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Debtor's plan dismissed as it was not feasible.

Byline: Virginia Lawyers Weekly

A debtor who filed multiple petitions allegedly as part of a scheme to delay, hinder or defraud his bank's attempts to foreclose on real property had his case dismissed because, despite prior warning, he failed to adequately demonstrate his plan was feasible.

Background

The debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on March 7, 2018. This was the debtor's third bankruptcy. U.S. Bank then filed a motion that alleged the debtor's previous bankruptcy was commenced two days before a scheduled foreclosure on the debtor's residence and that the successive bankruptcy petitions were part of a scheme to delay, hinder or defraud the creditor in its attempts to foreclose on the property.

The court, after reviewing the previous case filings, the pleadings in this case and the argument of counsel for U.S. Bank, found the case was filed in bad faith. The court entered an order granting the motion for relief that included an equitable servitude on the property for a period of two years from the date of the entry of the order. The district court affirmed the bankruptcy court's ruling.

On Sept. 21, 2018, the debtor filed his first disclosure statement and proposed plan. The trustee objected to the disclosure statement alleging that the debtor failed to provide adequate information to creditors. The court instructed the debtor to file an amended disclosure statement.

The trustee again objected to the amended disclosure statement. The trustee also objected to the feasibility of the proposed plan because the affidavit of contribution contained no information about the debtor's family members' current incomes, expenses and liabilities that might take precedence over their proposed contributions to the plan. U.S. Bank also objected to the amended statement.

Analysis

When the court granted U.S. Bank relief from the stay, it declined to exercise its authority to dismiss the case in order to give Mr. Mohammad one last opportunity to propose a plan of reorganization. He was put on notice in the pleadings filed by the trustee and U.S. Bank and at the hearing on his first disclosure statement that he needed to include information regarding his prior bankruptcies in an amended statement; however, he chose not to do so. In short, his amended disclosure statement contained the same deficiencies as the previous disclosure statement. Under these circumstances, the court has no reason to believe that a second amended disclosure statement would be proposed.

Mr. Mohammad knew that he was responsible for showing how he could afford to pay for his plan. His attempt to meet that responsibility by filing the affidavit of contribution has fallen short. The affidavit alone is insufficient evidence of the debtor's ability to fund a feasible plan. No supporting documents were attached to the document to indicate the source of the funds of the family members and their expenses and liabilities that would take precedence over their proposed contributions. The monthly operating reports filed by Mr. Mohammad in this case do not show a history of income contributions from his family members comparable to the contributions they propose to pay into the plan. None of the debtor's family members appeared in this court to testify to their ability to provide the debtor with the income necessary to fund his plan.

The debtor has established a history of proposing plans that are only feasible with substantial financial contributions of family members; however, there is no evidence before the court to demonstrate that the proposed contributions are sufficiently stable and regular to support a plan or that they would be likely to continue for the duration of a plan.

The court finds the amended disclosure statement fails to provide adequate information to creditors pursuant to 11 U.S.C. 1125 and therefore cannot be approved. The court also finds the debtor has failed to demonstrate any ability to fund a feasible plan; therefore, this case shall be dismissed.

In re Mohammad, No. 18-10785, Jan. 29, 2019. EDVA Bankr. at Alexandria (Kindred). VLW No. 019-4-001, 11 pp.

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Title Annotation:In re Mohammad, U.S. Bankruptcy Court for the Eastern District of Virginia
Publication:Virginia Lawyers Weekly
Date:Mar 8, 2019
Words:685
Previous Article:Case dismissed for repeated failure to file feasible plan.
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