Vol 19 (2022) - Issue 3

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What’s Done Is Done: Bankruptcy Court Rejects Attempt to Reopen Chapter 11 Case to Reallocate Value – In re NorthEast Gas Generation, LLC (Bankr. D Del)

Synopsis
In NorthEast Gas, the court rejected a request to reopen a chapter 11 case to permit the reorganised company to increase the amount of debt reinstated under its chapter 11 plan. The court premised its ruling on the well-established principle that once a chapter 11 plan is confirmed and substantially consummated, the
Bankruptcy Code prohibits modification of the plan.
The reorganised debtors had characterised the relief they sought as a permissible adjustment to the allowed amount of a claim. Despite that characterisation, and the fact that no stakeholder had objected, the Court determined that the relief requested would effect a reallocation of value under the plan, which constituted an impermissible, post-consummation plan modification.
NorthEast Gas makes clear that once a plan has been substantially consummated, the plan is final, and courts will not countenance attempts to modify the plan to reallocate value. In dicta, the court noted that a post-consummation modification may be permitted if the confirmed plan already includes a mechanism to implement the modification. Going forward, parties seeking optionality may be incentivised to include such mechanisms in their chapter 11 plans.