test folder

162 (b) the retention and enforcement by the debtor, the trustee or a representative of the estate appointed for such purpose, of any such claim or interest; (iv) provide for the sale of all or substantially all of the property of the estate and the distribution of the proceeds thereof among holders of claims or interests; (v) modify the rights of holders of secured claims (other than a mortgage secured by the debtor's principal residence) or unsecured claims or leave unaffected the rights of holders of any class of claims; and (vi) include any other appropriate provision not inconsistent with the Bankruptcy Code. 11 U.S.C. § 1123(b). Although not explicitly stated in section 1123(b), a chapter 11 plan may also provide for the payment of postpetition interest on unsecured claims, provided that such interest may only be paid to the extent that the debtor has disposable income available to pay such interest after making provision for full payment of all allowed claims. 85 This exception to the general rule that unsecured creditors may not recover postpetition interest on a prepetition claim is known as the "solvent debtor" rule. While courts differ in their opinions on the appropriate "legal rate" for postpetition interest, it is well established that if a debtor has sufficient liquidity, unsecured creditors may be paid postpetition interest on their prepetition claims. In re Adelphia Commc'ns Corp., 368 B.R. 140, 257 (Bankr. S.D.N.Y. 2007). 86 Some courts have determined that the 85 This is explicitly allowed in the Chapter 13 counterpart of this section of the code. 11. U.S.C. § 1322; see infra Part V.E.2.x 86 The reasoning behind this excpetion relates to the so-called "best interests test." Because creditors in a chapter 11 case must receive at least what they would recover in a hypothetical liquidation, courts have found the best interest test codified in section 1129(a)(7) to essentially "incorporate" section 726(a) of the Bankruptcy Code, which sets forth the distribution waterfall of estate property in a liquidation. See In re Energy Future

• Cover