2009 Chief Judge Burns - Opinions
Chief Judge Gloria Burns -- Opinions signed in 2009
The court concluded that the debtor's chapter 11 plan was not confirmable where the feasibility requirement of 11 U.S.C. § 1129 (a)(11) was not met because the debtor had no assets, a capital structure comprised solely of debt, did not meet its revenue projections for five consecutive months, was run by a manager with limited abilities and an insufficient knowledge of the business, and was servicing a declining casino market. Even if the debtor's plan had been feasible, confirmation would still have been denied, because the debtor's classification of unsecured creditors was not sufficiently distinct and weighty to reasonably require separate classes under 11 U.S.C. § 1122(a). Finally, the debtor's new capital contribution proposal did not comply with the 'new value' exception to the absolute priority rule as the equity holder proposing the cash infusion did not establish his contribution was reasonably equivalent to the interest being retained in the debtor.
Since an atypical debtor acting in bad faith has no absolute right to convert from chapter 7 to chapter 13, the court held that the debtor's motion to convert from chapter 7 to chapter 13 was denied. Here, the debtor's conduct was atypical and could not support a finding the motion was filed in good faith because he: (1) concealed assets and allegedly hindered, delayed, and defrauded creditors through fraudulent transfers of six properties; (2) frustrated the chapter 7 trustee's investigation, including refusing to provide court ordered tax returns; (3) did not accurately inform the chapter 7 trustee of his debts, expenses, and income; and (4) changed his testimony with regard to his income and ability to pay his debts. In looking at the totality of the circumstances, the proposed chapter 13 plan was not feasible and was not confirmable.