## Facts

- A Chapter 11 debtor proposed a plan dividing creditors into five classes, including Class 4 as an “administrative convenience class” of unsecured claims under $1,000.
- The plan proposed to pay Class 4 creditors 95% of allowed claims; the additional amount needed to pay 100% was small (about $154.33).
- An objecting secured creditor argued the plan was facially unconfirmable because the debtor “artificially impaired” Class 4 to manufacture an impaired accepting class under 11 U.S.C. § 1129(a)(10).
- The debtor argued Class 4 was not artificially impaired and that, after the 1994 amendments to 11 U.S.C. § 1124, a class could remain impaired even if paid 100% if the plan altered legal, equitable, or contractual rights.
- The court considered the objections at the disclosure-statement approval stage, before confirmation.

## Issues

1. Whether the proposed 95% payment to Class 4 constituted improper “artificial impairment” rendering the plan facially unconfirmable and requiring denial of disclosure-statement approval.
2. How the 1994 amendments to 11 U.S.C. § 1124 (removing the former “cash-out in full” basis for unimpaired status) affect impairment analysis for § 1129(a)(10).
3. Whether payment of 100% of allowed claim amounts, by itself, makes a class unimpaired under amended § 1124.

## Decision

- The court approved the debtor’s disclosure statement.
- The court held that, after the 1994 amendments, impairment under § 1124 is not resolved solely by whether a class is paid in full.
- The court declined to treat the alleged minimal, strategic underpayment to Class 4 as making the plan facially unconfirmable at the disclosure-statement stage.
- The court left disputes about impairment, § 1129(a)(10), and any “artificial impairment” arguments for the confirmation process unless the plan is clearly unconfirmable on its face.

## Legal Principles

- After the 1994 amendments to § 1124, a class is unimpaired only if the plan (1) leaves holders’ legal, equitable, and contractual rights unaltered, or (2) cures defaults and reinstates maturity without otherwise altering those rights; the former provision allowing unimpaired status by paying the allowed amount in cash on the effective date was removed.
- Payment of 100% of the allowed amount does not automatically render a class unimpaired; the controlling question is whether the plan alters the holder’s rights.
- At the disclosure-statement stage, confirmability objections justify denial only when the plan is clearly unconfirmable on its face; otherwise, confirmation disputes are generally addressed at the confirmation hearing.

## Conclusion

The court approved the disclosure statement, interpreting amended § 1124 to focus impairment on alteration of creditor rights rather than full payment alone, and treating “artificial impairment” objections as confirmation-stage matters absent facial unconfirmability.


In re Atlanta-Stewart Partners, 193 B.R. 79 (Bankr. N.D. Ga. 1996)