Kasen & Kasen, P.C.

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Chapter 11 provides both individual and business debtors with an opportunity to reorganize their financial obligations through a chapter 11 plan outlining the terms that will form the basis for new contractual rights between the debtor and his/her/its creditors.



Chapter 11 Plan Confirmation.



The goal in nearly all chapter 11 cases is to have the plan approved/confirmed by the Court. There are two alternative methods for confirming a chapter 11 plan: (1) the consensual method; and (2) the cram down method.

  • The Consensual Method. Under the consensual method, a chapter 11 debtor can achieve confirmation by obtaining unanimous acceptance of his/her/its chapter 11 plan by all impaired classes of creditors.
  • The Cram Down Method. The cram down method provides an alternative to Debtors who are unable to obtain unanimous acceptance by all impaired classes of creditors. Under the cram down method, a chapter 11 debtor can achieve confirmation by obtaining acceptance of his/her/its chapter 11 plan by at least one impaired class of creditors, provided the plan does not discriminate unfairly, and is fair and equitable, with respect to each non-accepting impaired class of creditors.

The Importance of Voting. Voting is key in chapter 11, because chapter 11 debtors need at least one impaired class of creditors to vote in favor of the plan in order to achieve confirmation. In order for a class to accept the plan, more than ½ of the class members and at least 2/3 in dollar amount must vote in favor of the plan.




Common Confirmation Issues in Chapter 11 Business Cases



Some common confirmation issues that come into play in chapter 11 business cases are as follows:

  • The Best Interest Test. Under the best interest test, an impaired creditor who has not voted, or voted against the plan, must retain or receive property not less in value than that if the debtor were liquidated in chapter 7.
  • The Absolute Priority Rule. The absolute priority rule only comes into play when a chapter 11 debtor is trying to achieve plan confirmation through the cram down method. Under the absolute priority rule, equity interests cannot be retained unless general unsecured creditors are paid in full.


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