- Case Type:
- Business
- Case Status:
- Reversed and Remanded
- Citation:
- BAP Nos. CC-22-1246-SGF and CC-22-1247-SGF (9th Circuit, Jun 23,2023) Published
- Tag(s):
-
- Ruling:
- Section 1191(c)(3) requires bankruptcy courts to take a "harder look" at a plan's feasibility than is required under § 1129(b)(2)(A) in order to confirm a subchapter V plan over a secured creditor's objection. Section 1191(c)(3) requires the debtor to show, with "concrete evidence," that she is reasonably likely to be able to make her plan payments.
- Procedural context:
- The largest secured creditor timely appealed the bankruptcy court's confirmation of the debtor's subchapter V reorganization plan and denial of the creditor's motion for relief from the automatic stay.
- Facts:
- Rita Ramos Curiel purchased a three-unit residential property on Sycamore Street (“Sycamore Property”) in Anaheim, California, and a commercial property on N. East Street (“NE Property”) from Ken Hamilton for $850,000 secured by the two parcels (together, “Properties”). When Curiel filed her subchapter V bankruptcy petition, the Sycamore Property was fully leased, and the NE Property was occupied by Curiel’s corporation, Lucky 7 Tire Center, Inc., which operated a tire store on the premises.
Curiel’s schedules showed encumbrances of more than $1,500,000, of which $728,227.24 was owed to the Ken Hamilton Family Trust (“Hamilton Trust”) for a purchase money note. Curiel also owed Michael Deskalakis $464,100 and $337,500 on separate judgments. The Properties were also subject to a $10,549 lien in favor of the Orange County Transportation Authority and property taxes.
Curiel filed her second amended subchapter V plan (“Plan”) in September 2022. The Plan proposed monthly payments of $12,050. The Plan also called for balloon payments, after seven years, to pay the secured claims, including those of the Hamilton Trust, Deskalakis, and the Orange County Transportation Authority. Curiel argued that a refinancing or sale of the Properties would pay the balloon payments.
Curiel based her projected monthly income and personal expenses using her monthly operating reports. Curiel forecasted that her monthly income would support Plan payments.
The Hamilton Trust objected to the Plan, arguing it was not feasible. The Hamilton Trust pointed out that Curiel reported a monthly average income of $12.581, which would be inadequate to fund the Plan. The Hamilton Trust also argued that Curiel’s forecast income relied on Lucky 7 Tire Center, which had suffered a loss of almost $20,000 in 2021. The Hamilton Trust also argued that Curiel had not demonstrated a reasonable likelihood that she would be able to sell or refinance the Properties, as contemplated by the Plan.
The Hamilton Trust was the only creditor that returned a ballot, and it rejected the Plan. Curiel thus conceded that she did not satisfy § 1129(a)(8) or § 1129(a)(10), and instead sought confirmation under § 1191(b).
The subchapter V trustee filed a statement in support of confirmation of the Plan.
The bankruptcy court overruled the Hamilton Trust’s objections and confirmed the Plan.
- Judge(s):
- SPRAKER, GAN, and FARIS, Bankruptcy Judges
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