In a case of first impression under the Small Business Reorganization Act of 2019 (SBRA), the court in In re Body Transit Inc. was faced with the application of 11 U.S.C. § 1111(b) in the context of confirming a small business debtor’s plan. Specifically, the court was required to determine whether the secured creditor’s collateral was of “inconsequential value” within the meaning of § 1111 (b)(1)(B)(i). The court’s determination of “inconsequential value” was, as the court put it, more than “a bean-counting exercise.” Instead, the court took account of the policy supporting a § 1111(b) election and the statutory provisions governing reorganization under the SBRA. In the end, the court’s consideration of the evidence and these conflicting policies led it to find that the collateral was of “inconsequential value,” and hence, the § 1111 (b) election was denied.

This article was originally published in the May 2021 issue of the American Bankruptcy Institute Journal. Read the full issue here.