Gift Plans

Plans containing a distribution under which a senior creditor “gifts” assets to a junior creditor or equity holder in exchange for the junior creditor’s or equity holder’s consent to a bankruptcy Chapter 11 plan of reorganization. Gift plans are, therefore, subject to increasing substantial judicial scrutiny and diverse court positions, with opponents arguing such plans violate the unfair discrimination and absolute priority rules of 11 U.S.C. § 1129(b).

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