In re Atlanta-Stewart Partners

193 B.R. 79 (1996)

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In re Atlanta-Stewart Partners

United States Bankruptcy Court for the Northern District of Georgia
193 B.R. 79 (1996)

Facts

Atlanta-Stewart Partners (debtor) filed for Chapter 11 bankruptcy in 1995. Atlanta-Stewart’s proposed reorganization plan classified Atlanta-Stewart’s creditors into five classes. Class 4 included unsecured creditors holding allowed claims of less than $1,000. Atlanta-Stewart proposed paying the Class 4 creditors 95 percent of their claims’ value. Equitable Life Insurance Company of Iowa (Equitable) (creditor) and the United States trustee objected to Atlanta-Stewart’s disclosure statement regarding the proposed reorganization plan. Equitable asserted that Atlanta-Stewart had artificially impaired Class 4 by proposing to pay 95 percent of the claims’ value instead of 100 percent. According to Equitable, if Atlanta-Stewart had not artificially impaired the class, Atlanta-Stewart would not have been able to satisfy the plan-confirmation requirement that at least one impaired class vote to accept Atlanta-Stewart’s plan. The United States trustee noted that paying the extra 5 percent to Class 4 would cost Atlanta-Stewart only $154.33. Atlanta-Stewart argued that it had not artificially impaired Class 4 and further asserted that even if it paid Class 4 in full, Class 4 would still be considered impaired under the 1994 amendments to 11 U.S.C. § 1124. The bankruptcy court considered the parties’ arguments in deciding whether to approve Atlanta-Stewart’s plan-disclosure statement.

Rule of Law

Issue

Holding and Reasoning (Kahn, J.)

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