CBS Business Bankruptcy & Reorganization 5

Question 1

What is a 'plan support agreement' (PSA) in the context of Chapter 11 reorganization?

Accepted Answer

A pre-petition agreement among major stakeholders to support a specific reorganization plan structure

Answer

A PSA is a lockup agreement signed by key creditors before or after filing, committing them to vote for and support a specific plan, accelerating the restructuring.

Question 2

Under § 364(d), what can a DIP lender receive that makes it particularly attractive to post-petition lenders?

Accepted Answer

A priming lien senior to all existing pre-petition secured liens with court approval

Answer

Under § 364(d), a debtor may grant a priming lien—senior to existing secured creditors—if the court finds existing lienholders are adequately protected.

Question 3

What is the 'new value exception' to the absolute priority rule in Chapter 11?

Accepted Answer

Existing equity holders may retain interests if they contribute new money or value equal to or exceeding the value they receive

Answer

The new value exception allows pre-petition equity to retain interests if they contribute reasonably equivalent new capital, though its scope remains debated post-203 North LaSalle.

Question 4

In a Chapter 11 case, what is a 'bar date' and what is the consequence of missing it?

Accepted Answer

The court-set deadline for creditors to file proofs of claim; missing it generally bars the claim from participating in distributions

Answer

Under Bankruptcy Rule 3003, creditors who fail to file proofs of claim by the bar date in a Chapter 11 case are generally barred from receiving any distributions.

Question 5

How does § 1111(b) affect a Chapter 11 plan's treatment of an undersecured creditor's claim?

Accepted Answer

An undersecured creditor may elect to have its entire claim treated as fully secured, waiving any right to a deficiency claim

Answer

Under § 1111(b)(2), an undersecured creditor may elect full secured treatment, requiring the plan to pay the full face amount of the debt even if collateral value is lower.

(CBS) Certified Bankruptcy Specialist Practice Test

(CBS) Certified Bankruptcy Specialist Practice Test

CBS Business Bankruptcy & Reorganization 5