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In addition to referring to the disclosure statement requirements, § 1129(a)(2) may arguably also refer to duties that the Code imposes on the plan proponent, particularly a trustee or debtor in possession. Thus, a violation of any substantive provision of the Code, such as unauthorized use of cash collateral, may preclude the defalcating proponent from obtaining confirmation of a plan, but courts should be cautious in applying this remedy where confirmation of the plan might be in the best interests of creditors even though the proponent has transgressed the Code.
The Code continues the provisions of Chapters X, XI and XII of the Act that precluded confirmation of a plan that is not proposed in good faith. § 1129(a)(3). If no objection is filed, the Rules allow the court to find good faith without evidence. Rule 3020(b)(2). This implies that the good faith standard is to be objectively determined from the provisions of the Plan and its compliance with the Code and its purposes, as some courts have held. Other courts, however, have used language that suggests there is also a subjective element to the test, or that the court must examine "the totality of the circumstances surrounding the confection" of the plan, which could also include consideration of the debtor's business practices or actions in the case. Whichever standard is adopted, however, courts generally treat the confirmation good faith requirement as distinct and very different from the judicially-created good faith qualification for filing a Chapter 11 petition, which requires an examination of all of the facts and circumstances and depends upon an amalgam of factors none of which is dispositive.
Addressing a frequent issue in single asset cases, the Seventh Circuit held that a motive to avoid adverse tax consequences, by legal means, is not bad faith. The Ninth Circuit has held that proposing a plan for the sole purpose of curing a default in order to avoid default interest is not in bad faith.
The Code also precludes confirmation if the plan is proposed "by any means forbidden by law." § 1129(a)(3). The reference to law generally is broader than the parallel provisions of the Bankruptcy Act, which precluded confirmation if the proposal and
