CONFIRMING A CHAPTER 11 PLAN

seem nonsensical, the plain language of § 1124 states that a claim is impaired unless its rights

are left unaltered and the section contains no suggestion that only "alterations of a particular

kind or degree can constitute impairment."²⁴⁶ The secured creditor's claim was impaired

under the plan because the plan replaced its state law foreclosure rights with a bankruptcy

court auction of its collateral.²⁴⁷

Lower courts have generally followed Anaheim,²⁴⁸ although the Second Circuit

balked at the logical extension that a claim paid more than its present value could be deemed

impaired.²⁴⁹ Following Anaheim, the Ninth Circuit Bankruptcy Appellate Panel held that a

²⁴⁶ L & J Anaheim, 995 F.2d at 942-943. The court cited as dictum its earlier ruling in In re Acequia, Inc., 787 F.2d 1352,1363 (9th Cir. 1986): "any alteration of rights is impairment even if the value of the rights is enhanced." The court also cited In re Barrington Oaks General Partnership, 15 B.R. 952, 962 (Bankr. D. Utah 1981), for its similar conclusion based on Congress' rejection of the "material and adverse" definition of creditors "affected" by a plan under Bankruptcy Act § 107.

²⁴⁷ L & J Anaheim, 995 F.2d at 943.

²⁴⁸ E.g., Bank of America v. 203 N. LaSalle St. Ptshp., 195 B.R. 692, 704 (N.D. Ill. 1996)(no artificial impairment even "Though the Debtor could have structured the Plan to provide payment of the trade debt claims in full with interest, [because] doing so would have reduced the amount available to satisfy other claims, including those of the [objecting] Bank, and would have made confirmation more difficult"), aff'd, 126 F.3d 955 (7^th Cir. 1977); In re Duval Manor Assocs., 198 B.R. 94 (Bankr. E.D. Pa. 1996)(30 day delay in payment constitutes impairment); In re Patrician St. Joseph Partners, 169

B.R.

669 (D. Az. 1994)(payment of unsecured creditors in full one year after confirmation constitutes impairment, as does reduction in ground lease payments to $5500 per month from contractual $ 5613 per month); In re Creekstone Apartments Associates, 1995 Bankr. LEXIS 552 (Bankr. M.D. Tenn. 1995), affd, 1995 U.S. Dist. LEXIS 14876 (M.D. Tenn. 1995). In In re Union Meeting Partners, 160

B.R.

757, 771 (Bankr. E.D. Pa. 1993), the court cited L & J Anaheim for the proposition that improvement in a secured creditor's rights can constitute impairment. In In re Ropt Ltd. Partnership, 152 B.R. 406 (Bankr. D. Mass 1993), a separately classified secured tax claim provided the accepting impaired class. The plan paid the claim in full over five years with interest at an above-market rate. Although the claim received "very favorable treatment," the court found that the plan impaired it because the right of immediate foreclosure was altered. In re Landing Associates, Ltd., 157 B.R. 791, 812-15 (Bankr. W.D. Tex. 1993) found impairment consisting of 60-day delay in payment of trade claims was not artificial but based on sound business reasons that debtor needed that time to determine whether to object to some claims, and in light of creditor's likely appeal debtor should not waste resources preparing to pay them on the effective date. See also In re Temple Zion, 125 B.R. 910 (Bankr. E.D. Pa. 1991)(plan "impaired" the rights of customers by providing a refund after the warranty rights expired, but arguably this paid their allowable claims in full, in cash, on the effective date (i.e., nothing), and therefore rendered them unimpaired under § 1124(3), even if they were impaired under § 1124(1) because the legal rights were altered).

In In re Boston Post Road Limited Partnership, 21 F.3d 477 (2d Cir. 1994), cert. denied, 115 S. Ct. 897 (1995), the debtor made this argument, relying on Anaheim, in proposing to pay a higher rate of interest on tenants' security deposits than was required by state law. The opinion seems skeptical of the Anaheim analysis, and suggests that to be impaired a creditor must be "harmed" by the plan, but ultimately did not reach those issues because it concluded that tenants had no claims since their leases were neither assumed or rejected under the plan and thus "rode through," or if the leases were assumed

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