After a hearing on the approval of a disclosure statement, Judge Edward J. Coleman of the Middle District of Georgia ruled that the absolute priority rule and new value exception apply in individual Chapter 11 cases. In re Rogers, Ch. 11 Case No. 14-40219, 2016 WL 3583299 (Bankr. M.D. Ga June 24, 2016) (click here for .pdf of opinion).
Debtors were the sole owners of Wetdog LLC, which in turn owns the Foley House Inn in Historic Savannah. After a default in payments to Wetdog’s secured creditors, Wetdog filed a Chapter 11 petition. Wetdog’s Chapter 11 Plan was confirmed in September 2014. The individual Debtors, because they were guarantors of the Wetdog debt, filed their own Chapter 13 petition in February 2014 and subsequently converted their case to a Chapter 11 case. Their principal asset was their 100% ownership interest in Wetdog. Debtors filed a Plan and Disclosure Statement that called for a 25% distribution to unsecured creditors other than the two secured creditors of Wetdog. Debtors’ Plan called for no distribution to those creditors as they were being paid in full in the Wetdog Plan. Debtors also proposed to retain all non-exempt, pre-petition property, including their interest in Wetdog which they valued at $
00.00. Continue Reading