Norton Annual Survey of Bankruptcy Law
“What Conduct is Required to Designate Votes Pursuant to Bankruptcy Code Section 1126(e)?”
A plan of reorganization cannot be confirmed unless it receives the requisite number of accepting votes of creditors in each creditor class. Section 1126(c) provides: "[a] class of claims has accepted a plan if such plan has been accepted by creditors, other than any entity designated under subsection (e) of this section, that hold at least two-thirds in amount and more than one-half in number of the allowed claims of such class held by creditors, other than any entity designated under subsection (e) of this section, that have accepted or rejected such plan." In turn, section 1126(e) provides that "[o]n request of a party in interest, and after notice and a hearing, the court may designate any entity whose acceptance or rejection of such plan was not in good faith, or was not solicited or procured in good faith or in accordance with the provisions of this title." Whether to designate a creditor's vote rests with the discretion of the bankruptcy court.