Bankruptcy Forms: Filing Bankruptcy Chapter 7 Bankruptcy Software Chapter 13

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TITLE 11–BANKRUPTCY

CHAPTER 11– REORGANIZATION

Sub Chapter IV – Railroad Reorganization

Sec. 1173. Confirmation of plan

 (a) The court shall confirm a plan if--
        (1) the applicable requirements of section 1129 of this title 
    have been met;
        (2) each creditor or equity security holder will receive or 
    retain under the plan property of a value, as of the effective date 
    of the plan, that is not less than the value of property that each 
    such creditor or equity security holder would so receive or retain 
    if all of the operating railroad lines of the debtor were sold, and 
    the proceeds of such sale, and the other property of the estate, 
    were distributed under chapter 7 of this title on such date;
        (3) in light of the debtor's past earnings and the probable 
    prospective earnings of the reorganized debtor, there will be 
    adequate coverage by such prospective earnings of any fixed charges, 
    such as interest on debt, amortization of funded debt, and rent for 
    leased railroads, provided for by the plan; and
        (4) the plan is consistent with the public interest.

    (b) If the requirements of subsection (a) of this section are met 
with respect to more than one plan, the court shall confirm the plan 
that is most likely to maintain adequate rail service in the public 
interest.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2644; Pub. L. 98-353, title III, 
Sec. 523, July 10, 1984, 98 Stat. 388.)


                      Historical and Revision Notes

                         legislative statements

    Section 1173 of the House amendment concerns confirmation of a plan 
of railroad reorganization and is derived from section 1172 of the House 
bill as modified. In particular, section 1173(a)(3) of the House 
amendment is derived from section 1170(3) of the Senate amendment. 
Section 1173(b) is derived from section 1173(a)(8) of the Senate 
amendment.


                        senate report no. 95-989

    Section 1173 adapts the provisions dealing with reorganization plans 
generally contained in section 1130 to the particular requirements of 
railroad reorganization plans, as set out in present section 77(e) 
[section 205(e) of former title 11]. Subsection (a) specifies the 
findings which the court must make before approving a plan: (1) The plan 
complies with the applicable provisions of the chapter; (2) the 
proponent of the plan complies with the applicable provisions of the 
chapter; (3) the plan has been proposed in good faith; (4) any payments 
for services or for costs or expenses in connection with the case or the 
plan are disclosed to the court and are reasonable, or, if to be paid 
later, are subject to the approval of the court as reasonable; (5) the 
proponent of the plan has disclosed the identity and affiliations of the 
individuals who will serve as directors, officers, or voting trustees, 
such appointments or continuations in office are consistent with the 
interests of creditors, equity security holders, and the proponent the 
public, and has disclosed the identity and compensation of any insider 
who will be employed or retained under the plan; (6) that rate changes 
proposed in the plan have been approved by the appropriate regulatory 
commission, or that the plan is contingent on such approval; (7) that 
confirmation of the plan is not likely to be followed by further 
reorganization or liquidation, unless it is contemplated by the plan; 
(8) that the plan, if there is more than one, is the one most likely to 
maintain adequate rail service and (9) that the plan provides the 
priority traditionally accorded by section 77(b) [section 205(b) of 
former title 11] to claims by rail creditors for necessary services 
rendered during the 6 months preceding the filing of the petition in 
bankruptcy.
    Subsection (b) continues the present power of the court in section 
77(e) [section 205(e) of former title 11] to confirm a plan over the 
objections of creditors or equity security holders who are materially 
and adversely affected. The subsection also confirms the authority of 
the court to approve a transfer of all or part of a debtor's property or 
its merger over the objections of equity security holders if it finds 
(1) that the ``public interest'' in continued rail transportation 
outweighs any adverse effect on creditors and equity security holders, 
and (2) that the plan is fair and equitable, affords due recognition to 
the rights of each class, and does not discriminate unfairly against any 
class.
    Subsection (c) permits modification of a plan confirmed by a final 
order only for fraud.


                         house report no. 95-595

    [Section 1172] This section [enacted as section 1173] requires the 
court to confirm a plan if the applicable requirements of section 1129 
(relating to confirmation of reorganization plans generally) are met, if 
the best interest test is met, and if the plan is compatible with the 
public interest.
    The test in this paragraph is similar to the test prescribed for 
ordinary corporate reorganizations. However, since a railroad cannot 
liquidate its assets and sell them for scrap to satisfy its creditors, 
the test focuses on the value of the railroad as a going concern. That 
is, the test is based on what the assets, sold as operating rail lines, 
would bring.
    The public interest requirement, found in current law, will now be 
decided by the court, with the ICC representing the public interest 
before the court, rather than in the first instance by the ICC. 
Liquidation of the debtor is not, per se, contrary to the public 
interest.


                               Amendments

    1984--Subsec. (a)(4). Pub. L. 98-353 substituted ``consistent'' for 
``compatible''.


                    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, 1165, 1174 of this 
title; title 26 section 354.


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Legal Resource Center: United States Code TITLE 11 Filing Bankruptcy Forms Software