The “effective date” of a Chapter 11 plan represents the point in time when a debtor begins to implement the plan’s provisions and make distributions to creditors. Often, parties will feel safe in assuming that once a confirmed plan goes effective and substantial implementation of it has occurred, the “train has left the station” and any remaining objections to confirmation have become moot.
The 9th U.S. Circuit Court of Appeals’ Jan. 24 decision in In re Thorpe Insulation Co. , however, serves as a firm reminder that a plan can be derailed even well after all of that has occurred. In Thorpe Insulation , the court held that the plan objection of a group of insurers was not equitably moot even though the plan had been confirmed, the effective date had long since passed, and the terms of the plan, including distributions to creditors, had begun to be implemented.
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