In chapter 11 bankruptcy voting procedures, the issue of non-voting impaired classes can be a complicated issue, but the Southern District of Texas’s new “nonfactor” approach can be used as a lens through which different solutions to this issue may be understood. The United States Bankruptcy Code states that a bankruptcy plan may only be confirmed if every impaired class votes to accept the plan. But despite the statute’s apparent clarity, different jurisdictions’ solutions vary, some deeming non-voting impaired classes to plan. This Note demystifies the Bankruptcy Code’s approach to this matter, examines the different jurisdictional approaches to this issue, and draws a conclusion that balances a just reading of the Bankruptcy Code with principles of fairness and equity. The Southern District of Texas’s nonfactor approach, one that developed in In re Franco’s Paving, LLC and In re Hot’z Power Wash, Inc., should be applied in small business subchapter V cases but must not be overapplied. In typical chapter 11 cases, non-voting impaired classes should count against plan confirmation while the “deemed acceptance” approach should be avoided.
Jacob Harrington (Wed,) studied this question.