Unlike a Code provision dealing with the treatment in Chapter 13 of claims that are secured by collateral that the debtor wants to retain, which clearly prohibited balloon payments to such creditors by requiring that plan payments on such claims must be in “equal amounts,” the Code provision dealing with the payment of tax claims under a Chapter 11 plan, in requiring “regular installment payments in cash,” did not clearly prohibit balloon payments. Thus, a tax creditor could not show a likelihood of success on its appeal from a bankruptcy court order confirming a Chapter 11 plan providing for a balloon payment on its claim, as required for the tax creditor to obtain a stay pending appeal.
Trustee may seek recovery from subsequent transferee without having earlier avoided initial transfer.
July 5th, 2008
Subject to the requirement of establishing avoidance, a trustee may prosecute an action to recover from a subsequent transferee under the bankruptcy statute allowing a trustee to recover property transferred in an avoidable transfer without having earlier avoided the initial transfer, the Ninth Circuit Bankruptcy Appellate Panel has held as a matter of first impression in its circuit, recognizing a split of authority at the circuit level. The BAP emphasized that the concepts of avoidance and recovery were separate and distinct, with their own statutes and limitations periods. It also noted the need to interpret the recovery statute to provide flexibility and to avoid absurd results, particularly in cases involving multiple transfers or settlements. Thus, a Chapter 7 trustee could seek to recover proceeds from an unauthorized postpetition sale of a debtor’s asset from a law firm, even though the trustee and the initial transferee had entered into a settlement which renounced liability and so prevented a conclusion that the transfer was “actually avoided.”
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