The Ninth Circuit held today that a bankruptcy court, before confirming a plan of reorganization, must take account of a creditor’s pending litigation that may result in a post-confirmation recovery of damages from the debtor. The 2-1 decision suggests that the bankruptcy court must at least estimate the value of the creditor’s claim to determine plan feasibility. In re Harbin (Sherman v. Harbin), No. 04-56799 & 04-56865 (9th Cir. Apr. 25, 2007).
Note: The original post said that the bankruptcy court must estimate a debtor’s claim against a creditor. The opinion in fact deals with estimation of a creditor’s claim against the debtor. Our bad.