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Under this rubric, the Seventh407 and Ninth408 Circuits also requires that the money or
money's worth be contributed at the confirmation or effective date. Hence, release of a lien
on property of the estate,409 funds contributed from a new loan obtained by the debtor,410 a
guarantee of repayment of a loan by a third party,411 a promissory note from the debtor412 or a
promise of future payments from the debtor's earnings413 are not sufficient.
These cases equate equity's agreement to fund shortfalls, which is not new money,414
both because the value is not present and not equivalent to cash, with the proffer of a
407 In Snyder, the Seventh Circuit stated the contribution must be "up front." 967 F.2d at 1131, citing In re Stegall, 85 B.R. 510, 514 (C.D. Ill. 1987), aff'd, 865 F.2d 140 (7th Cir. 1989); In re Olson, 80
B.R. 935, 937 (Bankr. C.D. Ill. 1987), aff'd, 1989 U.S. Dist. LEXIS 18177 (C.D. Ill. 1989).
408 In re Ambanc La Mesa Ltd. Ptshp., 115 F.3d 650, 655 (9th Cir. 1997)("Only those contributions from Ambanc's partners that will actually be paid on the effective date of the Plan may be considered as money or money's worth under the new value corollary.").
409 Snyder, 967 F.3d at 1131. But see Future Energy Corp., 83 B.R. at 498.
410 See In re Sawmill Hydraulics, Inc., 72 B.R. 454, 457 (Bankr. C.D. Ill. 1987) (equity's guaranty of a new $50,000 loan to the debtor may constitute new value). However, a loan does not add to the debtor's equity on its balance sheet. See generally B. Needles, FINANCIAL ACCOUNTING at 20 (1983);
G. Welsch et al., INTERMEDIATE ACCOUNTING at 512 (7th ed. 1986).
411 Kham & Nate's Shoes No. 2, 908 F.2d at 1362. Judge Easterbrook found that to the extent the circuit's prior opinion in In re Potter Material Service, Inc., 781 F.2d 99 (7th Cir. 1986), where the new value was a combination of $34,800 cash plus a guarantee of an existing $600,000 loan, authorized a guarantee alone as new value, it was overruled in Ahlers. 908 F.2d at 1362-63. In Potter, the sole shareholder's renewal of a personal guarantee of a corporate debt was found to be an adequate form of contribution because accounting experts testified the shareholders/guarantors were taking an economic risk. Potter, 781 F.2d at 103. See also In re Sovereign Group 1985-27, Ltd., 142 B.R. 702, 708 (E.D. Pa. 1992) (although bankruptcy court valued cash flow guarantee by partners, and required a cash deposit into an escrow, the district court rejected the guarantee as not constituting money or money's worth); In re 47th & Belleview Partners, 95 B.R. 117, 119-20 (Bankr. W.D. Mo. 1988) (general partner's guarantee of cash shortfalls lacked "certainty, at the time of approval of the plan," and was not contribution in "money or money's worth").
412 Yasparro, 100 B.R. at 99; In re C & P Gray Farms, Inc., 70 B.R. 704, 711 n.23 (Bankr. W.D. Mo. 1987) (plan itself is equivalent to a note from the debtor).
413 Snyder, 967 F.3d at 1131 (payment of $20,000 over five years); In re Applied Safety, Inc., 200
414 In re Ropt Ltd. Partnership, 152 B.R. 406, 412 (Bankr. D. Mass. 1993) ($20,000 down and promise to pay as much as $100,000 more in the future is $20,000 new value); In re Hendrix, 131 B.R. 751 (Bankr. M.D. Fla. 1991) (promise to make monthly payments to fund plan); see also Future Energy Corp., 83 B.R. at 499 (agreement to make future payments to creditors not the required present contribution).
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