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TITLE 11–BANKRUPTCY

CHAPTER 11– REORGANIZATION

Sub Chapter II – The Plan

Sec. 1129. Confirmation of plan

   (a) The court shall confirm a plan only if all of the following 
requirements are met:
        (1) The plan complies with the applicable provisions of this 
    title.
        (2) The proponent of the plan complies with the applicable 
    provisions of this title.
        (3) The plan has been proposed in good faith and not by any 
    means forbidden by law.
        (4) Any payment made or to be made by the proponent, by the 
    debtor, or by a person issuing securities or acquiring property 
    under the plan, for services or for costs and expenses in or in 
    connection with the case, or in connection with the plan and 
    incident to the case, has been approved by, or is subject to the 
    approval of, the court as reasonable.
        (5)(A)(i) The proponent of the plan has disclosed the identity 
    and affiliations of any individual proposed to serve, after 
    confirmation of the plan, as a director, officer, or voting trustee 
    of the debtor, an affiliate of the debtor participating in a joint 
    plan with the debtor, or a successor to the debtor under the plan; 
    and
        (ii) the appointment to, or continuance in, such office of such 
    individual, is consistent with the interests of creditors and equity 
    security holders and with public policy; and
        (B) the proponent of the plan has disclosed the identity of any 
    insider that will be employed or retained by the reorganized debtor, 
    and the nature of any compensation for such insider.
        (6) Any governmental regulatory commission with jurisdiction, 
    after confirmation of the plan, over the rates of the debtor has 
    approved any rate change provided for in the plan, or such rate 
    change is expressly conditioned on such approval.
        (7) With respect to each impaired class of claims or interests--
            (A) each holder of a claim or interest of such class--
                (i) has accepted the plan; or
                (ii) will receive or retain under the plan on account of 
            such claim or interest property of a value, as of the 
            effective date of the plan, that is not less than the amount 
            that such holder would so receive or retain if the debtor 
            were liquidated under chapter 7 of this title on such date; 
            or

            (B) if section 1111(b)(2) of this title applies to the 
        claims of such class, each holder of a claim of such class will 
        receive or retain under the plan on account of such claim 
        property of a value, as of the effective date of the plan, that 
        is not less than the value of such holder's interest in the 
        estate's interest in the property that secures such claims.

        (8) With respect to each class of claims or interests--
            (A) such class has accepted the plan; or
            (B) such class is not impaired under the plan.

        (9) Except to the extent that the holder of a particular claim 
    has agreed to a different treatment of such claim, the plan provides 
    that--
            (A) with respect to a claim of a kind specified in section 
        507(a)(1) or 507(a)(2) of this title, on the effective date of 
        the plan, the holder of such claim will receive on account of 
        such claim cash equal to the allowed amount of such claim;
            (B) with respect to a class of claims of a kind specified in 
        section 507(a)(3), 507(a)(4), 507(a)(5), 507(a)(6), or 507(a)(7) 
        of this title, each holder of a claim of such class will 
        receive--
                (i) if such class has accepted the plan, deferred cash 
            payments of a value, as of the effective date of the plan, 
            equal to the allowed amount of such claim; or
                (ii) if such class has not accepted the plan, cash on 
            the effective date of the plan equal to the allowed amount 
            of such claim; and

            (C) with respect to a claim of a kind specified in section 
        507(a)(8) of this title, the holder of such claim will receive 
        on account of such claim deferred cash payments, over a period 
        not exceeding six years after the date of assessment of such 
        claim, of a value, as of the effective date of the plan, equal 
        to the allowed amount of such claim.

        (10) If a class of claims is impaired under the plan, at least 
    one class of claims that is impaired under the plan has accepted the 
    plan, determined without including any acceptance of the plan by any 
    insider.
        (11) Confirmation of the plan is not likely to be followed by 
    the liquidation, or the need for further financial reorganization, 
    of the debtor or any successor to the debtor under the plan, unless 
    such liquidation or reorganization is proposed in the plan.
        (12) All fees payable under section 1930 of title 28, as 
    determined by the court at the hearing on confirmation of the plan, 
    have been paid or the plan provides for the payment of all such fees 
    on the effective date of the plan.
        (13) The plan provides for the continuation after its effective 
    date of payment of all retiree benefits, as that term is defined in 
    section 1114 of this title, at the level established pursuant to 
    subsection (e)(1)(B) or (g) of section 1114 of this title, at any 
    time prior to confirmation of the plan, for the duration of the 
    period the debtor has obligated itself to provide such benefits.

    (b)(1) Notwithstanding section 510(a) of this title, if all of the 
applicable requirements of subsection (a) of this section other than 
paragraph (8) are met with respect to a plan, the court, on request of 
the proponent of the plan, shall confirm the plan notwithstanding the 
requirements of such paragraph if the plan does not discriminate 
unfairly, and is fair and equitable, with respect to each class of 
claims or interests that is impaired under, and has not accepted, the 
plan.
    (2) For the purpose of this subsection, the condition that a plan be 
fair and equitable with respect to a class includes the following 
requirements:
        (A) With respect to a class of secured claims, the plan 
    provides--
            (i)(I) that the holders of such claims retain the liens 
        securing such claims, whether the property subject to such liens 
        is retained by the debtor or transferred to another entity, to 
        the extent of the allowed amount of such claims; and
            (II) that each holder of a claim of such class receive on 
        account of such claim deferred cash payments totaling at least 
        the allowed amount of such claim, of a value, as of the 
        effective date of the plan, of at least the value of such 
        holder's interest in the estate's interest in such property;
            (ii) for the sale, subject to section 363(k) of this title, 
        of any property that is subject to the liens securing such 
        claims, free and clear of such liens, with such liens to attach 
        to the proceeds of such sale, and the treatment of such liens on 
        proceeds under clause (i) or (iii) of this subparagraph; or
            (iii) for the realization by such holders of the indubitable 
        equivalent of such claims.

        (B) With respect to a class of unsecured claims--
            (i) the plan provides that each holder of a claim of such 
        class receive or retain on account of such claim property of a 
        value, as of the effective date of the plan, equal to the 
        allowed amount of such claim; or
            (ii) the holder of any claim or interest that is junior to 
        the claims of such class will not receive or retain under the 
        plan on account of such junior claim or interest any property.

        (C) With respect to a class of interests--
            (i) the plan provides that each holder of an interest of 
        such class receive or retain on account of such interest 
        property of a value, as of the effective date of the plan, equal 
        to the greatest of the allowed amount of any fixed liquidation 
        preference to which such holder is entitled, any fixed 
        redemption price to which such holder is entitled, or the value 
        of such interest; or
            (ii) the holder of any interest that is junior to the 
        interests of such class will not receive or retain under the 
        plan on account of such junior interest any property.

    (c) Notwithstanding subsections (a) and (b) of this section and 
except as provided in section 1127(b) of this title, the court may 
confirm only one plan, unless the order of confirmation in the case has 
been revoked under section 1144 of this title. If the requirements of 
subsections (a) and (b) of this section are met with respect to more 
than one plan, the court shall consider the preferences of creditors and 
equity security holders in determining which plan to confirm.
    (d) Notwithstanding any other provision of this section, on request 
of a party in interest that is a governmental unit, the court may not 
confirm a plan if the principal purpose of the plan is the avoidance of 
taxes or the avoidance of the application of section 5 of the Securities 
Act of 1933. In any hearing under this subsection, the governmental unit 
has the burden of proof on the issue of avoidance.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2635; Pub. L. 98-353, title III, 
Sec. 512, July 10, 1984, 98 Stat. 386; Pub. L. 99-554, title II, 
Secs. 225, 283(v), Oct. 27, 1986, 100 Stat. 3102, 3118; Pub. L. 100-334, 
Sec. 2(b), June 16, 1988, 102 Stat. 613; Pub. L. 103-394, title III, 
Sec. 304(h)(7), title V, Sec. 501(d)(32), Oct. 22, 1994, 108 Stat. 4134, 
4146.)


                      Historical and Revision Notes

                         legislative statements

    Section 1129 of the House amendment relates to confirmation of a 
plan in a case under chapter 11. Section 1129(a)(3) of the House 
amendment adopts the position taken in the Senate amendment and section 
1129(a)(5) takes the position adopted in the House bill. Section 
1129(a)(7) adopts the position taken in the House bill in order to 
insure that the dissenting members of an accepting class will receive at 
least what they would otherwise receive under the best interest of 
creditors test; it also requires that even the members of a class that 
has rejected the plan be protected by the best interest of creditors 
test for those rare cramdown cases where a class of creditors would 
receive more on liquidation than under reorganization of the debtor. 
Section 1129(a)(7)(C) is discussed in connection with section 1129(b) 
and section 1111(b). Section 1129(a)(8) of the House amendment adopts 
the provision taken in the House bill which permits confirmation of a 
plan as to a particular class without resort to the fair and equitable 
test if the class has accepted a plan or is unimpaired under the plan.
    Section 1129(a)(9) represents a compromise between a similar 
provision contained in the House bill and the Senate amendment. Under 
subparagraph (A) claims entitled to priority under section 507(a)(1) or 
(2) are entitled to receive cash on the effective date of the plan equal 
to the amount of the claim. Under subparagraph (B) claims entitled to 
priority under section 507(a)(3), (4), or (5), are entitled to receive 
deferred cash payments of a present value as of the effective date of 
the plan equal to the amount of the claims if the class has accepted the 
plan or cash payments on the effective date of the plan otherwise. Tax 
claims entitled to priority under section 507(a)(6) of different 
governmental units may not be contained in one class although all claims 
of one such unit may be combined and such unit may be required to take 
deferred cash payments over a period not to exceed 6 years after the 
date of assessment of the tax with the present value equal to the amount 
of the claim.
    Section 1129(a)(10) is derived from section 1130(a)(12) of the 
Senate amendment.
    Section 1129(b) is new. Together with section 1111(b) and section 
1129(a)(7)(C), this section provides when a plan may be confirmed, 
notwithstanding the failure of an impaired class to accept the plan 
under section 1129(a)(8). Before discussing section 1129(b) an 
understanding of section 1111(b) is necessary. Section 1111(b)(1), the 
general rule that a secured claim is to be treated as a recourse claim 
in chapter 11 whether or not the claim is nonrecourse by agreement or 
applicable law. This preferred status for a nonrecourse loan terminates 
if the property securing the loan is sold under section 363 or is to be 
sold under the plan.
    The preferred status also terminates if the class of which the 
secured claim is a part elects application of section 1111(b)(2). 
Section 1111(b)(2) provides that an allowed claim is a secured claim to 
the full extent the claim is allowed rather than to the extent of the 
collateral as under section 506(a). A class may elect application of 
paragraph (2) only if the security is not of inconsequential value and, 
if the creditor is a recourse creditor, the collateral is not sold under 
section 363 or to be sold under the plan. Sale of property under section 
363 or under the plan is excluded from treatment under section 1111(b) 
because of the secured party's right to bid in the full amount of his 
allowed claim at any sale of collateral under section 363(k) of the 
House amendment.
    As previously noted, section 1129(b) sets forth a standard by which 
a plan may be confirmed notwithstanding the failure of an impaired class 
to accept the plan.
    Paragraph (1) makes clear that this alternative confirmation 
standard, referred to as ``cram down,'' will be called into play only on 
the request of the proponent of the plan. Under this cramdown test, the 
court must confirm the plan if the plan does not discriminate unfairly, 
and is ``fair and equitable,'' with respect to each class of claims or 
interests that is impaired under, and has not accepted, the plan. The 
requirement of the House bill that a plan not ``discriminate unfairly'' 
with respect to a class is included for clarity; the language in the 
House report interpreting that requirement, in the context of 
subordinated debentures, applies equally under the requirements of 
section 1129(b)(1) of the House amendment.
    Although many of the factors interpreting ``fair and equitable'' are 
specified in paragraph (2), others, which were explicated in the 
description of section 1129(b) in the House report, were omitted from 
the House amendment to avoid statutory complexity and because they would 
undoubtedly be found by a court to be fundamental to ``fair and 
equitable'' treatment of a dissenting class. For example, a dissenting 
class should be assured that no senior class receives more than 100 
percent of the amount of its claims. While that requirement was 
explicitly included in the House bill, the deletion is intended to be 
one of style and not one of substance.
    Paragraph (2) provides guidelines for a court to determine whether a 
plan is fair and equitable with respect to a dissenting class. It must 
be emphasized that the fair and equitable requirement applies only with 
respect to dissenting classes. Therefore, unlike the fair and equitable 
rule contained in chapter X [chapter 10 of former title 11] and section 
77 of the Bankruptcy Act [section 205 of former title 11] under section 
1129(b)(2), senior accepting classes are permitted to give up value to 
junior classes as long as no dissenting intervening class receives less 
than the amount of its claims in full. If there is no dissenting 
intervening class and the only dissent is from a class junior to the 
class to which value have been given up, then the plan may still be fair 
and equitable with respect to the dissenting class, as long as no class 
senior to the dissenting class has received more than 100 percent of the 
amount of its claims.
    Paragraph (2) contains three subparagraphs, each of which applies to 
a particular kind of class of claims or interests that is impaired and 
has not accepted the plan. Subparagraph (A) applies when a class of 
secured claims is impaired and has not accepted the plan. The provision 
applies whether or not section 1111(b) applies. The plan may be crammed 
down notwithstanding the dissent of a secured class only if the plan 
complies with clause (i), (ii), or (iii).
    Clause (i) permits cramdown if the dissenting class of secured 
claims will retain its lien on the property whether the property is 
retained by the debtor or transferred. It should be noted that the lien 
secures the allowed secured claim held by such holder. The meaning of 
``allowed secured claim'' will vary depending on whether section 
1111(b)(2) applies to such class.
    If section 1111(b)(2) applies then the ``electing'' class is 
entitled to have the entire allowed amount of the debt related to such 
property secured by a lien even if the value of the collateral is less 
than the amount of the debt. In addition, the plan must provide for the 
holder to receive, on account of the allowed secured claims, payments, 
either present or deferred, of a principal face amount equal to the 
amount of the debt and of a present value equal to the value of the 
collateral.
    For example, if a creditor loaned $15,000,000 to a debtor secured by 
real property worth $18,000,000 and the value of the real property had 
dropped to $12,000,000 by the date when the debtor commenced a 
proceeding under chapter 11, the plan could be confirmed notwithstanding 
the dissent of the creditor as long as the lien remains on the 
collateral to secure a $15,000,000 debt, the face amount of present or 
extended payments to be made to the creditor under the plan is at least 
$15,000,000, and the present value of the present or deferred payments 
is not less than $12,000,000. The House report accompanying the House 
bill described what is meant by ``present value''.
    Clause (ii) is self explanatory. Clause (iii) requires the court to 
confirm the plan notwithstanding the dissent of the electing secured 
class if the plan provides for the realization by the secured class of 
the indubitable equivalents of the secured claims. The standard of 
``indubitable equivalents'' is taken from In re Murel Holding Corp., 75 
F.2d 941 (2d Cir. 1935) (Learned Hand, Jr.).
    Abandonment of the collateral to the creditor would clearly satisfy 
indubitable equivalence, as would a lien on similar collateral. However, 
present cash payments less than the secured claim would not satisfy the 
standard because the creditor is deprived of an opportunity to gain from 
a future increase in value of the collateral. Unsecured notes as to the 
secured claim or equity securities of the debtor would not be the 
indubitable equivalent. With respect to an oversecured creditor, the 
secured claim will never exceed the allowed claim.
    Although the same language applies, a different result pertains with 
respect to a class of secured claims to which section 1111(b)(2) does 
not apply. This will apply to all claims secured by a right of setoff. 
The court must confirm the plan notwithstanding the dissent of such a 
class of secured claims if any of three alternative requirements is met. 
Under clause (i) the plan may be confirmed if the class retains a right 
of setoff or a lien securing the allowed secured claims of the class and 
the holders will receive payments of a present value equal to the 
allowed amount of their secured claims. Contrary to electing classes of 
secured creditors who retain a lien under subparagraph (A)(i)(I) to the 
extent of the entire claims secured by such lien, nonelecting creditors 
retain a lien on collateral only to the extent of their allowed secured 
claims and not to the extent of any deficiency, and such secured 
creditors must receive present or deferred payments with a present value 
equal to the allowed secured claim, which in turn is only the equivalent 
of the value of the collateral under section 506(a).
    Any deficiency claim of a nonelecting class of secured claims is 
treated as an unsecured claim and is not provided for under subparagraph 
(A). The plan may be confirmed under clause (ii) if the plan proposes to 
sell the property free and clear of the secured party's lien as long as 
the lien will attach to the proceeds and will receive treatment under 
clause (i) or (iii). Clause (iii) permits confirmation if the plan 
provides for the realization by the dissenting nonelecting class of 
secured claims of the indubitable equivalent of the secured claims of 
such class.
    Contrary to an ``electing'' class to which section 1111(b)(2) 
applies, the nonelecting class need not be protected with respect to any 
future appreciation in value of the collateral since the secured claim 
of such a class is never undersecured by reason of section 506(a). Thus 
the lien secures only the value of interest of such creditor in the 
collateral. To the extent deferred payments exceed that amount, they 
represent interest. In the event of a subsequent default, the portion of 
the face amount of deferred payments representing unaccrued interest 
will not be secured by the lien.
    Subparagraph (B) applies to a dissenting class of unsecured claims. 
The court must confirm the plan notwithstanding the dissent of a class 
of impaired unsecured claims if the plan provides for such claims to 
receive property with a present value equal to the allowed amount of the 
claims. Unsecured claims may receive any kind of ``property,'' which is 
used in its broadest sense, as long as the present value of the property 
given to the holders of unsecured claims is equal to the allowed amount 
of the claims. Some kinds of property, such as securities, may require 
difficult valuations by the court; in such circumstances the court need 
only determine that there is a reasonable likelihood that the property 
given the dissenting class of impaired unsecured claims equals the 
present value of such allowed claims.
    Alternatively, under clause (ii), the court must confirm the plan if 
the plan provides that holders of any claims or interests junior to the 
interests of the dissenting class of impaired unsecured claims will not 
receive any property under the plan on account of such junior claims or 
interests. As long as senior creditors have not been paid more than in 
full, and classes of equal claims are being treated so that the 
dissenting class of impaired unsecured claims is not being discriminated 
against unfairly, the plan may be confirmed if the impaired class of 
unsecured claims receives less than 100 cents on the dollar (or nothing 
at all) as long as no class junior to the dissenting class receives 
anything at all. Such an impaired dissenting class may not prevent 
confirmation of a plan by objection merely because a senior class has 
elected to give up value to a junior class that is higher in priority 
than the impaired dissenting class of unsecured claims as long as the 
above safeguards are met.
    Subparagraph (C) applies to a dissenting class of impaired 
interests. Such interests may include the interests of general or 
limited partners in a partnership, the interests of a sole proprietor in 
a proprietorship, or the interest of common or preferred stockholders in 
a corporation. If the holders of such interests are entitled to a fixed 
liquidation preference or fixed redemption price on account of such 
interests then the plan may be confirmed notwithstanding the dissent of 
such class of interests as long as it provides the holders property of a 
present value equal to the greatest of the fixed redemption price, or 
the value of such interests. In the event there is no fixed liquidation 
preference or redemption price, then the plan may be confirmed as long 
as it provides the holders of such interests property of a present value 
equal to the value of such interests. If the interests are ``under 
water'' then they will be valueless and the plan may be confirmed 
notwithstanding the dissent of that class of interests even if the plan 
provides that the holders of such interests will not receive any 
property on account of such interests.
    Alternatively, under clause (ii), the court must confirm the plan 
notwithstanding the dissent of a class of interests if the plan provides 
that holders of any interests junior to the dissenting class of 
interests will not receive or retain any property on account of such 
junior interests. Clearly, if there are no junior interests junior to 
the class of dissenting interests, then the condition of clause (ii) is 
satisfied. The safeguards that no claim or interest receive more than 
100 percent of the allowed amount of such claim or interest and that no 
class be discriminated against unfairly will insure that the plan is 
fair and equitable with respect to the dissenting class of interests.
    Except to the extent of the treatment of secured claims under 
subparagraph (A) of this statement, the House report remains an accurate 
description of confirmation of section 1129(b). Contrary to the example 
contained in the Senate report, a senior class will not be able to give 
up value to a junior class over the dissent of an intervening class 
unless the intervening class receives the full amount, as opposed to 
value, of its claims or interests.
    One last point deserves explanation with respect to the admittedly 
complex subject of confirmation. Section 1129(a)(7)(C) in effect exempts 
secured creditors making an election under section 1111(b)(2) from 
application of the best interest of creditors test. In the absence of an 
election the amount such creditors receive in a plan of liquidation 
would be the value of their collateral plus any amount recovered on the 
deficiency in the case of a recourse loan. However, under section 
1111(b)(2), the creditors are given an allowed secured claim to the full 
extent the claim is allowed and have no unsecured deficiency. Since 
section 1129(b)(2)(A) makes clear that an electing class need receive 
payments of a present value only equal to the value of the collateral, 
it is conceivable that under such a ``cram down'' the electing creditors 
would receive nothing with respect to their deficiency. The advantage to 
the electing creditors is that they have a lien securing the full amount 
of the allowed claim so that if the value of the collateral increases 
after the case is closed, the deferred payments will be secured claims. 
Thus it is both reasonable and necessary to exempt such electing class 
from application of section 1129(a)(7) as a logical consequence of 
permitting election under section 1111(b)(2).
    Section 1131 of the Senate amendment is deleted as unnecessary in 
light of the protection given a secured creditor under section 1129(b) 
of the House amendment.
    Payment of taxes in reorganizations: Under the provisions of section 
1141 as revised by the House amendment, an individual in reorganization 
under chapter 11 will not be discharged from any debt, including 
prepetition tax liabilities, which are nondischargeable under section 
523. Thus, an individual debtor whose plan of reorganization is 
confirmed under chapter 11 will remain liable for prepetition priority 
taxes, as defined in section 507, and for tax liabilities which receive 
no priority but are nondischargeable under section 523, including no 
return, late return, and fraud liabilities.
    In the case of a partnership or a corporation in reorganization 
under chapter 11 of title 11, section 1141(d)(1) of the House amendment 
adopts a provision limiting the taxes that must be provided for in a 
plan before a plan can be confirmed to taxes which receive priority 
under section 507. In addition, the House amendment makes dischargeable, 
in effect, tax liabilities attributable to no return, late return, or 
fraud situations. The amendment thus does not adopt a shareholder 
continuity test such as was contained in section 1141(d)(2)(A)(iii) of 
the Senate amendment. However, the House amendment amends section 1106, 
relating to duties of the trustee, to require the trustee to furnish, on 
request of a tax authority and without personal liability, information 
available to the trustee concerning potential prepetition tax 
liabilities for unfiled returns of the debtor. Depending on the 
condition of the debtor's books and records, this information may 
include schedules and files available to the business. The House 
amendment also does not prohibit a tax authority from disallowing any 
tax benefit claimed after the reorganization if the item originated in a 
deduction, credit, or other item improperly reported before the 
reorganization occurred. It may also be appropriate for the Congress to 
consider in the future imposing civil or criminal liability on corporate 
officers for preparing a false or fraudulent tax return. The House 
amendment also contemplates that the Internal Revenue Service will 
monitor the relief from liabilities under this provision and advise the 
Congress if, and to the extent, any significant tax abuse may be 
resulting from the provision.
    Medium of payment of taxes: Federal, State, and local taxes incurred 
during the administration period of the estate, and during the ``gap'' 
period in an involuntary case, are to be paid solely in cash. Taxes 
relating to third priority wages are to be paid, under the general 
rules, in cash on the effective date of the plan, if the class has not 
accepted the plan, in an amount equal to the allowed amount of the 
claim. If the class has accepted the plan, the taxes must be paid in 
cash but the payments must be made at the time the wages are paid which 
may be paid in deferred periodic installments having a value, on the 
effective date of the plan, equal to the allowed amount of the tax 
claims. Prepetition taxes entitled to sixth priority under section 
507(a)(6) also must be paid in cash, but the plan may also permit the 
debtor whether a corporation, partnership, or an individual, to pay the 
allowed taxes in installments over a period not to exceed 6 years 
following the date on which the tax authority assesses the tax 
liability, provided the value of the deferred payments representing 
principal and interest, as of the effective date of the plan, equals the 
allowed amount of the tax claim.
    The House amendment also modifies the provisions of both bills 
dealing with the time when tax liabilities of a debtor in reorganization 
may be assessed by the tax authority. The House amendment follows the 
Senate amendment in deleting the limitation in present law under which a 
priority tax assessed after a reorganization plan is confirmed must be 
assessed within 1 year after the date of the filing of the petition. The 
House amendment specifies broadly that after the bankruptcy court 
determines the liability of the estate for a prepetition tax or for an 
administration period tax, the governmental unit may thereafter assess 
the tax against the estate, debtor, or successor to the debtor. The 
party to be assessed will, of course, depend on whether the case is 
under chapter 7, 11, or 13, whether the debtor is an individual, 
partnership, or a corporation, and whether the court is determining an 
individual debtor's personal liability for a nondischargeable tax. 
Assessment of the tax may only be made, however, within the limits of 
otherwise applicable law, such as the statute of limitations under the 
tax law.
    Tax avoidance purpose: The House bill provided that no 
reorganization plan may be approved if the principal purpose of the plan 
is the avoidance of taxes. The Senate amendment modified the rule so 
that the bankruptcy court need make a determination of tax avoidance 
purpose only if it is asked to do so by the appropriate tax authority. 
Under the Senate amendment, if the tax authority does not request the 
bankruptcy court to rule on the purpose of the plan, the tax authority 
would not be barred from later asserting a tax avoidance motive with 
respect to allowance of a deduction or other tax benefit claimed after 
the reorganization. The House amendment adopts the substance of the 
Senate amendment, but does not provide a basis by which a tax authority 
may collaterally attack confirmation of a plan of reorganization other 
than under section 1144.


                        senate report no. 95-989

    [Section 1130 (enacted as section 1129)] Subsection (a) enumerates 
the requirement governing confirmation of a plan. The court is required 
to confirm a plan if and only if all of the requirements are met.
    Paragraph (1) requires that the plan comply with the applicable 
provisions of chapter 11, such as sections 1122 and 1123, governing 
classification and contents of plan.
    Paragraph (2) requires that the proponent of the plan comply with 
the applicable provisions of chapter 11, such as section 1125 regarding 
disclosure.
    Paragraph (3) requires that the plan have been proposed in good 
faith, and not by any means forbidden by law.
    Paragraph (4) is derived from section 221 of chapter X [section 621 
of former title 11]. It requires that any payment made or promised by 
the proponent, the debtor, or person issuing securities or acquiring 
property under the plan, for services or for costs and expenses in, or 
in connection with the case, or in connection with the plan and incident 
to the case, be disclosed to the court. In addition, any payment made 
before confirmation must have been reasonable, and any payment to be 
fixed after confirmation must be subject to the approval of the court as 
reasonable.
    Paragraph (5) is also derived from section 221 of chapter X [section 
621 of former title 11]. It requires the plan to disclose the identity 
and affiliations of any individual proposed to serve, after 
confirmation, as a director, officer, or voting trustee of the 
reorganized debtor. The appointment to or continuance in one of these 
offices by the individual must be consistent with the interests of 
creditors and equity security holders and with public policy. The plan 
must also disclose the identity of any insider that will be employed or 
retained by the reorganized debtor, and the nature of any compensation 
to be paid to the insider.
    Paragraph (6) permits confirmation only if any regulatory commission 
that will have jurisdiction over the debtor after confirmation of the 
plan has approved any rate change provided for in the plan. As an 
alternative, the rate change may be conditioned on such approval.
    Paragraph (7) provides that in the case of a public company the 
court shall confirm the plan if it finds the plan to be fair and 
equitable and the plan either (1) has been accepted by classes of claims 
or interests as provided in section 1126, or (2), if not so accepted, 
satisfies the requirements of subsection (b) of this section.
    Paragraphs (8) and (9) apply only in nonpublic cases. Paragraph (8) 
does not apply the fair and equitable standards in two situations. The 
first occurs if there is unanimous consent of all affected holders of 
claims and interests. It is also sufficient for purposes of confirmation 
if each holder of a claim or interest receives or retains consideration 
of a value, as of the effective date of the plan, that is not less than 
each would have or receive if the debtor were liquidated under chapter 7 
of this title. This standard adapts the test of ``best interest of 
creditors'' as interpreted by the courts under chapter XI [chapter 11 of 
former title 11]. It is given broader application in chapter 11 of this 
title since a plan under chapter 11 may affect not only unsecured claims 
but secured claims and stock as well.
    Under paragraph (9)(A), if a class of claims or interests has not 
accepted the plan, the court will confirm the plan if, for the 
dissenting class and any class of equal rank, the negotiated plan 
provides in value no less than under a plan that is fair and equitable. 
Such review and determination are not required for any other classes 
that accepted the plan.
    Paragraph (9)(A) would permit a senior creditor to adjust his 
participation for the benefit of stockholders. In such a case, junior 
creditors, who have not been satisfied in full, may not object if, 
absent the ``give-up'', they are receiving all that a fair and equitable 
plan would give them. To illustrate, suppose the estate is valued at 
$1.5 million and claims and stock are:

------------------------------------------------------------------------
                                                 Claims and
                                                   stock        Equity
                                                 (millions)   (millions)
------------------------------------------------------------------------
(1) Senior debt...............................         $1.2         $1.2
(2) Junior debt...............................           .5           .3
(3) Stock.....................................        (\1\)            -
                                               -------------------------
  Total.......................................          1.7          1.5
------------------------------------------------------------------------
\1\ No value.

    Under the plan, the senior creditor gives up $100,000 in value for 
the benefit of stockholders as follows:

------------------------------------------------------------------------
                                                               Millions
------------------------------------------------------------------------
(1) Senior debt............................................         $1.1
(2) Junior debt............................................           .3
(3) Stock..................................................           .1
                                                            ------------
  Total....................................................          1.5
------------------------------------------------------------------------

    If the junior creditors dissent, the court may nevertheless confirm 
the plan since under the fair and equitable standard they had an equity 
of only $300,000 and the allocation to equity security holders did not 
affect them.
    Paragraph (9)(A) provides a special alternative with respect to 
secured claims. A plan may be confirmed against a dissenting class of 
secured claims if the plan or order of confirmation provides for the 
realization of their security (1) by the retention of the property 
subject to such security; (2) by a sale of the property and transfer of 
the claim to the proceeds of sale if the secured creditors were 
permitted to bid at the sale and set off against the purchase price up 
to the allowed amount of their claims; or (3) by such other method that 
will assure them the realization of the indubitable equivalent of the 
allowed amount of their secured claims. The indubitable equivalent 
language is intended to follow the strict approach taken by Judge 
Learned Hand in In Re Murel Holding Corp. 75, F.2d 941 (2nd Cir. 1935).
    Paragraph (9)(B) provides that, if a class of claims or interests is 
excluded from participation under the plan, the court may nevertheless 
confirm the plan if it determines that no class on a parity with or 
junior to such participates under the plan. In the previous 
illustration, no confirmation would be permitted if the negotiated plan 
would grant a participation to stockholders but nothing for junior 
creditors. As noted elsewhere, by reason of section 1126(g), an excluded 
class is a dissenting class under section 1130.
    Paragraph (10) states that, to be confirmed, the plan must provide 
that each holder of a claim under section 507 will receive property, as 
therein noted, of a value equal to the allowed amount of the claim. 
There are two exceptions: (A) The holder thereof may agree to a 
different settlement in part or in whole; (B) where a debtor's business 
is reorganized under chapter 11, this provision requires that taxes 
entitled to priority (including administrative claims or taxes) must be 
paid in cash not later than 120 days after the plan is confirmed, unless 
the Secretary of the Treasury agrees to other terms or kinds of payment. 
The bill, as introduced, required full payment in cash within 60 days 
after the plan is confirmed.
    Paragraph (11) requires a determination regarding feasibility of the 
plan. It is a slight elaboration of the law that has developed in the 
application of the word ``feasible'' in Chapter X of the present Act 
[chapter 10 of former title 11].
    Paragraph (12) requires that at least one class must accept the 
plan, but any claims or interests held by insiders are not to be 
included for purposes of determining the number and amount of 
acceptances.
    Subsection (b) provides that if, in the case of a public company, 
the plan meets the requirements of subsection (a) (except paragraphs (8) 
and (9) which do not apply to such a company), the court is to confirm 
the plan if the plan or the order of confirmation provides adequate 
protection for the realization of the value of the claims or interests 
of each class not accepting the plan. The intent is to incorporate 
inclusively, as a guide to the meaning of subsection (a) the provisions 
of section 216(7) ([former] 11 U.S.C. 616(7)) with respect to claims and 
section 216(8) ([former] 11 U.S.C. 616(8)) with respect to equity 
security interests.
    Under subsection (c) the court may confirm only one plan, unless the 
order of confirmation has been revoked under section 1144. If the 
requirements for confirmation are met with respect to more than one 
plan, the court shall consider the preferences of creditors and 
stockholders in deciding which plan to confirm.
    Subsection (d) provides that the bankruptcy court may not confirm a 
plan of reorganization if its principal purpose is the avoidance of 
taxes or the avoidance of section 5 of the Securities Act of 1933 (15 
U.S.C. 77e). This rules modifies a similar provision of present law 
(section 269 of the Bankruptcy Act [section 669 of former title 11]).


                         house report no. 95-595

    Paragraph (7) [of subsec. (a)] incorporates the former ``best 
interest of creditors'' test found in chapter 11, but spells out 
precisely what is intended. With respect to each class, the holders of 
the claims or interests of that class must receive or retain under the 
plan on account of those claims or interest property of a value, as of 
the effective date of the plan, that is not less than the amount that 
they would so receive or retain if the debtor were liquidated under 
chapter 7 on the effective date of the plan.
    In order to determine the hypothetical distribution in a 
liquidation, the court will have to consider the various subordination 
provisions of proposed 11 U.S.C. 510, 726(a)(3), 726(a)(4), and the 
postponement provisions of proposed 11 U.S.C. 724. Also applicable in 
appropriate cases will be the rules governing partnership distributions 
under proposed 11 U.S.C. 723, and distributions of community property 
under proposed 11 U.S.C. 726(c). Under subparagraph (A), a particular 
holder is permitted to accept less than liquidation value, but his 
acceptance does not bind the class.
    Property under subparagraph (B) may include securities of the 
debtor. Thus, the provision will apply in cases in which the plan is 
confirmed under proposed 11 U.S.C. 1129(b).
    Paragraph (8) is central to the confirmation standards. It requires 
that each class either have accepted the plan or be unimpaired.
    Paragraph (9) augments the requirements of paragraph (8) by 
requiring payment of each priority claim in full. It permits payments 
over time and payment other than in cash, but payment in securities is 
not intended to be permitted without consent of the priority claimant 
even if the class has consented. It also permits a particular claimant 
to accept less than full payment.
    Subsection (b) permits the court to confirm a plan notwithstanding 
failure of compliance with paragraph (8) of subsection (a). The plan 
must comply with all other paragraphs of subsection (a), including 
paragraph (9). This subsection contains the so-called cramdown. It 
requires simply that the plan meet certain standards of fairness to 
dissenting creditors or equity security holders. The general principle 
of the subsection permits confirmation notwithstanding nonacceptance by 
an impaired class if that class and all below it in priority are treated 
according to the absolute priority rule. The dissenting class must be 
paid in full before any junior class may share under the plan. If it is 
paid in full, then junior classes may share. Treatment of classes of 
secured creditors is slightly different because they do not fall in the 
priority ladder, but the principle is the same.
    Specifically, the court may confirm a plan over the objection of a 
class of secured claims if the members of that class are unimpaired or 
if they are to receive under the plan property of a value equal to the 
allowed amount of their secured claims, as determined under proposed 11 
U.S.C. 506(a). The property is to be valued as of the effective date of 
the plan, thus recognizing the time-value of money. As used throughout 
this subsection, ``property'' includes both tangible and intangible 
property, such as a security of the debtor or a successor to the debtor 
under a reorganization plan.
    The court may confirm over the dissent of a class of unsecured 
claims, including priority claims, only if the members of the class are 
unimpaired, if they will receive under the plan property of a value 
equal to the allowed amount of their unsecured claims, or if no class 
junior will share under the plan. That is, if the class is impaired, 
then they must be paid in full or, if paid less than in full, then no 
class junior may receive anything under the plan. This codifies the 
absolute priority rule from the dissenting class on down.
    With respect to classes of equity, the court may confirm over a 
dissent if the members of the class are unimpaired, if they receive 
their liquidation preference or redemption rights, if any, or if no 
class junior shares under the plan. This, too, is a codification of the 
absolute priority rule with respect to equity. If a partnership 
agreement subordinates limited partners to general partners to any 
degree, then the general principles of paragraph (3) of this subsection 
would apply to prevent the general partners from being squeezed out.
    One requirement applies generally to all classes before the court 
may confirm under this subsection. No class may be paid more than in 
full.
    The partial codification of the absolute priority rule here is not 
intended to deprive senior creditor of compensation for being required 
to take securities in the reorganized debtor that are of an equal 
priority with the securities offered to a junior class. Under current 
law, seniors are entitled to compensation for their loss of priority, 
and the increased risk put upon them by being required to give up their 
priority will be reflected in a lower value of the securities given to 
them than the value of comparable securities given to juniors that have 
not lost a priority position.
    Finally, the proponent must request use of this subsection. The 
court may not confirm notwithstanding nonacceptance unless the proponent 
requests and the court may then confirm only if subsection (b) is 
complied with. The court may not rewrite the plan.
    A more detailed explanation follows:
    The test to be applied by the court is set forth in the various 
paragraphs of section 1129(b). The elements of the test are new[,] 
departing from both the absolute priority rule and the best interests of 
creditors tests found under the Bankruptcy Act [former title 11]. The 
court is not permitted to alter the terms of the plan. It must merely 
decide whether the plan complies with the requirements of section 
1129(b). If so, the plan is confirmed, if not the plan is denied 
confirmation.
    The procedure followed is simple. The court examines each class of 
claims or interests designated under section 1123(a)(1) to see if the 
requirements of section 1129(b) are met. If the class is a class of 
secured claims, then paragraph (1) contains two tests that must be 
complied with in order for confirmation to occur. First, under 
subparagraph (A), the court must be able to find that the consideration 
given under the plan on account of the secured claim does not exceed the 
allowed amount of the claim. This condition is not prescribed as a 
matter of law under section 1129(a), because if the secured claim is 
compensated in securities of the debtor, a valuation of the business 
would be necessary to determine the value of the consideration. While 
section 1129(a) does not contemplate a valuation of the debtor's 
business, such a valuation will almost always be required under section 
1129(b) in order to determine the value of the consideration to be 
distributed under the plan. Once the valuation is performed, it becomes 
a simple matter to impose the criterion that no claim will be paid more 
than in full.
    Application of the test under subparagraph (A) also requires a 
valuation of the consideration ``as of the effective date of the plan''. 
This contemplates a present value analysis that will discount value to 
be received in the future; of course, if the interest rate paid is 
equivalent to the discount rate used, the present value and face future 
value will be identical. On the other hand, if no interest is proposed 
to be paid, the present value will be less than the face future value. 
For example, consider an allowed secured claim of $1,000 in a class by 
itself. One plan could propose to pay $1,000 on account of this claim as 
of the effective date of the plan. Another plan could propose to give a 
note with a $1,000 face amount due five years after the effective date 
of the plan on account of this claim. A third plan could propose to give 
a note in a face amount of $1,000 due five years from the effective date 
of the plan plus six percent annual interest commencing on the effective 
date of the plan on account of this claim. The first plan clearly meets 
the requirements of subparagraph (A) because the amount received on 
account of the second claim has an equivalent present value as of the 
effective date of the plan equal to the allowed amount of such claim.
    The second plan also meets the requirements of subparagraph (A) 
because the present value of the five years note as of the effective 
date of the plan will never exceed the allowed amount of the secured 
claim; the higher the discount rate, the less present value the note 
will have. Whether the third plan complies with subparagraph (A) depends 
on whether the discount rate is less than six percent. Normally, the 
interest rate used in the plan will be prima facie evidence of the 
discount rate because the interest rate will reflect an arms length 
determination of the risk of the security involved and feasibility 
considerations will tend to understate interest payments. If the court 
found the discount rate to be greater than or equal to the interest rate 
used in the plan, then subparagraph (A) would be complied with because 
the value of the note as of the effective date of the plan would not 
exceed the allowed amount of the second claim. If, however, the court 
found the discount rate to be less than the interest rate proposed under 
the plan, then the present value of the note would exceed $1,000 and the 
plan would fail of confirmation. On the other hand, it is important to 
recognize that the future principal amount of a note in excess of the 
allowed amount of a secured claim may have a present value less than 
such allowed amount, if the interest rate under the plan is 
correspondingly less than the discount rate.
    Even if the requirements of subparagraph (A) are complied with, the 
class of secured claims must satisfy one of the three clauses in 
paragraph (B) in order to pass muster. It is sufficient for confirmation 
if the class has accepted the plan, or if the claims of the class are 
unimpaired, or if each holder of a secured claim in the class will 
receive property of a value as of the effective date of the plan equal 
to the allowed amount of such claim (unless he has agreed to accept 
less). It is important to note that under section 506(a), the allowed 
amount of the secured claim will not include any extent to which the 
amount of such claim exceeds the value of the property securing such 
claim. Thus, instead of focusing on secured creditors or unsecured 
creditors, the statute focuses on secured claims and unsecured claims.
    After the court has applied paragraph (1) to each class of secured 
claims, it then applies paragraph (2) to each class of unsecured claims. 
Again two separate components must be tested. Subparagraph (A) is 
identical with the test under section 1129(b)(1)(A) insofar as the 
holder of an unsecured claim is not permitted to receive property of a 
value as of the effective date of the plan on account of such claim that 
is greater than the allowed amount of such claim. In addition, 
subparagraph (B) requires compliance with one of four conditions. The 
conditions in clauses (i)-(iii) mirror the conditions of acceptance 
unimpairment, or full value found in connection with secured claims in 
section 1129(b)(1)(B).
    The condition contained in section 1129(b)(2)(B)(iv) provides 
another basis for confirming the plan with respect to a class of 
unsecured claims. It will be of greatest use when an impaired class that 
has not accepted the plan is to receive less than full value under the 
plan. The plan may be confirmed under clause (iv) in those circumstances 
if the class is not unfairly discriminated against with respect to equal 
classes and if junior classes will receive nothing under the plan. The 
second criterion is the easier to understand. It is designed to prevent 
a senior class from giving up consideration to a junior class unless 
every intermediate class consents, is paid in full, or is unimpaired. 
This gives intermediate creditors a great deal of leverage in 
negotiating with senior or secured creditors who wish to have a plan 
that gives value to equity. One aspect of this test that is not obvious 
is that whether one class is senior, equal, or junior to another class 
is relative and not absolute. Thus from the perspective of trade 
creditors holding unsecured claims, claims of senior and subordinated 
debentures may be entitled to share on an equal basis with the trade 
claims. However, from the perspective of the senior unsecured debt, the 
subordinated debentures are junior.
    This point illustrates the lack of precision in the first criterion 
which demands that a class not be unfairly discriminated against with 
respect to equal classes. From the perspective of unsecured trade 
claims, there is no unfair discrimination as long as the total 
consideration given all other classes of equal rank does not exceed the 
amount that would result from an exact aliquot distribution. Thus if 
trade creditors, senior debt, and subordinate debt are each owed $100 
and the plan proposes to pay the trade debt $15, the senior debt $30, 
and the junior debt $0, the plan would not unfairly discriminate against 
the trade debt nor would any other allocation of consideration under the 
plan between the senior and junior debt be unfair as to the trade debt 
as long as the aggregate consideration is less than $30. The senior debt 
could take $25 and give up $5 to the junior debt and the trade debt 
would have no cause to complain because as far as it is concerned the 
junior debt is an equal class.
    However, in this latter case the senior debt would have been 
unfairly discriminated against because the trade debt was being unfairly 
over-compensated; of course the plan would also fail unless the senior 
debt was unimpaired, received full value, or accepted the plan, because 
from its perspective a junior class received property under the plan. 
Application of the test from the perspective of senior debt is best 
illustrated by the plan that proposes to pay trade debt $15, senior debt 
$25, and junior debt $0. Here the senior debt is being unfairly 
discriminated against with respect to the equal trade debt even though 
the trade debt receives less than the senior debt. The discrimination 
arises from the fact that the senior debt is entitled to the rights of 
the junior debt which in this example entitle the senior debt to share 
on a 2:1 basis with the trade debt.
    Finally, it is necessary to interpret the first criterion from the 
perspective of subordinated debt. The junior debt is subrogated to the 
rights of senior debt once the senior debt is paid in full. Thus, while 
the plan that pays trade debt $15, senior debt $25, and junior debt $0 
is not unfairly discriminatory against the junior debt, a plan that 
proposes to pay trade debt $55, senior debt $100, and junior debt $1, 
would be unfairly discriminatory. In order to avoid discriminatory 
treatment against the junior debt, at least $10 would have to be 
received by such debt under those facts.
    The criterion of unfair discrimination is not derived from the fair 
and equitable rule or from the best interests of creditors test. Rather 
it preserves just treatment of a dissenting class from the class's own 
perspective.
    If each class of secured claims satisfies the requirements of 
section 1129(b)(1) and each class of unsecured claims satisfies the 
requirements of section 1129(b)(2), then the court must still see if 
each class of interests satisfies section 1129(b)(3) before the plan may 
be confirmed. Again, two separate criteria must be met. Under 
subparagraph (A) if the interest entitles the holder thereof to a fixed 
liquidation preference or if such interest may be redeemed at a fixed 
price, then the holder of such interest must not receive under the plan 
on account of such interest property of a value as of the effective date 
of the plan greater than the greater of these two values of the 
interest. Preferred stock would be an example of an interest likely to 
have liquidation preference or redemption price.
    If an interest such as most common stock or the interest of a 
general partnership has neither a fixed liquidation preference nor a 
fixed redemption price, then the criterion in subparagraph (A) is 
automatically fulfilled. In addition subparagraph (B) contains five 
clauses that impose alternative conditions of which at least one must be 
satisfied in order to warrant confirmation. The first two clauses 
contain requirements of acceptance or unimpairment similar to the first 
two clauses in paragraphs (1)(B) and (2)(B). Clause (iii) is similar to 
the unimpairment test contained in section 1124(3)(B), except that it 
will apply to cover the issuance securities of the debtor of a value as 
of the effective date of the plan equal to the greater of any fixed 
liquidation preference or redemption price. The fourth clause allows 
confirmation if junior interests are not compensated under the plan and 
the fifth clause allows confirmation if there are no junior interests. 
These clauses recognized that as long as senior classes receive no more 
than full payment, the objection of a junior class will not defeat 
confirmation unless a class junior to it is receiving value under the 
plan and the objecting class is impaired. While a determination of 
impairment may be made under section 1124(3)(B)(iii) without a precise 
valuation of the business when common stock is clearly under water, once 
section 1129(b) is used, a more detailed valuation is a necessary 
byproduct. Thus, if no property is given to a holder of an interest 
under the plan, the interest should be clearly worthless in order to 
find unimpairment under section 1124(3)(B)(iii) and section 1129(a)(8); 
otherwise, since a class of interests receiving no property is deemed to 
object under section 1126(g), the more precise valuation of section 
1129(b) should be used.
    If all of the requirements of section 1129(b) are complied with, 
then the court may confirm the plan subject to other limitations such as 
those found in section 1129(a) and (d).
    Subsection (c) of section 1129 governs confirmation when more than 
one plan meets the requirements of the section. The court must consider 
the preferences of creditors and equity security holders in determining 
which plan to confirm.
    Subsection (d) requires the court to deny confirmation if the 
principal purpose of the plan is the avoidance of taxes (through use of 
sections 346 and 1146, and applicable provisions of State law or the 
Internal Revenue Code [title 26] governing bankruptcy reorganizations) 
or the avoidance of section 5 of the Securities Act of 1933 [15 U.S.C. 
77e] (through use of section 1145).

                       References in Text

    Section 5 of the Securities Act of 1933, referred to in subsec. (d), 
is classified to section 77e of Title 15, Commerce and Trade.


                               Amendments

    1994--Subsec. (a)(4). Pub. L. 103-394, Sec. 501(d)(32)(A)(i), 
substituted period for semicolon at end.
    Subsec. (a)(9)(B). Pub. L. 103-394, Sec. 304(h)(7)(i), substituted 
``, 507(a)(6), or 507(a)(7)'' for ``or 507(a)(6)''.
    Subsec. (a)(9)(C). Pub. L. 103-394, Sec. 304(h)(7)(ii), substituted 
``507(a)(8)'' for ``507(a)(7)''.
    Subsec. (a)(12). Pub. L. 103-394, Sec. 501(d)(32)(A)(ii), inserted 
``of title 28'' after ``section 1930''.
    Subsec. (d). Pub. L. 103-394, Sec. 501(d)(32)(B), struck out ``(15 
U.S.C. 77e)'' after ``Act of 1933''.
    1988--Subsec. (a)(13). Pub. L. 100-334 added par. (13).
    1986--Subsec. (a)(7). Pub. L. 99-554, Sec. 283(v)(1), struck out 
``of'' after ``to''.
    Subsec. (a)(9)(B). Pub. L. 99-554, Sec. 283(v)(2), inserted 
reference to section 507(a)(6).
    Subsec. (a)(9)(C). Pub. L. 99-554, Sec. 283(v)(3), substituted 
``507(a)(7)'' for ``507(a)(6)''.
    Subsec. (a)(12). Pub. L. 99-554, Sec. 225, added par. (12).
    1984--Subsec. (a)(1), (2). Pub. L. 98-353, Sec. 512(a)(1), (2), 
substituted ``title'' for ``chapter''.
    Subsec. (a)(4). Pub. L. 98-353, Sec. 512(a)(3), amended par. (4) 
generally. Prior to amendment, par. (4) read as follows: ``(A) Any 
payment made or promised by the proponent, by the debtor, or by a person 
issuing securities or acquiring property under the plan, for services or 
for costs and expenses in, or in connection with, the case, or in 
connection with the plan and incident to the case, has been disclosed to 
the court; and (B)(i) any such payment made before confirmation of the 
plan is reasonable; or (ii) if such payment is to be fixed after 
confirmation of the plan, such payment is subject to the approval of the 
court as reasonable.''
    Subsec. (a)(5)(A)(ii). Pub. L. 98-353, Sec. 512(a)(4), substituted 
``; and'' for the period at the end.
    Subsec. (a)(5)(B). Pub. L. 98-353, Sec. 512(a)(5), substituted 
``the'' for ``The''.
    Subsec. (a)(6). Pub. L. 98-353, Sec. 512(a)(6), inserted 
``governmental'' after ``Any''.
    Subsec. (a)(7). Pub. L. 98-353, Sec. 512(a)(7)(A), substituted ``of 
each impaired class of claims or interests'' for ``each class''.
    Subsec. (a)(7)(B). Pub. L. 98-353, Sec. 512(a)(7)(B), substituted 
``holder's'' for ``creditor's''.
    Subsec. (a)(8). Pub. L. 98-353, Sec. 512(a)(8), inserted ``of claims 
or interests'' after ``each class''.
    Subsec. (a)(10). Pub. L. 98-353, Sec. 512(a)(9), substituted ``If a 
class of claims is impaired under the plan, at least one class of claims 
that is impaired under the plan has accepted the plan, determined 
without including any acceptance of the plan by any insider'' for ``At 
least one class of claims has accepted the plan, determined without 
including any acceptance of the plan by any insider holding a claim of 
such class''.
    Subsec. (b)(2)(A)(i)(I), (ii). Pub. L. 98-353, Sec. 512(b)(1), 
substituted ``liens'' for ``lien'' wherever appearing.
    Subsec. (b)(2)(B)(ii). Pub. L. 98-353, Sec. 512(b)(2), inserted 
``under the plan'' after ``retain''.
    Subsec. (b)(2)(C)(i). Pub. L. 98-353, Sec. 512(b)(3), substituted 
``interest'' for ``claim'', and ``or the value'' for ``and the value''.
    Subsec. (d). Pub. L. 98-353, Sec. 512(c), inserted ``the application 
of'' and provisions requiring that in any hearing under this subsection, 
the governmental unit has the burden of proof on the issue of avoidance.


                    Effective Date of 1994 Amendment

    Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not 
applicable with respect to cases commenced under this title before Oct. 
22, 1994, see section 702 of Pub. L. 103-394, set out as a note under 
section 101 of this title.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-334 effective June 16, 1988, but not 
applicable to cases commenced under this title before that date, see 
section 4 of Pub. L. 100-334, set out as an Effective Date note under 
section 1114 of this title.


                    Effective Date of 1986 Amendment

    Effective date and applicability of amendment by section 225 of Pub. 
L. 99-554 dependent upon the judicial district involved, see section 
302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of 
Title 28, Judiciary and Judicial Procedure.
    Amendment by section 283 of Pub. L. 99-554 effective 30 days after 
Oct. 27, 1986, see section 302(a) of Pub. L. 99-554.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-353 effective with respect to cases filed 90 
days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out 
as a note under section 101 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 347, 524, 901, 1110, 1112, 
1114, 1123, 1127, 1146, 1161, 1168, 1173 of this title.


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The Center For Debt Management™

Helping Consumers Save Money and Reduce Debt Is Our Only Business!™

We invite you to explore the sectors listed below. We promise that you'll find exceptional values, offers and resources in which to reduce your living expenses and to enjoy life!


Debt Management and Financial Services! The Internet's oldest and most comprehensive debt management agency! Resources for debt management, consumer credit counseling, debt consolidation, debt reduction settlements, legal aid, financial aid, loans and financing, credit repair, credit reports, insurance quotes, income sources, tax assistance, and more.

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