650 B.R. 914
8th Cir. BAP2023Background
- Steven and Michele Swackhammer filed Chapter 12 in September 2018 and confirmed a consensual modified plan in September 2019.
- The Swackhammers sought successive plan modifications in 2020, 2021, March 2022, and a fourth modification after negotiations failed; each sought more time to pay secured creditor Farm Credit Services of America (Farm Credit).
- Farm Credit repeatedly objected, arguing the debtors failed to show a required substantial and unanticipated change in circumstances and that the proposed plans were not feasible; the bankruptcy court nonetheless approved the prior modifications.
- At a May 2022 evidentiary hearing Mr. Swackhammer testified about lost acreage caused by delayed financing, pandemic impacts, and health problems; the trustee expressed concern about feasibility but endorsed an orally modified proposal tied to land sales.
- At a subsequent telephonic hearing the bankruptcy court confirmed the fourth modified plan (with a dismissal-on-default shortcut), and Farm Credit appealed while the Swackhammers remained current on the fourth plan.
Issues
| Issue | Swackhammers' Argument | Farm Credit's Argument | Held |
|---|---|---|---|
| Whether §1229 requires a showing of a substantial (and unanticipated) change in circumstances to modify a confirmed Chapter 12 plan | §1229’s plain text allows modification without an extra-change requirement | §1229 should be read to require an unanticipated, substantial change to protect plan finality | The BAP holds at minimum a substantial change in circumstances is required; it need not decide generally whether that change must always be unanticipated, but finds the Swackhammers met an unanticipated-change standard here |
| Standard of review for confirming a modified plan under §1229 | De novo review (parties urged de novo) | De novo (same) | Court applies abuse-of-discretion review because §1229 modifications are discretionary |
| Whether the bankruptcy court’s factual findings (change in circumstances; feasibility) were clearly erroneous | Findings supported by testimony, exhibits, and court’s prior familiarity | Findings unsupported, evidence unclear, and earlier transcripts/exhibits absent | Findings were not clearly erroneous; court’s assessment of unanticipated substantial change and feasibility is affirmed |
| Whether the court could rely on prior hearings, pandemic context, and Mr. Swackhammer’s testimony to find feasibility and changed circumstances | Prior record, land-sale commitments, and testimony provide reasonable assurance of feasibility | Reliance on prior record and generalized pandemic references was improper and insufficient | Reliance was permissible here given the court’s four-year familiarity, admitted exhibits, and the Swackhammers’ demonstrated payments and commitments |
Key Cases Cited
- Bullard v. Blue Hills Bank, 575 U.S. 496 (U.S. 2015) (finality of orders denying confirmation and appellate jurisdiction)
- In re Johnson, 458 B.R. 745 (B.A.P. 8th Cir. 2011) (held §1329 modifications should be limited to substantial change in circumstances)
- Educ. Assistance Corp. v. Zellner, 827 F.2d 1222 (8th Cir. 1987) (dicta indicating plan may be modified for substantial change in ability to pay)
- In re Olsen, 861 F.2d 188 (8th Cir. 1988) (confirmation of a modified plan is discretionary)
- In re Ahlers, 794 F.2d 388 (8th Cir. 1986) (feasibility is a factual question reviewed for clear error)
- Norwest Bank Worthington v. Ahlers, 485 U.S. 197 (U.S. 1988) (discussing chapter 12 plan issues; Ahlers decision considered at the Supreme Court level)
- Murphy v. O’Donnell (In re Murphy), 474 F.3d 143 (4th Cir. 2007) (recognizing a substantial and unanticipated post-confirmation change standard)