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The Evolution of New Value Plans

By Alan K. Mills, David M. Powlen and Jonathan D. Sundheimer
May 24, 2013

Although many circuit courts of appeal have recognized the existence of a new value exception to the absolute priority rule, the Supreme Court has yet to issue a ruling that expressly adopts this exception, which is also known as the “new value corollary.” These circumstances have led many to question whether the new value corollary would survive Supreme Court review. A recent decision by the Seventh Circuit Court of Appeals, In re Castleton Plaza, LP, 707 F.3d 821 (7th Cir. 2013) has put into question the application of the corollary in future Chapter 11 cases.

New Value Corollary

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