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Robert Kevin Lee, A Professional Law Corporation
Certified Specialist in Bankruptcy Law | State Bar of California Board of Legal Specialization

Welcome to Robert K. Lee, A.P.C.

We are the leading firm in provider of information, news and services in the field of bankruptcy law.  Robert K. Lee is a Certified Specialist in Bankruptcy Law [State Bar of California, Board of Legal Specialization].  He has recently passed the American Board of Certification examination in Business Bankruptcy and is awaiting formal certification expected sometime in June or July of 2012.
 
View the video on the RIGHT to hear a client testimonial.

Student Loan Dischargeability: All or Nothing ?

 

A popular misconception is that a student loan is either entirely dischargeable or non-dischargeable.  However, it is possible to partially discharge a student loan debt, provided the debtor satisfies the burden of meeting the requirements of all three prongs of the “undue hardship” test. [In re Saxman (9th Cir. 2003) 325 F3d 1168, 1173–1175; In re Carnduff (9th Cir. BAP 2007) 367 BR 120, 130–131; In re Craig (9th Cir. 2009) 579 F3d 1040, 1044]

 

2011-08-23 | 293 Comments

Chapter 11: Ninth Circuit BAP Rules Absolute Priority Rule Does Not Apply to Individual Cases

The Ninth Circuit BAP recently ruled that the absolute priority rule does not apply to individual Chapter 11 cases.  In re Friedman BK. No. 07-02135 (AZ-11-1105-JuKiCl and AZ-11-1149-JuKiCl).
2012-05-03 | 0 Comments

When the Absolute Priority Rule is Not So Absolute

Depending on the court, it may recognize the "new value" exception to the absolute priority rule.There is a non statutory “exception” or “corollary” to the absolute priority rule under which junior classes may receive property or retain interests in the debtor to the extent they contribute substantial “new capital” to the estate—even where the plan does not pay senior classes in full. In re Bonner Mall Partnership (9th Cir. 1993) 2 F3d 899, 906 [It is ... the set of conditions under which former shareholders may lawfully obtain a priority interest in the reorganized venture.
 

The main issue is whether a reorganization plan that gives stock to former equity holders does so primarily because of their old interests in the debtor or for legitimate business reasons.  There must be causation between “holding the prior claim or interest and receiving or retaining property.”  Causation may be lacking (and the plan therefore disqualified) whenever junior classes acquire or retain an interest at a price that fails to provide the greatest possible addition to the bankruptcy estate; “and it would always come at a price too low when the equity holders obtained or preserved an ownership interest for less than someone else would have paid.” 

The requirements are that the contribution must be: 1] new; 2] substantial; 3] money or money's worth; 4] necessary for successful reorganization; 5] reasonably equivalent to the value or interest received; and 5] tested in the marketplace

 

1] "New Contribution":  What is offered must be new capital or some other new contribution. Loaning money to the debtor secured by the debtor's assets does not constitute a “present contribution of new value.” 

 

2]  The new value contributed must be “substantial” in comparison to:

—the total amount of unsecured claims;
—the total amount of claims being discharged; or

—the dividend being paid on unsecured claims by virtue of the contribution.

 

3]  The new value contributed must:

—consist of money or property that is freely traded in the economy; and

—be a present contribution, occurring on the effective date of the plan.

That is, no future contributions or services, no personal guarantees or release of debts would suffice.

 

4]  "Necessary for a successful reorganization":  Under this requirement, the plan proponent must show that the reorganization effort may fail without the new value contribution. The Ninth Circuit has stated that the old owners may demonstrate the “necessity” for their new value contribution simply by showing that they are “the most feasible source of the new capital.”  But the Supreme Court has found that "[t]he old owners must do more than demonstrate that the new capital is necessary for a successful reorganization. The old owners must also show that the reorganized entity needs funds from the prior owner-managers because no other source of capital is available.” 

 

5] The “new value” contributed must be reasonably equivalent to the value of the interest received or retained. The equivalency requirement ensures that equity holders will not eviscerate the absolute priority rule by means of gratuitous, token cash infusions proposed primarily to ‘buy’ cheap financing.” This ordinarily requires the value of the debtor's business to be determined on a “going concern” basis.  A debtor's “going concern” value is generally determined by estimating the debtor's future earnings and discounting those earnings to present value using an appropriate discount rate. 

 
6]  Marketplace exposure required:   The best way to determine the value of the interest offered for new value is marketplace exposure.
2012-05-03 | 0 Comments

Negative Amortization Plans May be Available in Chapter 11 Real Estate Cases

Negative amortization plans do not necessarily violate the "fair and equitable" rule when the DIP defers payments of interest on its debt obligation where the deferred amount can be capitalized at a rate of interest which enables the deferred amount to equal the present value of the creditor's allowed secured claim.  Great Western Bank v. Sierra Woods Group (9th Cir. 1992) 953 F2d 1174, 1176-1177.  The "fair and equitable" rule, otherwise known as the "absolute priority rule" is one of the two prongs of a test that must be met to confirm a non-consensual plan of reorganization in Chapter 11.

2011-09-15 | 3 Comments

The Politics of Chapter 11 Voting

Chapter 11 Plans are confirmed by classes of claims that vote to accept or reject the plan of reorganization.  If all accept the plan [either because they are unimpaired or vote affirmatively to accept the plan], then that plan is considered a consensual plan.  A non-consensual plan can still be "crammed down" on a class of claims by meeting other requirements [i.e. the "unfair discrimination" and "fair and equitable" prongs].  How is acceptance by a class determined ?  Acceptance by a class of claims is determined by 2/3 of the dollar amount and more than 1/2 of the number of claims who actually vote.  Thus, it is imperative to know who is likely to vote and who is not likely to vote. 

2011-10-09 | 2 Comments

A Trustee's Deadline to Object to Exemptions is Absolutely Absolute

A Trustee has 30 days to object to a debtor's claim of exemption.  F.R.B.P. 4003(b)(4) requires the trustee or any creditor to file an objection to exemptions within 30 days after the conclusion of the meeting of creditors held pursuant to Rule 2003(a), or the filing of any amendment to the list or supplemental schedules unless, within such period, further time is granted by the court. 
2011-09-06 | 10 Comments


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[2011-09-23]

As a Bankruptcy Lawyer in Los Angeles, Robert Kevin Lee A.P.C. is one of the best Bankruptcy Lawyers in Los Angeles.  He is a Board Certified Bankruptcy Attorney in Los Angeles, just one of 35 such Certified Bankruptcy Attorneys in Los Angeles County.  As one of only 35 Certified Bankruptcy Lawyers in Los Angeles County, he has helped thousands erase debt and get a fresh start.  ROBERT KEVIN LEE, A.P.C. is the place to call if you are looking for one of the best Los Angeles Bankruptcy Lawyers | Lawyer or Los Angeles Bankruptcy Attorneys | Attorney.