Minnesota Bankruptcy Case: Objections to Individual Chapter 11 Plan Overruled
The following is a summary of a Minnesota bankruptcy case or a case relevant to Minnesota bankruptcy law.
Minnesota Bankruptcy Case:
In re Feneis, BKY 09-60317 (Bankr. D. Minn. 1/20/10) (O’Brien, J.).
Objections to Individual Chapter 11 Plan Overruled
The debtor, Feneis, filed an individual chapter 11 petition, after the decline of his real estate development business. Secured creditor Citizens State Bank objected to confirmation of Feneis’s chapter 11 plan. The proposed plan provided that three of the four secured claims, including Citizens State Bank’s claim, were unimpaired. The secured creditor whose claim was impaired supported the plan, and the unsecured creditor classes overwhelmingly voted to support it. The bank objected to confirmation. The court overruled the bank’s objections and approved the plan.
First, the bank argued that the plan was not proposed in good faith because: 1) nonexempt equity in the debtor’s homestead should be tapped; 2) jewelry given by the debtor to his wife should be liquidated; and 3) equity in the family cabin should be contributed. The court found that 1) there was no non-exempt equity in the debtor’s homestead (remaining equity after his exemption belonged to his wife); 2) the jewelry was a gift that was not subject to avoidance and no longer belonged to the debtor; and 3) the debtor owned no interest in the family cabin.
Second, the bank argued that unsecured creditors would receive more in a chapter 7 liquidation than they would receive through the plan. The court found that the bank’s argument assumed the availability of assets not available for liquidation (equity in the home, the wife’s jewelry, and the family cabin), and that the debtor had presented credible evidence that was not rebutted that the distribution to unsecured creditors under the plan was greater than they would receive in liquidation.
Third, the bank challenged the feasibility of the plan on the basis of: 1) the debtor’s earnings, based on the stated lack of liquidation values of the entities that would employ him; and 2) the fact that the debtor planned to borrow against a life insurance policy, which required the debtor’s wife’s consent. The court found that the debtor had provided credible evidence of the viability of the entities that would employ him and their ability to pay his salaries, but stated that a final order confirming the plan would not be issued until the debtor filed a copy of an agreement signed by his spouse which agreed to the life insurance loan, and evidence of the deposit of the loan into the loan account as provided in the agreement.
Credit: The preceding was a summary of a case relevant to Minnesota bankruptcy law. The case summary was prepared by the U.S. Bankruptcy Court through Judge Robert J. Kressel & attorney Faye Knowles.