## Facts

- Jodene Audrey Puff (Debtor) filed a Chapter 11 case seeking reorganization.
- Debtor owned real estate that served as collateral for secured claims held by Wells Fargo Financial Leasing, Inc. (Wells Fargo) and Farmers Savings Bank (Farmers).
- Debtor’s valuation of the real estate differed substantially from the valuations asserted by Wells Fargo and Farmers.
- Wells Fargo also asserted that some obligations Debtor treated as secured debt were instead “true leases,” which would require different treatment under a Chapter 11 plan.
- Debtor filed a third amended plan and a third amended disclosure statement and sought approval of the disclosure statement under 11 U.S.C. § 1125.
- Wells Fargo and Farmers objected to approval, arguing the disclosure statement was inadequate because it did not sufficiently address (1) the valuation disagreements and (2) the possibility that some Wells Fargo obligations were true leases.
- The United States Bankruptcy Court for the Northern District of Iowa (Collins, J.) held a hearing on whether the third amended disclosure statement contained “adequate information” for solicitation.

## Issues

1. Whether Debtor’s third amended disclosure statement provided “adequate information” under 11 U.S.C. § 1125 when the values of key collateral were disputed and Wells Fargo claimed certain obligations were true leases.
2. Whether the court had to resolve the valuation disputes and the lease-versus-loan characterization dispute before approving the disclosure statement for solicitation.

## Decision

- The court overruled the objections of Wells Fargo and Farmers.
- The court approved Debtor’s third amended disclosure statement for use in soliciting votes on the plan.
- The court determined that § 1125 does not require a disclosure statement to decide contested valuation or claim-characterization questions as a condition of approval.
- The court found that, in context, the disclosure statement provided sufficient information for creditors to make an informed judgment about the plan and their proposed treatment, even though the disputes remained for later determination (including at confirmation and related contested matters).

## Legal Principles

- A Chapter 11 disclosure statement must contain “adequate information” as defined in 11 U.S.C. § 1125—information of a kind, and in sufficient detail, that would enable a hypothetical reasonable creditor or investor to make an informed judgment about the plan.
- What counts as “adequate information” depends on the circumstances of the case; it is a flexible, case-by-case determination.
- The disclosure-statement stage is aimed at informed voting and is not intended to fully litigate all contested factual and legal disputes that may affect confirmation.
- The existence of unresolved disputes (such as collateral valuation or whether an arrangement is a true lease) does not by itself bar approval, so long as the disclosure statement gives creditors enough to understand the proposed plan treatment and the nature of the disagreements.

## Conclusion

In re Puff, 2011 WL 2604759 (Bankr. N.D. Iowa June 30, 2011), held that a Chapter 11 disclosure statement may be approved under § 1125 even when major disputes remain about collateral value and whether certain obligations are true leases, because the disclosure statement need only provide enough information for a reasonable creditor to make an informed judgment on the plan; the court therefore overruled Wells Fargo’s and Farmers’ objections and approved the debtor’s third amended disclosure statement for solicitation.


In re Puff, 2011 WL 2604759 (2011)