Saturday, May 17, 2014
Toibb v. Radloff case brief summary
Toibb v. Radloff
Facts: Toibb undervalues his assets and filed Chapter 7 – converts to Chapter 11 after he knows what his stock is worth. His plan to fund the plan with any dividends from the stock…
o Issue: Can individual debtors not engaged in a business file for Chapter 11?
o Holding: “Absent some showing of harm to the creditors of a nonbusiness debtor allowed to reorganize under Chapter 11, we see nothing in the allocation of "burdens" and "benefits" of Chapter 11 that warrants an inference that Congress intended to exclude a consumer debtor from its coverage.”
o § 1112(b): Court has substantial discretion to dismiss or convert for cause ( if a plan is not workable…)
o Generally, debtor needs to fulfill some Chapter 11 purpose such as:
Increasing returns to creditors
Moving assets to their highest utility
o Rule: Individual debtors may file Chapter 11.
o Rule: Debtor need not be engaged in an “ongoing business” to be eligible for Chapter 11.
· Policy: “Terminal Euphoria”
o Many Chapter 11 cases take years to complete. One reason is that too many debtors who seek refuge in Chapter 11 have no business being there – not merely because (like Sheldon Toibb) they have no business to reorganize, but because the businesses they do have are beyond resuscitation, and because their filings (unlike Sheldon Toibb’s) are not calculated to achieve even the broader Chapter 11 goal of maximizing the value of estate property and enhancing the return for creditors. One court has diagnosed the problem as the “terminal euphoria” of debtors that are doomed. In re Little Creek Development Co.
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