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ABI Exclusive

Courts Are Now Split on Ignoring Nonvoting Classes in Subchapter V Plans

Disagreeing with two bankruptcy courts in Houston, Miami’s Judge Isicoff holds that a Sub V plan with a nonvoting class can be confirmed only as a nonconsensual plan.


A dissenting voice has been raised on the question of whether a Subchapter V plan can be confirmed consensually if there are no votes in a class.

Bankruptcy Judge Laurel M. Isicoff of Miami disagreed with two bankruptcy judges in Houston who decided that a class isn’t counted if there are no votes in the class.

The Subchapter V debtor filed a chapter 11 plan with two creditor classes, both secured with one creditor in each. One secured class was populated by a bank, and the second secured class had the U.S. Small Business Administration.

The bank accepted the plan, but the SBA did not vote. There were no objections to confirmation, but the U.S. Trustee, the Subchapter V trustee and the bank argued that the plan could not be confirmed as a consensual plan under Section 1129(a)(8) because the SBA class had no votes.

The resolution rested on the interpretation of Sections 1191(a) and 1129(a)(8).

Section 1191(a) says that the court “shall” confirm a Subchapter V plan “only if” all the requirements of Section 1129(a) have been met other than subparagraph 1129(a)(15), which applies to an individual debtor where an unsecured claimholder objects to confirmation.

Among the confirmation requirements, Section 1129(a)(8) requires that each class “has accepted” the plan or is “unimpaired.”

When “an impaired class of creditors fails to cast a ballot at all,” Judge Isicoff characterized the debtor as arguing that the “class should not be counted at all for purposes of section 1129(a)(8), citing two cases from the Southern District of Texas — In re Franco’s Paving LLC, 654 B.R. 107 (Bankr. S.D. Tex. 2023), and In re Hot’z Power Wash, Inc., 655 B.R. 107 (Bankr. S.D. Tex. 2023).” To read ABI’s reports on the two Texas cases, click here and here.

Both courts in Texas, Judge Isicoff said, “held that a non-voting class can be ignored for purposes of whether section 1129(a)(8) is satisfied.” The two courts, she said, read Congress as having created “a streamlined chapter 11 process for small business debtors” and as having shown a “clear articulation of a preference for consensual plans confirmed under section 1191(a).”

To disregard a nonvoting class, Judge Isicoff understood the two Texas courts as believing that “Congress clearly never contemplated that there would be a class of impaired creditors where no creditor voted” and that Section 1126(c) created a “mathematical absurdity.”

Judge Isicoff proceeded to explain why she disagreed and was concluding that Section 1129(a)(8) had not been met because “each class of impaired claims did not accept the Debtor’s Plan.” With regard to a nonvoting class, she said that “the Bankruptcy Code on this point is neither silent nor absurd, but, rather, unambiguous and consistent with the purposes of the Bankruptcy Code.” She demonstrated how the Code envisions a nonvoting class.

First, Judge Isicoff said, Section 1126(a) says that a claimholder “may” vote to accept or reject. It does not say that a claimholder “shall” vote. Second, the mathematical formula in Section 1126(c) takes into account class members who do not vote.

“It is not absurd,” Judge Isicoff said, “that no creditors in a class voting on a plan should be treated any differently than a situation where there is not a sufficient number of creditors voting in favor of a plan to satisfy section 1129(a)(8).”

Judge Isicoff held that “the Plan must satisfy section 1129(a)(8)” and that “Section 1129(a)(8) requires that each impaired class accept the plan.” Although she could not confirm the plan as a consensual plan, she confirmed the plan as nonconsensual “because the Plan satisfies all of the other applicable provisions of section 1129(a).”


Except where statutory language in Subchapter V deviates from the norm, caselaw in “regular” chapter 11 should apply in Subchapter V, and vice versa. Not considering a nonvoting class in “regular” chapter 11 would be a notable development.

A requisite in both “regular” chapter 11 and Subchapter V, Section 1129(a)(8) requires that each class be unimpaired or “has accepted the plan.” In this writer’s view, not voting is not the equivalent of “has accepted,” because “has accepted” is language that contemplates an affirmative act.

Given the lack of specific textual support for disregarding nonvoting classes, other courts may be inclined to believe that Section 1129(a)(8) should not be ignored in Subchapter V, akin to the majority’s opinion nixing a creative interpretation of chapter 11 plans in Harrington v. Purdue Pharma L.P., 23-124 (Sup. Ct. June 27, 2024).

Opinion Link

Case Details

Case Citation

In re M.V.J. Auto World Inc., 23-16612 (Bankr. S.D. Fla. June 21, 2024)

Case Name

In re M.V.J. Auto World Inc.

Case Type



Lack of voting by the SBA and other governmental entities has been a consistent issue in sub V cases, no? Not sure how to remedy this issue to get to a consensual plan in cases where there are a small number of creditor classes, and the court decides to enforce the plain language of the Code.
Seems to me that allowing non-voting creditors to have blocking rights incentivizes and rewards non-participation in a process. That makes no sense to me, and strikes me as counterproductive.