Forever 21’s Wind-Down Plan Shot Down, Spoiling Chapter 11 Case

Forever 21 Inc. lost its bid to send its bankruptcy plan to a creditor vote, after a judge ruled that administrative creditors’ failure to respond to a settlement offer shouldn’t be assumed as their consent.

Judge Mary Walrath’s rejection of the Chapter 11 plan crushes the teen fashion retailer’s chances of a company-controlled wind down. Her decision puts its bankruptcy estate on course to convert the case to a Chapter 7, which would be overseen by a court-appointed liquidator.

The Chapter 11 plan, submitted by Forever 21’s bankruptcy estate, violates the bankruptcy code by deeming consent from administrative creditors unless ...