DBSD Case Upholds Designation of Votes Cast By a Claims
Purchaser
The right to vote to accept or reject a plan of reorganization
is one of the key rights given to impaired creditors in the Chapter
11 bankruptcy process. Generally, in Chapter 11 bankruptcy cases,
it is up to the collective opinion of impaired creditors to decide
whether a plan is acceptable. While the right to vote on a plan is
fundamental, not all creditors are entitled to vote their claims.
Notably, creditors whose claims are not impaired by a plan, or who
will receive no distribution on a plan, or whose claims are subject
to an objection are not entitled to vote. In addition, the
Bankruptcy Code allows the bankruptcy court to
"designate," or, in effect, to disregard, the votes of
any entity whose acceptance or rejection of such plan was not in
good faith. The Bankruptcy Code, however, provides no guidance
about what constitutes a bad faith vote to accept or reject a
proposed Chapter 11 plan.
