation separately filed for chapter 7 bankruptcy relief. In the principal’s chapter 7 bankruptcy, using guiding Fifth Circuit precedent and the text of section 1123(b)(3), the Bankruptcy Court found that the Corporation’s plan did reserve breach of fiduciary duty claims, such as those that the liquidating trustee was ultimately pursuing (after the prosecution of the non-dischargeability action).
Section 1123(b) (3) of the Bankruptcy Code facilitates the use of a liquidating trust for prompt administration of the estate by providing post-confirmation standing to an appointed representative of the estate to enforce claims and interests. and 13 affiliated debtors (collectively, the "Debtors") each filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.The cases are pending before the Honorable Kevin J.The section highlights issues of particular significance to the IRS in Chapter 11 bankruptcy cases.(1) IRM 5.17.10, In 2015, probation and restitution based liabilities previously worked throughout the country by Advisors, known as Advisory Probation Liaisons (APLs), were centralized to Advisors in the Dallas Advisory Group.In conjunction with the other provisions of the Bankruptcy Code that require a disclosure statement and plan to provide “adequate information” for a claim or interest holder to make an informed judgment about the plan, Section 1123(b)(3) effectively provides notice to creditors of retention and prospective enforcement of claims that may enlarge the estate’s assets for distribution.