The United States Bankruptcy Court converted a case from Chapter 11 to Chapter 7 at a hearing on the proposed disclosure statement. The debtor appealed, alleging that it had a right to seek confirmation of its proposed plan. The District Court affirmed the decision of the Bankruptcy Court. The debtor appealed to the Court of Appeals for the Third District. The Court of appeals affirmed the decision of the District Court, holding that that a bankruptcy court may convert a case from Chapter 11 to Chapter 7 at the disclosure hearing when the plan is patently unconformable, such that no dispute of material facts remains and defects cannot be cured by creditor voting. Although the Bankruptcy Code requires a court to rule on the confirmation of a plan after notice and a hearing, the Court found the disclosure hearing to sufficiently meet the requirements of the Bankruptcy Code, and held that “nothing in either the language or logic of the Code requiring the court or parties to grind the same corn a second time.”
In Re: American Capital Equip., LLC, 10-2239 (3rd. Cir. 2012)