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secured creditor may file a liquidating plan. The bankruptcy court may then be faced with two competing plans, both of which are confirmable assuming that the new value corollary can be satisfied once exclusivity has been terminated. In deciding which of two confirmable plans to confirm under § 1129(c), the bankruptcy court might conclude that reorganization is to be preferred over liquidation, or that the debtor's new value plan provides more to creditors, including the secured creditor, than does the liquidating plan.
To the extent the new value adjustment survives, it remains difficult to apply with any precision. Perhaps this should not be surprising given the judicial flexibility Justice Douglas intended the adjustment to provide.
In Bonner Mall the Ninth Circuit summarized the five new value requirements as derived from Case and Ahlers: the new value must be (1) new or "fresh," (2) substantial, (3) money or money's worth, (4) necessary for the reorganization, and (5) exceed the value of the retained interest.
New value cannot come from property of the estate. Postpetition appreciation in asset values or profits do not qualify. Creditors are entitled to receive the value of the estate and its appreciation; the new value must come from an independent source, which may mean that new value is impossible for an individual debtor absent gifts from relatives or friends. Contributing rental income from the estate asset is not "new" value, nor is a purchase of estate assets. A plan whose "contribution" is collection of debts owed to the debtor does not suffice. 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. In contrast, payment of administrative expenses ought to suffice.
In Case, the Supreme Court stated that contributions of cash or an acceptable cash
