In re Johnson, III

Holders of nondischargeable claims can be forced to accept pro rata payments during the life of the plan and collect the remainder only after discharge or dismissal, the BAP rules.

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Case Type:
Case Status:
2018 WL 1798228, Case Number 16-8045 (6th Cir. BAP 2018) (6th Circuit, Apr 16,2018) Published
Appeal of Confirmation of Chapter 11 Plan dismissed as equitably moot.
Procedural context:
Bankruptcy Court confirmed Debtor's Chapter 11 Plan over objections of creditor. Creditor appealed Confirmation Order but did not obtain stay of effect of Order. Bankruptcy Appellate Panel dismissed appeal as equitably moot.
Bankruptcy Court confirmed Chapter 11 Plan over objections of Creditor, finding that Plan was feasible and met best interests of creditors test as well as good faith. Creditor appealed confirmation but did not requests or obtain a stay of confirmation. Debtor substantially consummated Plan by creating Creditor Trust, appointing Trustee, and transferring assets to Trust including right to portion of Debtor's future income and right to pursue pending litigation, to be used for benefit of creditors. Appeal is equitably moot when reversing Confirmation Order would prejudice parties who relied in good faith on confirmation of Plan, taking into account (1) whether stay was obtained; (2) whether plan has been substantially consummated; and (3) whether relief requested would affect rights of parties not before Court or success of plan. Although Plan called for payments over ling period of time property had already been transferred and distributions had already been made to creditors. Creditor's objection went to heart of confirmation, such that reversal on appeal would require setting aside confirmation entirely, requiring complete re-writing of Plan. Appeal is not equitably not where reversal on appeal would require only minor adjustments rather than wholesale annihilation or substantial upset of plan. In this case, Court would not be able to grant piecemeal relief and reversal would require setting aside Plan in its entirety. Appeal equitably moot and dismissed.
Harrison, Opperman, Wise

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