unless after notice and a hearing the court orders otherwise for cause, confirmation of the plan does not discharge any debt provided for in the plan until the court grants a discharge on completion of all payments under the plan; the value, as of the effective date of the plan, of property actually distributed under the plan on account of each allowed unsecured claim is not less than the amount that would have been paid on such claim if the estate of the debtor had been liquidated under chapter 7 on such date; the court may grant a discharge if, after notice and a hearing held not more than 10 days before the date of the entry of the order granting the discharge, the court finds that there is no reasonable cause to believe that— of a kind specified in paragraph (2)(A) or (2)(B) of section 523(a) that is owed to a domestic governmental unit, or owed to a person as the result of an action filed under subchapter III of chapter 37 of title 31 or any similar State statute; or Section 1141(d) of the House amendment is derived from a comparable provision contained in the Senate amendment.
However, section 1141(d)(2) of the House amendment is derived from the House bill as preferable to the Senate amendment.
It also permits the creditors to take a more active role in fashioning the liquidation of the assets and the distribution of the proceeds than in a chapter 7 case.
And while most Chapter 11 filings don't include liquidation of the business's assets, it may be permitted in some cases. Liquidation Availability For the most part, small business owners choose Chapter 11 over Chapter 7 specifically to avoid asset liquidation.
While Chapter 7 filings normally entail a complete shutdown of the business and a selloff of all assets in order to repay the debt, the goal of Chapter 11 is to maintain business operations and repay the debt over time.
A minority of courts have upheld the preclusive effect of a confirmation order as binding on creditors even if they did not receive notice of the bankruptcy or confirmation process. on the ground that the plan is violative of section 524 and not within the power, even jurisdiction of the bankruptcy court .... Upon confirmation, all property of the bankruptcy estate is vested in the debtor unless otherwise provided in a Chapter 11 plan, or in the order confirming the plan.
On the other hand, if a party is not listed on the debtor's bankruptcy schedules and/or did not receive notice of the confirmation hearing, most courts would find that the party is not be bound by the terms of the confirmed plan. But where a party does not have a pre-petition or administrative claim against the debtor, courts have found that such parties are not "creditors" and therefore are not bound by the plan. , 67 F.3d 779, 785 (9th Cir.1995)("creditors who do not wish to release third party debtors pursuant to the principal debtor's plan of reorganization should object to confirmation ... In such cases, the third party releases may not be enforceable against that creditor.
Except as provided in subsections (d)(2) and (d)(3) of this section, the provisions of a confirmed plan bind the debtor, any entity issuing securities under the plan, any entity acquiring property under the plan, and any creditor, equity security holder, or general partner in the debtor, whether or not the claim or interest of such creditor, equity security holder, or general partner is impaired under the plan and whether or not such creditor, equity security holder, or general partner has accepted the plan.
Except as provided in subsections (d)(2) and (d)(3) of this section and except as otherwise provided in the plan or in the order confirming the plan, after confirmation of a plan, the property dealt with by the plan is free and clear of all claims and interests of creditors, equity security holders, and of general partners in the debtor. That said, it is possible to have liquidation under Chapter 11, and it may benefit debtors and creditors more than Chapter 7 liquidation: In a chapter 11 case, a liquidating plan is permissible.Such a plan often allows the debtor in possession to liquidate the business under more economically advantageous circumstances than a chapter 7 liquidation.Chapter 7 is also used by businesses to terminate operations, and resolve tax liabilities that might otherwise become personal liabilities of the principals.A Chapter 13 bankruptcy, also referred to as a “Wage Earner’s Plan,” allows time to bring past due payments on home loans and car loans, and avoid foreclosure or repossession while payments are made under a court approved plan. 1994)(a confirmed plan is similar to a contract and all parties are bound by its terms). In these situations, courts will hold that the confirmed plan is binding on the creditor. Their philosophy is that if a creditor objects to the third party release, then the creditor should file an objection to confirmation of the plan pursuant to 11 U. C.§ 524 and further appeal the confirmation order if the creditor's objection is denied. These extraordinary cases generally involve a "channeling" of claims to a fund, with a bar against pursuit of the funding sources such as insurance policy proceeds. What if an entity did not have notice of the bankruptcy or did not have an opportunity to contest confirmation of the plan containing a third party release? If a plan or order does not provide for this vesting of property in the debtor, then the claims of creditors are not released at confirmation.