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Case dismissed for repeated failure to file feasible plan.

Byline: Virginia Lawyers Weekly

A debtor who failed on four separate occasions to file a feasible plan will not get a fifth opportunity. Instead, the court held the debtor's repeated failures, which were based upon unreliable and inaccurate financial projections, were unlikely to be cured with another attempt, and dismissed the case.

Background

At issue in this case are two farming operations in which the debtor actively participates. The debtor has financed his farming operations in part through loans from Farm Service Agency, Skyline, and Farm Credit. Those creditors have filed secured claims in this case.

The debtor filed his first Chapter 12 plan on July 31, 2017, to which Farm Credit, Skyline and the trustee all objected. The court denied confirmation of the plan. Since September 2017, the debtor has filed five subsequent plans, none of which have yet been confirmed. He filed his fifth amended plan shortly after the confirmation hearing on the fourth amended plan at issue here.

Fourthamendedplan

The trustee and Farm Credit raise several issues with the debtor's fourth amended plan. Farm Credit argues that it is not feasible and will not provide for payment on its secured claims as required by 11 U.S.C. 1222 and 1225(a)(5). The trustee further notes that the plan is underfunded, such that unsecured creditors will not receive the dividend the plan proposes. On the other hand, the trustee appears to support confirmation of the debtor's fifth amended plan. Similarly, rather than arguing for confirmation of the fourth amended plan, the debtor focuses on confirmation of the fifth amended plan.

When the debtor first filed a plan in this case, the trustee, Farm Credit and

Skyline all cast doubt on the debtor's ability to propose a feasible plan. Although Skyline and the trustee have not expressly renewed their objections based on feasibility, the court nonetheless has the same concern over whether the debtor can meet this requirement.

If the court were to give the debtor the benefit of the doubt and accept the original revenue projection for 2018, in comparison to the most favorable expense projection of 2018, the debtor's revenue would exceed his expenses by $108,667.17. However, a review of the debtor's 2017 operating reports shows that his 2018 revenue did not fall far below the prior year's earnings, thus indicating that the original 2018 projections were overly optimistic. In all but the most optimistic scenarios, the debtor would not have income sufficient to make all his required payments. Accordingly, the court finds it improbable that the debtor will comply with the terms of his plan.

Moreover, these calculations all rely on several significant assumptionsnamely, that the debtor's expenses and revenue will remain relatively steady. Unfortunately, that appears unlikely as the debtor has cut expenses to the bone. Most importantly, these calculations assume the accuracy of the debtor's record keeping and projections. At several points during the case, the creditors and the court have each expressed doubt about the veracity of the debtor's records.

The debtor points to his consistent ability to make payments pursuant to the court's orders as evidence of feasibility. It is true that as the case has proceeded for the last year and a half, the debtor has made his required payments. However, that the debtor has remained current on his obligations to date does not necessarily prove his ability to make future payments or to make balloon payments in seven years, either through refinancing or accumulation of funds. The debtor has not demonstrated he can comply with the terms of his plan by making annual payments going forward. Accordingly, the court finds that the debtor's fourth amended plan fails to meet the feasibility requirement of Section 1225(a)(6).

Leavetoamend

Since the court held a hearing on the debtor's fourth amended plan, the debtor has filed yet another modified plan. Because the debtor has not filed a confirmable plan within the 90-day period required by the Bankruptcy Code, he may file further amended plans only pursuant to leave from this court. The court construes the fifth amended plan as a request for leave to amend, which the court denies.

Farm Credit has had to make its point repeatedly that the debtor's financial projections are unreliable and inaccurate. The court agrees, and the fifth amended plan does nothing to persuade the court otherwise.

Case dismissed.

In re Akers, No. 17-70584, Jan. 3, 2019. WDVA Bankr. at Roanoke (Black). VLW No. 019-4-003, 21 pp.

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Title Annotation:In re Akers, U.S. Bankruptcy Court for the Western District of Virginia
Publication:Virginia Lawyers Weekly
Date:Mar 8, 2019
Words:752
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