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Marshack Hays LLP
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New Ninth Circuit Ruling Makes Chapter 11 for Individuals Far More Difficult 

In January 2016, the Ninth Circuit Court of Appeals in Zachary v. California Bank & Trust ruled that the Absolute Priority Rule still applies to individual Chapter 11 reorganizations, even after the Bankruptcy Code was amended in 2005. Several court opinions had previously decided that the 2005 amendment made compliance with the Absolute Priority Rule unnecessary, which in turn made it easier for individuals to confirm Chapter 11 plans. This will no longer be the rule of law in the Ninth Circuit, a jurisdiction which includes the state of California. The ruling has resolved that individuals filing Chapter 11 reorganizations must still comply with the Absolute Priority Rule.

The Absolute Priority Rule provides that a dissenting class of unsecured creditors must be provided for in full before the debtor can receive or retain property under a plan of reorganization. In Zachary, the husband and wife debtors sought confirmation of a Chapter 11 plan which allowed the debtors to retain ownership of their business, their home, and their rental property. The plan provided that the dissenting class of unsecured creditors would receive $5,000 on account of their $2 million claim. The Bankruptcy Court denied the confirmation because the Court held that the plan violated the Absolute Priority Rule. 

Read full post at: http://www.marshackhays.com/new-ninth-circuit-ruling-makes-chapter-11-for-individuals-far-more-difficult/
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Attorney Ed Hays, named Best Lawyer 2015, will be speaking at the Orange County Bar Association on 9/24 at the Commercial Law and Bankruptcy Meeting. Specific topic is "Exemptions Case Law and Statutory Update".
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