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create creditor classes prior to filing.231 Even the creation of unsecured debt would not suffice, however, if the deficiency claim of a secured creditor would dominate the unsecured class vote. Secured debt may be necessary; in a single asset apartment complex case, a small secured claim against a computer or furniture may provide the answer.
It can be argued that administrative expense claims, gap claims and priority unsecured tax claims may not provide the accepting impaired class because § 1123(a)(1) prohibits them from being classified in a class232 (although the language of § 1123(a) can alternatively be read as merely stating that classifying such claims is not required, and § 1129((a)(9)(B) does refer to certain of these tax claims as constituting a "class").
There is also case law suggesting that a class created for administrative convenience pursuant to § 1122(b) cannot provide the accepting impaired class.233 However, nothing in §§ 1122(b) or 1129(a)(10) expressly precludes the administrative convenience class from providing the requisite acceptance if it is left impaired. One district court decision recognized an impaired administrative convenience class as satisfying § 1129(A)(10), but without analysis.234
The Third Circuit has held that the impairment must occur under the plan, not simply
231
In re Hobson Pike Associates, Ltd., 3 BCD 1205, 1213 (Bankr. N.D. Ga. 1977)("It has been suggested that, aside from suppliers and materialmen debts, lawyers, accountants, architects engineers, planners and/or others could be employed to assist the debtor and not be paid by the time of filing."). Of course there are dischargability problems created if debt is created with fraudulent intent, and the comment was written before Congress expressly excluded the votes of insiders.
232
See In re Mortgage Investment Company of El Paso, 111 B.R. 604 (Bankr. W.D. Tex. 1990); In re Perdido Motel Group, 101 B.R. 289, 293-94 (Bankr. N.D. Ala. 1989). The Fourth Circuit has adopted this analysis, but incorrectly assumed secured tax claims were priority claims, whereas § 507(a)(8) [formerly § 507(a)(7)] applies only to unsecured tax claims. In re Bryson Properties, XVIII, 961 F.2d 496, n.8 (4th Cir. 1992). Secured tax claims are not priority claims, U.S. v. Victor, 121 F.3d 1383 (10th Cir. 1997), and therefore should be capable of providing the accepting impaired class vote. In re Curtis Center Ltd. Ptshp., 192 B.R. 648 (Bankr. E.D. Pa. 1996).
233
In re S & W Enterprise, 37 B.R. 153, 162 (Bankr. N.D. Ill. 1984); In re Mastercraft Record Plating, Inc., 32 B.R. 106 (Bankr. S.D.N.Y. 1983). These cases relied solely on Act practices, and were decided before the Supreme Court's recent insistence on adherence to literal interpretation absent an ambiguity, so they may have lost their precedential impact. Moreover, the Act practices may have little relevance, since as noted above there was no accepting class requirement under the Act.
234 "This Class consists of the claims of unsecured creditors to the extent the claims are not more than $250 in the aggregate. The Plan provides for payment of these claims ninety days after the effective date of the Plan, without interest. This constitutes an alteration of these claimants' legal, equitable or contractual rights. This impairment is not artificial and constitutes a valid impaired class that voted in favor of the plan." In re Patrician St. Joseph Partners Ltd., 169 B.R. 669, 679 (D. Az. 1994).
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