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Acquisition of Claims for Plan Control

Published in The Bankruptcy Strategist
Article | September 7, 2018

The article examines the US Court of Appeals for the Ninth Circuit's recent guidance to creditors seeking to block confirmation of a plan by acquiring claims against the debtor. In Pacific Western Bank, et al. v. Fagerdala USA-Lompoc, Inc., the court held that a bankruptcy court may not designate claims under section 1126(e) of the Bankruptcy Code for bad faith simply because a creditor offers to purchase only a subset of available claims to block confirmation of a plan or because blocking confirmation will adversely impact the remaining creditors. Examining this case and other recent decisions, courts will be reluctant to find the requisite "ulterior motive" that demonstrates bad faith sufficient to designate a creditor's vote when the primary motive is to improve the creditor's recovery on its claims against the debtor.

Read the article, "Acquisition of Claims for Plan Control," in its entirety here.

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