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In re Commercial Envelope Manufacturing Co.

3 Bankr. Ct. Dec. 647 (1977)

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In re Commercial Envelope Manufacturing Co.

United States Bankruptcy Court for the Southern District of New York

3 Bankr. Ct. Dec. 647 (1977)

Facts

Four interrelated corporations (the debtor corporations) (debtors) that shared common ownership filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. The debtor corporations moved to substantively consolidate their assets and liabilities, arguing that such consolidation was necessary to create a reorganization plan. The debtor companies presented testimony from an accountant who explained that the accounting of the debtor corporations was done together, meaning there was no separate accounting for the assets and liabilities of each company. The debtor corporations had also guaranteed loans made to each other, further entangling their finances. The accountant stated that an audit to untangle the assets and liabilities of the debtor corporations, if even possible, would be prohibitively expensive and time-consuming, and that substantively consolidating the assets and liabilities of the debtor corporations would be beneficial to their creditors. Two creditors of the debtor corporations (the objecting creditors) (creditors) objected to the substantive consolidation but presented no evidence that the consolidation would disadvantage them.

Rule of Law

Issue

Holding and Reasoning (Babitt, J.)

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