In a subchapter V case, after denial of confirmation of Debtor’s plan of reorganization and while a creditor’s motion to convert or dismiss the bankruptcy case was under advisement, Debtor filed another plan and a motion to establish confirmation procedures. In the alternative, Debtor asked the Court to approve a structured dismissal. First, the Court observed that Debtor had the right to file preconfirmation plan modifications and treated its preconfirmation amended plans as plan modifications. Second, the Court rejected Debtor’s contention that subchapter V imposes no time limit after denial of confirmation to file a new plan. Third, the Court observed that although a subchapter V debtor may need an extension of time under the stricter standard set forth in § 1189(b) to file another plan following denial of confirmation, the Court did not need to decide the issue. Instead, the Court applied the more liberal standard adopted by courts in chapter 12 cases for granting additional time to file another plan following denial of confirmation and ruled that Debtor would not be given time to file another plan. The Court explained that Debtor had a full and fair opportunity to seek confirmation of its plan, the case had been pending for almost two years, the parties had incurred enormous legal fees, and the new plan was basically an attempt to correct evidentiary gaps in the confirmation hearing already held. Fourth, the Court found that “cause” existed to convert or dismiss the chapter 11 case. Fifth, the Court denied Debtor’s request that the Court approve a structured dismissal because it was not feasible. Debtor intended to continue operating the business, but Debtor’s secured creditor could foreclose its lien on any accounts receivable that Debtor generated. The Court found that Debtor could not protect the receivables by granting a purchase money lien. Finally, the Court found that it was in the best interests of creditors and the estate to convert the case to chapter 7 instead of dismissing the case. The Court relied in making that decision on the secured creditor’s agreement to a chapter 7 carve-out.

Liquidating trustee moved the court to reconsider it ruling that former counsel for the debtor in possession could be retained by a creditor asserting a claim against the liquidating trust. The court analyzed each argument in support of the motion to reconsider and rejected each.reco

Creditor filed a motion for summary judgment asserting that a prior state court foreclosure judgment precluded debtor from contesting its motion for relief from stay under the Rooker-Feldman doctrine, claim preclusion, and issue preclusion. The Court denied the motion, concluding that Rooker-Feldman was inapplicable and creditor did not satisfy all elements necessary to apply either claim or issue preclusion.

The Court considered whether to confirm Debtor’s third plan of reorganization pursuant to § 1191(b), which governs non-consensual subchapter V plans. Under the plan, to defeat a creditor’s § 1111(b) election, Debtor proposed surrendering and replacing all or substantially all of the creditor’s collateral, which included the equipment and vehicles Debtor used to operate its business and most of its cash and accounts receivable. The Court found that Debtor failed to show it would have the financial ability to replace surrendered assets necessary for it to maintain its operations. Therefore, the Court denied plan confirmation for failure to meet the feasibility requirements of § 1129(a)(11) and § 1191(c)(3), made applicable by § 1191(b).