589 B.R. 154
N.D. Ill.2018Background
- Debtor Suzanne Aleshire filed Chapter 11 in January 2015 listing four rental/residential properties (three in Winnetka, IL; one in Bonita Springs, FL) with aggregate value less than secured indebtedness and limited other assets.
- She had ceased mortgage payments on the Winnetka properties since 2008; Wells Fargo (and others) had advanced large pre- and post-petition property-tax payments (post-petition ≈ $90,000).
- Over two years in bankruptcy Aleshire proposed three plans; none were confirmed. Her third plan required substantial monthly funding and relied on speculative income sources, loan modifications, and family/trust support.
- Wells Fargo moved to dismiss under 11 U.S.C. § 1112(b) for failure to pay post-petition taxes and for lack of feasibility/continuing diminution of the estate; the U.S. Trustee did not oppose dismissal.
- At an evidentiary hearing the court found Aleshire could not realistically (and had not) demonstrate ability to pay post-petition taxes or to fund a plan to retain all properties; the court denied an extension, dismissed the case, and imposed a 180-day refiling bar.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether failure to pay post-petition property taxes was cause to dismiss under §1112(b) | Aleshire argued Wells Fargo did not need to pay taxes to protect collateral (so dismissal was improper) | Wells Fargo: failure to timely pay post-petition taxes is statutory "cause" to dismiss and debtor must reimburse advances | Court: Dismissal affirmed — unpaid post-petition taxes are cause under §1112(b)(4)(I) and debtor lacked means to repay them |
| Whether debtor's inability to propose/confirm a feasible plan warranted dismissal | Aleshire contended she had or would obtain income, loan modifications, and family support to fund a confirmable plan and needed more time due to health | Wells Fargo: income projections speculative, no realistic loan modification, continuing prejudice and diminution of estate; prolonging stay unfair | Court: Dismissal affirmed — after two years the court reasonably found no realistic prospect of confirmation and denied further extension |
| Whether the bankruptcy court abused discretion in denying more time / accommodating debtor’s health | Aleshire argued health and age warranted further accommodation and additional time | Wells Fargo and U.S. Trustee: prior extensions granted; further delay would prejudice creditors and was futile | Court: No abuse — judge granted multiple prior accommodations; denial of further extension was within discretion |
| Whether dismissal relief should have allowed debtor to continue negotiating loan modifications in bankruptcy | Aleshire argued negotiations could produce modifications enabling a confirmable plan | Wells Fargo: modifications were speculative and did not justify keeping case pending; modifications can be pursued outside bankruptcy | Court: Held debtor offered no realistic basis to think modifications would be secured; keeping case pending was unwarranted |
Key Cases Cited
- In re Brooks, 488 B.R. 483 (Bankr. N.D. Ga. 2013) (Chapter 11 dismissal appropriate where confirmation of plan not imminent)
- Matter of Woodbrook Assocs., 19 F.3d 312 (7th Cir. 1994) (bankruptcy courts have broad discretion to determine when to dismiss for lack of progress)