Creditor Does Not Become An Insider Simply Because It Purchases A Claim From An Insider

Before a bankruptcy court can confirm a Chapter 11 plan, it must determine if any persons voting to accept the plan are insiders. The Ninth Circuit in In re The Village at Lakeridge, LLC, 2016 U.S. App. Lexis 2124 recently held that a creditor was not a statutory insider because he did not fall within one of the categories listed in 11 U.S.C. §101(31). The panel held that the creditor did not become a statutory insider simply by receiving a claim from a statutory insider. In addition, the panel held that the creditor was not a non-statutory insider because he did not have a close relationship with the debtor and did not negotiate the relevant transaction at less than arm’s length.

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