Opinion
Bankruptcy No. 03-31179
December 31, 2003
MEMORANDUM AND ORDER
This case is before the Court to consider confirmation of the First Modified Chapter 12 Plan of Debtors Curtis E, Nelson and Diana L. Nelson filed December 17, 2003. Peoples State Bank — Velva ("the Bank") objects to confirmation on multiple grounds including the plan's failure to meet the requirements of 11 U.S.C. § 1225(a)(5) and (6).
The confirmation hearing was held by video conference on December 17, 2003.
On October 6, 2003, the Bank filed a Motion for Relief from Stay in this case. No objections were lodged against the motion, and the Court granted the motion on November 17, 2003, to the extent necessary to allow the Bank to foreclose its liens in the Debtors' real property, machinery and equipment, livestock, crops and crop proceeds. The Debtors filed a motion for reconsideration of the order granting relief from stay on November 21, 2003, and this Court denied the motion to reconsider on December 11, 2003.
Debtors bear the burden of establishing all of the elements essential to the confirmation of the plan, including its feasibility. In re Szudera, 269 B.R. 837, 842 (Bankr. D. N. D. 2001). The feasibility requirement pertains to all proposed Chapter 12 plans pursuant to section 1225(a)(6), which provides that a plan may be confirmed only if "the debtor will be able to make all payments under the plan and to comply with the plan." 11 U.S.C. § 1225(a)(6); see Szudera, 269 B.R. at 842. Although debtors are not required to guarantee their plans, they must provide a reasonable assurance that the plan can be effectuated. In re Sauer, 223 B.R. 715, 726 (Bankr. D. N. D. 1998). They must therefore prove that their proposed plans are both realistic and will cash flow. Id.
With these principles in mind, the Court must examine both the terms of the plan and whether the debtors are likely to meet their obligations under the plan. In re Tofsrud, 230 B.R. 862, 872 (Bankr. D. N. D. 1999). Moreover, the Court must be persuaded of the ability of the plan to cash flow based on realistic and objective facts, not visionary or overly optimistic projections. Id. When construing feasibility requirements, this Court gives Chapter 12 debtors every reasonable benefit of the doubt, but it will not blindly confirm a plan which will not cash flow and is therefore unfeasible. Id. at 872-73.
The plan before the Court fails to acknowledge, much less address, the stark reality that the Bank has been granted relief from the automatic stay and, as a result, may pursue its nonbankruptcy rights and remedies, including obtaining possession of the Debtors' real and personal property through foreclosure. Although the Debtors also largely avoided this fact at the hearing on the matter, they did suggest that despite the granting of relief from the stay that the property remained in the bankruptcy estate. Assuming, arguendo, the Debtors are correct on this point of law, they nonetheless failed to establish how estate status would operate to prevent the Bank from realizing its security interest in the property. Because the Debtors' plan is wholly dependent upon the faulty premise that they will remain in possession of the real and personal property securing the Bank's interest, the Court can only conclude that the plan is not feasible and is therefore incapable of confirmation.
Based on the foregoing, confirmation of the Debtors' First Modified Chapter 12 Plan filed December 17, 2003 is DENIED.
SO ORDERED.