Colonial Ch. 11 Plan Could Rip Off Creditors: Judge

Law360, New York (May 23, 2011, 5:44 PM EDT) -- An Alabama bankruptcy judge rejected Colonial BancGroup Inc.'s Chapter 11 reorganization plan Friday, saying the potential fees for a plan administrator were not in the best interests of creditors because they could nearly double the fees a liquidation trustee would earn.

Judge Dwight H. Williams Jr. agreed with objections filed by the Federal Deposit Insurance Corp., the receiver for Colonial BancGroup's former subsidiary Colonial Bank, and BB&T Co., which took over Colonial Bank's assets after its 2009 collapse, that entering Chapter 11 rather than liquidating the...
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