Noting that prepetition claims in a Chapter 11 case are typically paid only through a confirmed plan of reorganization and according to the priority scheme established in the Bankruptcy Code, the Court considered the statutory basis for allowing payment of prepetition employee wages and benefits and concluded that payment of the prepetition wages and benefits was permitted by the Bankruptcy Code and warranted in this case. In reaching this conclusion, the Court noted that Congress had afforded a very high priority to employee wages under 11 U.S.C. § 507. The Court found that under 11 U.S.C. §§ 1106, 1107, and 1108, payment of such prepetition claims is consistent with the fiduciary duty of the debtor-in-possession to stabilize, protect, and preserve the estate, including an operating business's going-concern value. The Court also held that its power to approve early payment of prepetition wage and benefits claims to employees was augmented by the Court's equitable powers, as codified in 11 U.S.C. § 105, to fill in "statutory gaps" as necessary to implement the priority scheme of the Bankruptcy Code. Accordingly, the Debtor was authorized to pay certain prepetition wages and benefits obligations.
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Unpublished Opinions
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Judge Thomas B. McNamara (TBM)
The Court found that the holder of a durable power of attorney, valid under the Colorado Uniform Power of Attorney Act, Colo. Rev. Stat. § 15-14-701, et seq., may qualify under Fed. R. Bank. P. 1004.1 as a representative for an incompetent bankruptcy debtor. Further, when the power of attorney contemplates that the attorney-in-fact will have broadest scope of authority, encompassing the right to act on the principal's behalf with respect to claims and litigation, the attorney-in-fact has the right to file a petition for bankruptcy relief and otherwise participate in a bankruptcy proceeding for the principal. In this case, the Court concluded that there was no need for it to appoint the Debtor's wife as attorney-in-fact to act for the Debtor in their joint bankruptcy case, because the Debtor, through his general power of attorney, had already appointed his wife to act on his behalf.