Maharaj: Absolute-Priority Rule Lives On (at Least in Fourth Circuit)

The US Court of Appeals for the Fourth Circuit, upholding a bankruptcy court's denial of plan confirmation to individual chapter 11 debtors, recently became the highest court yet to take sides in the controversy over whether the absolute-priority rule still applies in chapter 11 cases involving...

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Bibliographic Details
Published inAmerican Bankruptcy Institute journal Vol. 31; no. 7; p. 30
Main Authors Costella, Richard L, Bell, Juliana
Format Journal Article
LanguageEnglish
Published Alexandria American Bankruptcy Institute 01.08.2012
Subjects
Bankruptcy Abuse Prevention & Consumer Protection Act 2005-US
Bankruptcy reorganization
Federal court decisions
Federal courts
Language
Mortgage companies
Personal bankruptcy
Petitions
United States > US
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Summary:The US Court of Appeals for the Fourth Circuit, upholding a bankruptcy court's denial of plan confirmation to individual chapter 11 debtors, recently became the highest court yet to take sides in the controversy over whether the absolute-priority rule still applies in chapter 11 cases involving individuals. In In re Maharaj, the Fourth Circuit took what has become the decided majority view: It held that the changes to the Bankruptcy Code wrought by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 did not abolish the now-codified rule that, in various incarnations, has for more than 100 years required a debtor's reorganization plan to pay unsecured creditors in full before equity-holders may retain or receive property. It's unlikely that the Fourth Circuits opinion is the last word. In re Lively, a case in which the bankruptcy court took the narrow view, currently is on direct appeal to the US Court of Appeals for the Fifth Circuit.
ISSN:1931-7522