Bucking The Trend With Rule 9019 Settlements

Law360, New York (September 17, 2012, 12:59 PM EDT) -- In the normal course, prepetition unsecured creditors are not entitled to receive payments on their claim until the effective date of a plan — i.e. at the same time that all other prepetition unsecured creditors receive payment. Sometimes, however, under the guise of Bankruptcy Code Sections 363 and 105, debtors enter into Rule 9019 settlements with prepetition unsecured creditors that pay such creditors in cash (or other form of currency) upon approval of the settlement, instead of the effectiveness of the plan.

The “justifications” for such...
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