July 11, 2011 Articles

Interpreting Creditor Silence under Section 1129 of the Bankruptcy Code

The Bankruptcy Code provides no clear guidance on the question of whether creditor silence should be deemed an acceptance or a rejection, and case law has not provided consistent guidance.

By Kevin J. Mitchell

Section 1129(a) of the Bankruptcy Code contains several requirements that a Chapter 11 debtor must satisfy to confirm a consensual plan of reorganization. Among other things, each impaired class of claims must accept the plan under section 1129(a)(8); otherwise, a debtor must resort to more onerous cramdown provisions. See 11 U.S.C. § 1129(a)(8), (b). A creditor class accepts a plan when creditors holding at least two-thirds in amount and a majority in number of allowed claims accept the plan. 11 U.S.C. § 1126(c). Bankruptcy Rule 3018 defines both “acceptance” and “rejection.” Rule 3018 provides that acceptance or rejection of a plan shall: be made in writing; identify the plan accepted or rejected; be signed by the creditor or equity security holder; and conform to the appropriate official form. Fed. R. Bankr. P. 3018(c).

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