In re Hallum
United States Bankruptcy Court for the Eastern District of Tennessee
29 B.R. 343 (1983)

- Written by Solveig Singleton, JD
Facts
A. P. Hallum and Bettye Hallum (debtors) owned a plant nursery. The Hallums filed a petition under Chapter 11 of the Bankruptcy Code (the code). The Farmers Home Administration (Farmers) (creditor) held a lien on the Hallums’ property to secure about $3 million of debt. The value of Farmers’ collateral was about $1.4 million. Thus, Farmers had a secured claim on the Hallums’ estate of about $1.4 million and an unsecured claim of about $1.6 million. Under the Hallums’ proposed reorganization plan, the unsecured claim would not be paid in full. Section 1111(b)(2) of the code stated that a class of secured creditors could elect to have its secured claims recognized to the full extent that the claims were allowed. That is, the claims would be treated as secured claims for the allowed amount of the debt rather than for the value of the collateral. Farmers notified the court that it intended to elect to have its claim treated as a secured claim under § 1111(b)(2). This meant that Farmers would have a secured claim of $3 million and no deficiency claims. The bankruptcy court considered whether Farmers was entitled to elect to have its allowed claim treated as secured under § 1111(b)(2) given that Farmers was the only creditor in its class.
Rule of Law
Issue
Holding and Reasoning (Kelley, J.)
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