b. (§9.37) Best Interest of Creditors Test
Under 11 U.S.C. § 1129(a)(7)(A)(ii), generally, each creditor or interest holder must receive under the plan as of the effective date at least as much as they would have received if the debtor were liquidated under Chapter 7 of the Bankruptcy Code. See In re Affiliated Foods, Inc., 249 B.R. 770, 787 (Bankr. W.D. Mo. 2000) (Venters, B.J.); In re David Green Prop. Mgmt., 164 B.R. 92, 99 (Bankr. W.D. Mo. 1994) (See, B.J.). The failure of the plan to meet the “best interest of creditors test,” or “the liquidation analysis,” provides the basis for an objection to confirmation by each individual creditor or interest holder, regardless of whether the class of claims or interests in which they are grouped has accepted the plan. The purpose of § 1129(a)(7)(A)(ii) is to prevent confirmation of a plan under which a nonaccepting, impaired creditor or interest holder recovers less than if the debtor’s property were liquidated under Chapter 7 of the Bankruptcy Code. In determining what a holder would receive upon liquidation, each of the Bankruptcy Code provisions applicable to liquidation cases, including 11 U.S.C. § 510, which relates to subordination, should be considered. The calculation of what a creditor would receive in a hypothetical Chapter 7 proceeding is sometimes referred to as a “liquidation analysis.” See In re Arn Ltd. P’ship, 140 B.R. 5 (Bankr. D.D.C. 1992). While this analysis must be based on the evidence and not assumptions, the...
