Case Study: In Re Maharaj

Law360, New York (August 20, 2012, 5:51 PM EDT) -- In the first circuit court opinion to address the issue, the United States Court of Appeals for the Fourth Circuit recently held that the absolute priority rule applies in cases filed by individual debtors under Chapter 11 of the United States Bankruptcy Code. In re Maharaj, 681 F.3d 558 (4th Cir. 2012). This decision further magnifies the conflict in the courts that have decided the issue.

The debtors were the owners and operators of an auto body repair shop in Chantilly, Va. Their debts exceeded the...
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