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asset values or profits do not qualify.392 Creditors are entitled to receive the value of the estate and its appreciation; the new value must come from an independent source,393 which may mean that new value is impossible for an individual debtor absent gifts from relatives or friends.394 Contributing rental income from the estate asset is not "new" value,395 nor is a purchase of estate assets.396 A plan whose "contribution" is collection of debts owed to the debtor does not suffice.397 For this reason, a plan premised upon the debtor's partners satisfying their prepetition obligations under notes evidencing deferred partnership contributions should not constitute new value. Similarly, where the equity's new contribution only pays prepetition claims for which the equity is already responsible, one may view the payment as on account of an existing obligation.398 In contrast, payment of administrative expenses ought to suffice.399
392 See In re Stegall, 865 F.2d 140, 143 (7th Cir. 1989) (debtors' contribution of post-petition crop).
393 See In re Henke, 90 B.R. 451 (Bankr. D. Mont. 1988), where the court erroneously allowed the debtor's contribution of non-farm patent income, presumably property of the estate, and the promise to re-mortgage the farm at the end of the plan period to pay claims, to satisfy the new value requirement.
394
Computer Task Group, Inc. v. Brotby (In re Brotby), 303 B.R. 177 (9th Cir. BAP 2003)(debtor's future wages would not count as new value but contribution from exempt retirement fund could; dictum because contribution not shown to be substantial or necessary); In re Rocha, 179 B.R. 305 (Bankr. M.D. Fla. 1995)(debtor's own future earnings cannot suffice). See also In re Davis, 262 B.R. 791 (Bankr. D. Az. 2001). Yet in a corporate case, one court inexplicably concluded the "outside" investors' contributions should not be counted. In re Grammercy Twins Associates, 1995 WL 590361 (Bankr. S.D.N.Y. 1995).
395
In re Boyd, 15 F.3d 1089 (9th Cir. 1993); In re Woodmere Investors Limited Partnership, 178 B.R. 346 (Bankr. S.D.N.Y. 1995).
396
In re Economy Lodging Systems, Inc. 205 B.R. 862 (Bankr. S.D. Ohio 1997) (purchase of assets by reorganized company owned by debtor's shareholder does not satisfy new value exception).
397 In re Short, 173 B.R. 946 (Bankr. E.D. Okla. 1994); In re S.A.B.T.C. Townhouse Ass'n, Inc., 152
B.R. 1005, 1010 (Bankr. M.D. Fla. 1993) (collection of past due assessments from members of homeowners' association not "new value"); In re Lettick Typografic, Inc., 103 B.R. 32, 37 (Bankr. D. Conn. 1989) (insider claimed credit for "directing" a corporation owing a sum to the debtor to pay an IRS claim).
398 Creekside Landing, 140 B.R. at 719.
399 See In re River Capital Corp., 155 B.R. 382, 386 (Bankr. E.D. Va. 1991) (stock issued to holders of administrative claims did not violate absolute priority rule); In re Sherwood Square Assoc., 107 B.R. 872, 887 (Bankr. D. Md. 1989) (new capital contribution could include forgiveness of repayment of allowed administrative expenses). Compare In re C.P.M. Const., 124 B.R. 335 (Bankr. D.N.M. 1991) (debtors could not "contribute" the value of their pre-confirmation labor).
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