The plan either pays the loan off in cash, according to a payment schedule, or gives the secured creditor a secured convertible note. That’s a requirement if the inferior classes of creditors are to be given even a partial payment, the plan must pay the secured creditors in full. If the loan is paid in full, then by definition the lien is released.
In a liquidation, if the proceeds aren’t sufficient to pay the lien holder/secured creditor, the lien is discharged with the partial payment. But that isn’t what this plan proposes, it proposes to pay the guy off.
They have filed a separate lawsuit as an attempt to get the lien released as invalid and those loans would then become unsecured (would raise that total from $13.8M to $14.8M). That case will be heard in mid-September and will delay any confirmation of the plan.
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