on a Chapter 11 PlanSection 1125(b) of the Bankruptcy Code provides that votes in favor of a chapter 11 plan can be solicited postpetition only after the creditor or shareholder receives a court-approved disclosure document containing "adequate information," a concept defined in section 1125(a). The provision is "designed to 'discourage the undesirable practice of soliciting acceptance or rejection at a time when creditors and stockholders were too ill-informed to act capably in their own interests.'" In re Heritage Org., LLC, 376 B.R. 783, 794 (Bankr. N.D. Tex. 2007) (quoting In re Clamp-All Corp., 233 B.R. 198, 208 (Bankr. D. Mass. 1999)).In cases where section 1125(b) has been violated, section 1126(e) provides a remedy:On request of a party in interest, and after notice and a hearing, the court may designate any entity whose acceptance or rejection of such plan was not in good faith, or was not solicited or procured in good faith or in accordance with the provisions of this title.11 U.S.C. § 1126(e) (emphasis added). "Designation" of an entity under section 1126(e) means that it is disqualified from voting or its vote is disallowed. See Collier on Bankruptcy ¶ 1126.06 (16th ed. 2022). Votes cast by any creditor or interest holder designated under the provision are not counted for the purpose of determining whether the plan has been accepted by a class of creditors or interest holders under sections 1126(c) and 1126(d). See In re DBSD N. Am., Inc., 634 F.3d 79, 106 (2d Cir. 2011).Designation of a vote under section 1126(e) "is a drastic remedy, and, as a result, designation of votes is the exception, not the rule. The party seeking to have a ballot disallowed has a heavy burden of proof." In re Adelphia Commc'ns Corp., 359 B.R. 54, 61 (Bankr. S.D.N.Y. 2006)).What constitutes "solicitation" of a vote on a plan is unclear. Most courts agree that the term "must be read narrowly … because [a] broad reading of § 1125 can seriously inhibit free creditor negotiations." Century Glove, Inc

t, such holder changes such holder's previous acceptance or rejection."Rule 3019(a) of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules") provides that, in a chapter 11 case, the plan proponent may file with the court a modification of a chapter 11 plan after it has been accepted but prior to confirmation. It further states that:If the court finds after hearing on notice to the trustee, any committee appointed under the Code, and any other entity designated by the court that the proposed modification does not adversely change the treatment of the claim of any creditor or the interest of any equity security holder who has not accepted in writing the modification, it shall be deemed accepted by all creditors and equity security holders who have previously accepted the plan.Fed. R. Bankr. P. 3019(a) (emphasis added).Solicitation of Votes on a Chapter 11 PlanGenerally, holders of allowed claims and interests have the right to vote to accept or reject a chapter 11 plan. See 11 U.S.C. § 1126(a). A class of claims accepts a plan if creditors (other than creditors whose votes are disallowed under section 1126(e)) holding at least two-thirds in amount and more than one-half in number of the allowed claims voting in the class (again, not counting disallowed claims) vote in favor of the plan. See 11 U.S.C. § 1126(c). For a class of equity interests to accept a plan, the holders of at least two-thirds of the interests voting must vote to accept it. See 11 U.S.C. § 1126(d). Creditors or interest holders whose claims or interests are not "impaired" under the plan (as defined in 11 U.S.C. § 1124), however, are conclusively deemed to accept the plan, "and solicitation of acceptances with respect to such class from the holders of claims or interests of such class is not required." See 11 U.S.C. § 1126(f). Creditors and interest holders that would receive or retain nothing under the plan are deemed to reject it. See 11 U.S.C. § 1126(g).Section 1125(b) of the Bankruptcy Code provides tha

St. Paul Fire & Marine Ins. Co. v. Labuzan, 579 F.3d 533, 539 (5th Cir. 2009) (considering whether lawmakers intended to abrogate prudential standing requirements in section 362(k) of the Bankruptcy Code, which authorizes the recovery of damages for a willful violation of the automatic stay).Voting on a Chapter 11 PlanGenerally, holders of allowed claims and interests have the right to vote to accept or reject a chapter 11 plan. See 11 U.S.C. § 1126(a). Claimants or interest holders whose claims or interests are not "impaired" under the plan (as defined in 11 U.S.C. § 1124), however, are deemed conclusively to accept the plan, and stakeholders who would receive nothing under the plan are deemed to reject it.

e effect of substantively consolidating the debtors and therefore would wreak havoc on mezzanine lenders who rely on debtors' separate existences for purposes of preserving their collateral. According to the court, "[S]uch hypothetical concerns are policy considerations best left for Congress to resolve." Id. at 730.In a concurring opinion, Circuit Judge Friedland wrote that because the chapter 11 plan effectively merged the debtors without any assessment of whether substantive consolidation was appropriate, the lender's argument that it was unfairly deprived of the ability to object effectively to confirmation had some foundation. Even so, he noted, the lender failed to raise that objection in the bankruptcy court, choosing instead to rely on its objections under section 1129(a)(10). Id. at 731-33.Assignment of Voting Rights in Intercreditor and Subordination AgreementsGenerally, holders of allowed claims and interests have the right to vote to accept or reject a chapter 11 plan. See 11 U.S.C. § 1126(a). Claimants or interest holders whose claims or interests are not "impaired" under the plan (as defined in 11 U.S.C. § 1124), however, are deemed conclusively to accept the plan, and stakeholders who would receive nothing under the plan are deemed to reject it. See 11 U.S.C. §§ 1126(f) and (g). In addition, any holder of a claim or interest to which an objection has been filed does not have the right to vote the portion of the claim or interest objected to, unless the holder obtains an order temporarily allowing the claim or interest for voting purposes pending resolution of the merits of the objection. Unliquidated or contingent claims may be estimated for purposes of voting on a plan. See 11 U.S.C. § 502(c).Subordination agreements among creditors specifying in advance how their competing claims against the borrower will be dealt with in terms of priority, receipt of payment, recourse to assets, and other related rights commonly include provisions that restrict or transfer the junior

nough, it may be deemed a plan "modification," in which case the Bankruptcy Code may require that stakeholders be provided with additional disclosure regarding the alteration and an opportunity to vote on the plan as modified. The U.S. Bankruptcy Court for the Southern District of New York addressed the procedures governing post-confirmation modification of a chapter 11 plan in In re Celsius Network LLC, 2023 WL 8931299 (Bankr. S.D.N.Y. Dec. 27, 2023). In a case where the debtors' "toggle" chapter 11 plan expressly contemplated two alternative transactions, but the debtors proposed certain changes prior to the plan's implementation, the court held that, even if the alterations qualified as a plan "modification," no additional disclosure or voting was necessary because the changes did not materially and adversely impact creditors.Solicitation of Votes on a Chapter 11 PlanGenerally, holders of allowed claims and interests have the right to vote to accept or reject a chapter 11 plan. See 11 U.S.C. § 1126(a). A class of claims accepts a plan if creditors (other than creditors whose votes are disallowed under section 1126(e)) holding at least two-thirds in amount and more than one-half in number of the allowed claims in the class (again, not counting disallowed claims) vote in favor of the plan. See 11 U.S.C. § 1126(c). For a class of equity interests to accept a plan, the holders of at least two-thirds of the interests voting must vote to accept it. See 11 U.S.C. § 1126(d). Creditors or interest holders whose claims or interests are not "impaired" under the plan (as defined in 11 U.S.C. § 1124), however, are conclusively deemed to accept the plan, "and solicitation of acceptances with respect to such class from the holders of claims or interests of such class is not required." See 11 U.S.C. § 1126(f). Creditors and interest holders that would receive or retain nothing under the plan are deemed to reject it. See 11 U.S.C. § 1126(g).Section 1125(b) of the Bankruptcy Code provides that votes

ith a higher liquidation priority, including various categories of unsecured claims. See id. § 726(a)(5).Distributions are to be made pro rata to parties of equal priority within each of the six categories specified in section 726. If claimants in a higher category of distribution do not receive full payment of their claims, no distributions can be made to parties in lower categories.In a chapter 11 case, the chapter 11 plan determines the treatment of secured and unsecured claims (as well as equity interests), subject to the requirements of the Bankruptcy Code.Impairment of Claims Under a Chapter 11 PlanCreditor claims and equity interests must be placed into classes in a chapter 11 plan and treated in accordance with the Bankruptcy Code's plan confirmation requirements. Such classes of claims or interests may be either "impaired" or "unimpaired" by a chapter 11 plan. The distinction is important because only impaired classes have the ability to vote to accept or reject a plan. Under section 1126(f) of the Bankruptcy Code, unimpaired classes of creditors and interest holders are conclusively presumed to have accepted a plan. Section 1126(g) provides that classes of creditors or interest holders that receive or retain nothing under a plan are deemed not to have accepted the plan.Section 1124 provides that a class of creditors is impaired under a plan unless the plan: (i) "leaves unaltered the legal, equitable, and contractual rights" to which each creditor in the class is entitled; or (ii) cures any defaults (with limited exceptions), reinstates the maturity and other terms of the obligation, and compensates each creditor in the class for resulting losses.Section 1124 originally included a third option, then section 1124(3), for rendering a claim unimpaired—by providing the claimant with cash equal to the allowed amount of its claim. In In re New Valley Corp., 168 B.R. 73 (Bankr. D.N.J. 1994), the court ruled that, in light of this third option, and because sections 726(a)(5) and 1129(a)(7) of the Bankr

the start of the case. In contrast, a prepackaged case involves the prepetition negotiation and solicitation of votes on a proposed plan. Once that process is complete, and assuming the debtor obtains sufficient votes, it then files for Chapter 11 and asks the bankruptcy court to confirm the plan.While it is not unusual for a debtor to emerge from Chapter 11 within 30-60 days after filing a prepack, some debtors have completed the process in substantially less time. Of course, the prepack process does not begin with the petition date. For example, after prepetition negotiations, the prepetition solicitation periods in most prepacks are longer than the period required by the Bankruptcy Rules generally or by the letter of the Rules pertaining to prepacks. Nevertheless, they can greatly reduce the cost and risk of the Chapter 11 process by limiting the debtor’s time in bankruptcy itself.Although Congress clearly contemplated prepackaged bankruptcies (for example, in Sections 1125(g) and 1126(b) of the Bankruptcy Code, which govern the prepetition solicitation of plans and associated disclosure requirements), a truly comprehensive framework for their administration — especially one that adequately accounts for the industry trend toward rapid prepacks — has been lacking.Historically, the Bankruptcy Court for the Southern District of New York has led in providing guidance on prepackaged bankruptcy cases. It first promulgated formal guidelines for prepackaged cases in 1999, which it amended in 2009 and later again in 2013. The new SDNY guidelines continue to reflect the evolving nature of such cases.The GuidelinesMost notably, the new guidelines recognize the concept of a “Rapid Prepackaged Chapter 11 Case” and provide a road map for the conduct of such cases, including with respect to limitations on the types of issues to be raised and the type of notice to be provided.The guidelines also provide that:In all prepackaged Chapter 11 cases, the hearings on approval of the disclosure statement and/or com

nd exercise its legal and contractual collection remedies. However, if the borrower files for chapter 11 protection, the lender must refrain from exercising such remedies unless it obtains relief from the automatic stay to do so. As long as the stay remains in place, the borrower as a chapter 11 debtor-in-possession can propose a plan that decelerates a defaulted loan, "cures" any defaults (with certain exceptions), and reinstates the original terms of the debt—in effect, "roll[ing] back the clock to the time before the default existed." MW Post Portfolio Fund Ltd. v. Norwest Bank Minn., N.A. (In re Onco Inv. Co.), 316 B.R. 163, 167 (Bankr. D. Del. 2004); see also 11 U.S.C. § 1123(a)(5)(G) (providing that a plan shall provide adequate means for its implementation, such as "curing or waiving of any default").To the extent that its claim is not "impaired" under the terms of the proposed plan, the lender will be deemed to have accepted the plan and will not be entitled to vote on it. See 11 U.S.C. § 1126(f). Even though the lender is precluded from enforcing its contractual right of acceleration, the lender's claim will be deemed unimpaired if the plan: (i) cures any defaults, "other than a default of a kind specified in section 365(b)(2) … or of a kind that section 365(b)(2) expressly does not require to be cured"; (ii) reinstates the pre-default maturity of the debt; (iii) compensates the lender for any damages sustained due to reasonable reliance on its contractual or legal ability to accelerate the debt; (iv) compensates the lender for any actual pecuniary loss arising from the debtor's failure to perform a nonmonetary obligation; and (v) does not "otherwise alter the legal, equitable, or contractual rights" of the lender. See 11 U.S.C. § 1124(2).Under section 365(b) of the Bankruptcy Code, if there has been a default in an executory contract or unexpired lease, the trustee or chapter 11 debtor-in-possession may not assume the contract or lease without, among other things, curing the

on any claim with a higher liquidation priority, including unsecured claims. See id. § 726(a)(5).Distributions in chapter 7 are made pro rata to parties of equal priority within each of the six categories specified in section 726. If claimants in a higher category of distribution do not receive full payment of their claims, no distributions can be made to parties in lower categories.In a chapter 11 case, the chapter 11 plan determines the treatment of secured and unsecured claims (as well as equity interests), subject to the requirements of the Bankruptcy Code.Impairment of Claims Under a Chapter 11 PlanCreditor claims and equity interests must be placed into classes in a chapter 11 plan and treated in accordance with the Bankruptcy Code's plan confirmation requirements. Such classes of claims or interests may be either "impaired" or "unimpaired" by a chapter 11 plan. The distinction is important because only impaired classes have the ability to vote to accept or reject a plan. Under section 1126(f) of the Bankruptcy Code, unimpaired classes of creditors and shareholders are conclusively presumed to have accepted a plan.Section 1124 provides that a class of creditors is impaired under a plan unless the plan: (i) "leaves unaltered the legal, equitable, and contractual rights" to which each creditor in the class is entitled; or (ii) cures any defaults (with limited exceptions), reinstates the maturity and other terms of the obligation, and compensates each creditor in the class for resulting losses.Section 1124 originally included a third option, then section 1124(3), for rendering a claim unimpaired—by providing the claimant with cash equal to the allowed amount of its claim. In In re New Valley Corp., 168 B.R. 73 (Bankr. D.N.J. 1994), the court ruled that, in light of this third option, and because sections 726(a)(5) and 1129(a)(7) of the Bankruptcy Code (described below) apply in a chapter 11 case only to impaired creditors, a solvent debtor's chapter 11 plan that paid unsecured claims in full in cash

The distinction is important because, among other things, only impaired classes have the ability to vote to accept or reject a plan. Under section 1126(f) of the Bankruptcy Code, unimpaired classes of creditors and shareholders are conclusively presumed to have accepted a plan.Section 1124 provides that a class of claims is impaired under a plan unless the plan: (1) "leaves unaltered the legal, equitable, and contractual rights" to which each creditor in the class is entitled; or (2) cures any defaults (with limited exceptions), reinstates the maturity and other terms of the obligation, and compensates each creditor in the class for resulting losses.Section 1124 originally included a third option, then section 1124(3), for rendering a claim unimpaired—by providing the claimant with cash equal to the allowed amount of its claim.