## Facts

- A limited partnership owned a 298-unit apartment complex and refinanced it with a $9.35 million mortgage loan secured by the property and rents.
- The loan had a four-year term with a balloon payment due in May 1991; the debtor defaulted shortly before maturity and filed a Chapter 11 petition five days before the balloon due date.
- The bankruptcy court valued the secured creditor’s claim at $9,879,927.81 and the apartment complex at $10,500,000; the secured creditor held over 99% of the total claim value against the debtor’s assets.
- The plan created three creditor classes: (1) the secured creditor, (2) a roughly $60,000 litigation claim, and (3) about $13,000 in trade debt.
- The plan paid the secured creditor $500,000 on the effective date and extended the remaining debt for 10 years.
- The plan paid the litigation claimant and trade creditors in full, but delayed payment for 60 days after the effective date.
- The bankruptcy court treated all classes as impaired due to altered rights (including payment timing) and confirmed the plan based on acceptance by an impaired class under 11 U.S.C. § 1129(a)(10); the district court affirmed.

## Issues

1. Whether a plan satisfies 11 U.S.C. § 1129(a)(10) when the only accepting impaired class is impaired only by a minor, intentional payment delay imposed solely to create an impaired accepting class.
2. Whether such artificial impairment renders a plan not proposed “in good faith” under 11 U.S.C. § 1129(a)(3) when the secured creditor holding over 99% of claim value is the only creditor materially affected.
3. Whether confirmation is proper over the dominant secured creditor’s objection in a single-asset real estate case where other creditors are paid in full with only a short delay.

## Decision

- The court of appeals reversed confirmation and remanded.
- Although a slight payment delay can constitute impairment under § 1124(1), the court held that trivial, contrived impairment used solely to satisfy § 1129(a)(10) was improper in these circumstances.
- The court concluded the plan failed the good-faith requirement of § 1129(a)(3) because it used nominally impaired minor creditors to facilitate a cramdown against the only materially affected creditor.

## Legal Principles

- A class is impaired under 11 U.S.C. § 1124(1) if a plan alters its legal, equitable, or contractual rights, including by changing payment timing.
- A plan seeking confirmation (including through cramdown) must satisfy 11 U.S.C. § 1129(a)(10) by obtaining acceptance from at least one impaired, non-insider class.
- The good-faith requirement of 11 U.S.C. § 1129(a)(3) limits the use of technical compliance where plan structure is designed to defeat the substantive function of § 1129(a)(10).
- When the only creditor bearing meaningful economic consequences is a secured creditor holding nearly all claim value, artificially impairing small, otherwise unimpaired claims to manufacture an accepting impaired class can support denial of confirmation for lack of good faith.

## Conclusion

The Eighth Circuit held that a Chapter 11 plan could not be confirmed over the objection of a secured creditor holding over 99% of claim value when the debtor imposed only a minor, strategic impairment on small claims to obtain an accepting impaired class; the plan was not proposed in good faith and confirmation was reversed and remanded.


In re Windsor on the River Assocs., Ltd., 7 F.3d 127 (8th Cir. 1993)