Walnut Street Four: Should the petition for involuntary bankruptcy be granted? Richard P. Friese: Can the bankruptcy court confirm the debtor's plan of reorganization?
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Hello, Im doing some research on the following. I have two questions I need an explanation on and need as much information you can give and any sources you want to list for me to check into.
Petition
In March 1988, Daniel E. Beren, John M. Elliot, and Edward, F. Mannino formed Walnut Street Four, a general partnership, to purchase and renovate an office building in Harrisburg, Pennsylvania. They borrowed more than $200,000 from Hamilton Bank to purchase the building and begin renovation. Disagreements among the partners arose when the renovation costs exceeded their estimates. When Beren was unable to obtain assistance from Elliot and Mannino regarding obtaining additional financing, the partnership quit paying its debts. Beren filed an involuntary petition to place the partnership into Chapter 7 Bankruptcy. The other partners objected to the bankruptcy filing. At the time of the filing, the partnership owed debts of more than $380,000 and had approximately $550 in the partnership bank account.
1. Should the petition for involuntary bankruptcy be granted?
Plan of Reorganization
Richard P. Friese (Debtor) filed a voluntary petition for Chapter 11 bankruptcy. In May 1989, Debtor filed a plan of reorganization that divided his creditors into three classes. The first class, administrative creditors, were to be paid in full. The second class, unsecured creditors, were to receive 50% on their claims. The IRS was the third class. It was to receive $20,000 on confirmation and the balance in future payments. No creditors voted to accept the plan. The unsecured creditors are impaired because their legal, equitable, and contractual rights are being altered.
2. Can the bankruptcy court confirm the debtor's plan of reorganization?
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"Usually involuntary bankruptcy is granted when the creditor files a petition and the debtor owes them a sizable amount of money or if the debtor has missed..."
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No, the petition for involuntary bankruptcy should not be granted. The reasons for this are as follows:
1. In case of Chapter 7 Bankruptcy, the creditors would file for involuntary bankruptcy. The creditor in this case is the Hamilton Bank that has not filed for bankruptcy but Beren has.
2. This is a general partnership and as such each of the partners is jointly and severally responsible for the debts of the company, so Beren is himself indebted to the creditors including the Hamilton Bank, how can he file for involuntary bankruptcy on behalf of the creditors?
3. The bank has lent 200,000 and the expenditure incurred is 380,000. Unknown to us it is possible that Beren has lent the money to the company and is now apprehensive that he will not get back his money. ...
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