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ARTICLE · 18 MAY 2015

Beware! – Approach Chapter 11 Releases With Caution

Fox Rothschild LLP
Fox Rothschild LLP
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Chapter 11 plans routinely contain provisions either releasing, or enjoining litigation against, various stakeholders involved in the case, particularly where the plan contemplates an infusion of cash by those stakeholders.

United StatesInsolvency/Bankruptcy/Re-Structuring
Heather Ries
Heather Ries
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Chapter 11 plans routinely contain provisions either releasing, or enjoining litigation against, various stakeholders involved in the case, particularly where the plan contemplates an infusion of cash by those stakeholders.  With few exceptions, the provisions of a confirmed chapter 11 plan are binding upon all creditors, whether or not they vote in favor of the plan.  Accordingly, it is important for creditors to review Chapter 11 plan releases carefully.

In the rent case of Iberiabank v. Geisen (In re FFS Data, Inc.), 776 F.3d 1299 (11th Cir. 2015)(http://media.ca11.uscourts.gov/opinions/pub/files/201411473.pdf) the bank creditor made a pre-petition loan for $10.6 million ("Loan") which was guaranteed by FFS Data, Inc. ("Corporate Debtor") and its president ("Debtor's President").  Shortly prior to the Corporate Debtor's bankruptcy, the borrower defaulted on the Loan.  The bank creditor agreed to forbearance against the borrower and the Debtor's President to

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