447 B.R. 459
Bankr. D.S.C.2011Background
- Debtor Om Shivai, Inc. filed Chapter 11 as a small business debtor on June 29, 2010, in the District of South Carolina.
- The Debtor operates a Days Inn motel with 27 rooms in Richburg, SC, purchased in 1999.
- Sustainability concerns arise as monthly operating reports show positive net income in only four of eight recent months.
- The debtor’s secured debt totals approximately $1,137,386, including a mortgage around $1,083,586 and two tax liens; unsecured and priority debts are listed at about $84,503 and $2,000 respectively.
- Debtor’s Plan proposes long-term payments to First Citizens Bank, Chester County, SC Dept. of Revenue, and IRS, with a significant balloon payment and minimal payments to other classes, alongside an estimated $95,000 repair need and limited prospective funding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Feasibility under 11 U.S.C. 1129(a)(11) | UST contends plan is not feasible given cash-flow deficiencies. | Debtor asserts adequate plan structure and manageability to fund obligations. | Plan is not feasible; fails 1129(a)(11) feasibility requirement. |
| Best interests and dismissal/conversion under 11 U.S.C. 1112(b)(4) | UST/Creditor argue cause exists for dismissal due to continued losses and failure to file plan promptly. | Debtor contends potential rehabilitation and no prejudice; argues for conversion rather than dismissal. | Cause exists under 1112(b)(4)(A) and (J); case dismissed rather than converted. |
| 12 U.S.C. 1112(b)(2) protection | Debtor cannot invoke 1112(b)(2) protections due to lack of rehabilitation prospects. | N/A (court addresses statutory analysis) | Inapplicable because 1112(b)(4) causes already established; protection not available. |
Key Cases Cited
- In re Gyro-Trac (USA), Inc., 441 B.R. 470 (Bankr. D.S.C. 2010) (court independently evaluates plan feasibility under 1129(a)(11))
- In re Walker, 165 B.R. 994 (E.D. Va. 1994) (feasibility requires workable plan, not mere optimism)
- In re Radco Props., Inc., 402 B.R. 666 (Bankr. E.D.N.C. 2009) (feasibility and plan viability considerations in action)
- In re Westgate Props., Ltd., 432 B.R. 720 (Bankr. N.D. Ohio 2010) (discusses rehabilitation prospects and feasibility)
- In re Landmark Atlantic Hess Farm, LLC, No. 10-24656-DK, 2011 WL 831724 (Bankr. D. Md. 2011) (discusses analysis under 1112(b)(4) but WL citation used in opinion)