656 B.R. 429
Bankr. D.N.M.2023Background
- Debtor Trinity Legacy Consortium, LLC filed a Subchapter V chapter 11 case and sought to extend the § 1189(b) 90-day plan-filing deadline from August 24, 2023 to October 23, 2023.
- Debtor previously deselected and then reselected Subchapter V, retained new counsel, and received four prior, unopposed extensions of the plan deadline.
- Multiple major unsecured creditors (claims ≈ $3.7M of ≈ $5M) participated in court-ordered mediation; mediator reports showed settlements with four creditors and ongoing negotiations with the Johnstons and Sacketts.
- Two creditors objected to the requested extension, arguing Subchapter V must be speedy, Debtor offered no live evidence, negotiations aren’t a proper basis, and Debtor delayed producing documents.
- The court adopted an equitable, Pioneer-guided standard for § 1189(b) (balancing relevant circumstances), found Debtor near consensual settlements, and granted a final one-month extension to October 23, 2023 while warning further extensions are unlikely and requiring a meaningful (not placeholder) plan.
Issues
| Issue | Debtor's Argument | Objecting Creditors' Argument | Held |
|---|---|---|---|
| Appropriate legal standard for § 1189(b) extensions | Court should permit extension to facilitate consensual plan; apply equitable balancing | Court should apply a strict "beyond debtor's control" test (deny if delay within debtor's control) | Court adopts an equitable Pioneer-style inquiry (balance prejudice, length, reason for delay, good faith, progress) |
| Whether mediation/negotiations justify extension | Mediation and near-settlements with major creditors justify extra time to file a meaningful plan | Negotiations alone are insufficient; debtor delayed producing documents and could file a placeholder plan | Negotiation progress is a relevant equitable factor and can justify a limited extension when balanced against creditor protections |
| Burden of proof / lack of live evidence | Relief may be granted based on docket record and mediator reports; Debtor close to settlement | Debtor failed to meet burden at hearing by not offering testimony or principals' attendance | Court acknowledged Debtor bore the burden but found record (mediator reports, prior unopposed extensions, trustee support) adequate to grant one-month extension |
| Whether extension warranted on these facts | One-month extension will allow concluding remaining settlements and a meaningful plan; little prejudice to creditors | Multiple prior extensions and Subchapter V's speed justify denial; risk of undue delay | Court granted extension to Oct. 23, 2023, finding no bad faith, limited creditor prejudice, potential greater harm from business shutdown; warned against further extensions |
Key Cases Cited
- Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380 (1993) (announces equitable, multi‑factor inquiry for excusable neglect and supports bankruptcy courts’ equitable balancing)
- In re Trepetin, 617 B.R. 841 (Bankr. D. Md. 2020) (applies equitable balancing to § 1189(b) requests and favors access to Subchapter V where fairness warrants)
- In re Majestic Gardens Condo. C Ass’n, Inc., 637 B.R. 755 (Bankr. S.D. Fla. 2022) (applies a stricter "beyond debtor's control" test and denies extension where counsel calendaring error caused delay)
- In re Baker, 625 B.R. 27 (Bankr. S.D. Tex. 2020) (adopts a multi‑factor test considering control, plan progress, relation of deficiencies to circumstances, and creditor objections; granted extension)
- In re Seven Stars on the Hudson Corp., 618 B.R. 333 (Bankr. S.D. Fla. 2020) (applies strict circumstances‑beyond‑debtor test to deny extension)