Now Updating
In re Barbara Wigley

Summarizing by Bradley Pearce

Village Green I, GP v. Federal National Mortgage Assoc. (In re Village Green I, GP)

File Name 16a0018p.06; Docket No. 14-6521
Affirming the District Court for the Western District of Tennessee, the Sixth Circuit held that the single-asset real estate debtors' plan was not filed in good faith, and upheld dismissal of the case. The Sixth Circuit found there is no good faith requirement to avoid impairing a class of claims under Section 1124(1), but that the artificial impairment of minor creditors in the case, who were closely associated with the debtor, along with the ability to pay the minor claims in full, violated the good faith requirement of Section 1129(3)
Procedural context:
The bankruptcy court confirmed a plan based on acceptance by a class consisting of two unsecured, closely-related debtors who would be paid over a period of 60 days. The district court reversed and remanded; the bankruptcy court again confirmed the plan on remand. The district court again reversed and remanded, then the bankruptcy court denied confirmation, lifted the stay and dismissed the case. The debtor appealed to the district court, which affirmed, then to the Sixth Circuit.
Village Green owned an apartment building in Memphis with a value of $5.4 million and a debt of $8.6 millioin to Fannie Mae. The only other creditors were the debtor's former lawyer and accountant, collectively owed less than $2,400 (the "minor claims"). The plan proposed to pay the minor claims in two payments over a period of 60 days, which the bankruptcy court found impaired their claims. The minor claims creditors accepted the plan, which the bankruptcy court confirmed over the objection of Fannie Mae. The Sixth Circuit noted the debtor had monthly net income of over $71,000, and that Fannie Mae had tendered full payment to the minor claimants, who rejected the payment.
Guy, Moore and Kethledge; opinion by Kethledge

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