Phil Kean Designs Inc
Dated: June 29, 2026
Lori V. Vaughan
United States Bankruptcy Judge
www.flmb.uscourts.gov
MEMORANDUM OPINION ON CONFIRMATION OF DEBTOR‘S FINAL CHAPTER 11 SUBCHAPTER V PLAN OF REORGANIZATION
A key benefit of subchapter V of chapter 11 is that a debtor may confirm a plan without the affirmative vote of its creditors, but only if the plan is fair and equitable which requires devotion of its projected disposable income over the plan term. Debtor seeks to take advantage of this cramdown provision, but faces the objection of creditors Daniel and Patricia Stasny (collectively “Creditors” or “Stasnys“). Creditors assert debtor‘s plan pays too little over too short a period to be fair and equitable despite inclusion of a true-up mechanism that would potentially pay them more. Because debtor has demonstrated that the plan devotes its projected disposable income over the life of the plan, and there is no justification for extending the plan term, the Court overrules Creditors’ objection.
Phil Kean Designs Inc. (“Debtor“) is part of the Phil Kean Design Group—a group of Florida companies that provide design and construction services for custom, luxury homes.1 Debtor is the construction arm of the group.2 Debtor‘s Chief Executive Officer, Philip Kean, holds a 50% ownership interest in the company, while its Vice President, Bradley Grosberg, owns the remaining 50%.3
Debtor filed a voluntary petition for relief under chapter 11, subchapter V of the Bankruptcy Code on November 25, 2025 following a prolonged contract dispute with a former client.4 Although the $1.3 million arbitration award initially entered against Debtor in that dispute was later vacated, litigation costs significantly impaired Debtor‘s liquidity and disrupted its business operations resulting in this bankruptcy.5 Debtor filed its Subchapter V Plan of Reorganization on February 16, 2026 which provided for payment of Debtor‘s projected disposable income over three years based on attached projections.6 This initial plan drew objections from homeowners asserting construction defect claims, including, Tim and Petra Holt (collectively “Holts“), William C. Bray and Christine A. Bray (collectively “Brays“) and the Stasnys (together, the “Homeowners“).7 After some negotiations, Debtor amended its plan to provide for distribution of its surplus income in an effort to resolve the objections raised by the Homeowners.8 The Holts and Brays withdrew their objections.9 This and other changes were
Debtor‘s Plan divides claims and interests into five classes.12 Classes 1 and 2 comprise the allowed secured claims of Cogent Bank, which are unimpaired. Class 2(a) consists of the allowed secured claim of Golden Oak which is likewise unimpaired.13 As unimpaired classes, these secured creditors are presumed to accept the Plan under
Debtor‘s Plan proposes to pay unsecured creditors, pro rata, its projected disposable income over three-years for a total distribution of $91,217.76, paid in quarterly distributions.17 The Plan also requires Debtor to remit its “Surplus Income” to unsecured claimants on a semiannual basis.18 The Plan defines “Surplus Income” as “the amount by which Debtor‘s actual disposable income exceeds Debtor‘s projected disposable income for such period as set forth in the Plan‘s financial projections attached thereto.”19 Debtor must submit quarterly financial statements to support this calculation. Entitlement to such payment, however, is expressly conditioned upon a
The Court held a trial on March 25, 2026, to consider confirmation of the Plan and Creditors’ Objection.21 At trial, the Court admitted into evidence, without objection, Debtor‘s exhibits including its operating projections (the “Projections“).22 The Court also heard testimony from Debtor‘s president, Tommy Watkins (“Watkins“). Debtor‘s Plan will be funded out of the continued operation of its construction business. Debtor projects total income of $2,440,642.17 in year one, $2,485,115.01 in year two, and $2,530,477.31 in year three.23 The Projections reflect a slight upward trend over the life of the Plan, with total income increasing by 2%, health insurance expenses by 5%, and other expenses by 3% to account for annual wage increases.24 Insiders, Philip Kean and Bradley Grosberg, are not receiving any compensation or distributions from the reorganized Debtor during the Plan term.25
Watkins addressed the discrepancies between the Projections and Debtor‘s schedules. He explained that the $11,700,000.00 figure in Debtor‘s Statement of Financial Affairs reflects the firm‘s total gross revenue for 2025. The $2,223,642.17 income figure is the builder fee, calculated as 20% of total revenue, which reflects gross profit.26 Debtor typically undertakes six to eight new construction projects in a year, which could generate gross revenue of approximately $30 million,
Discussion
The dispute in this case centers around Debtor‘s payment of projected disposable income under the Plan. Debtor is not eligible to confirm the Plan as consensual under
As of the effective date of the plan—
(A) the plan provides that all of the projected disposable income of the debtor to be received in the 3-year period, or such longer period not to exceed 5 years as the court may fix, beginning on the date that the first payment is due under the plan will be applied to make payments under the plan; or…
For purposes of this section, the term ‘disposable income’ means the income that is received by the debtor and that is not reasonably necessary to be expended—
…
(2) for the payment of expenditures necessary for the continuation, preservation, or operation of the business of the debtor.
Creditors argue the Plan is not fair and equitable under
Bankruptcy courts outside this jurisdiction have examined the relationship between
This case presents a slightly different question. Creditors are not advocating for the inclusion of a true-up. Instead, they argue a true-up cannot replace the requirement that Debtor devote its projected disposable income under the Plan. On this point, the Court agrees.
There can be little doubt that a true-up provides added benefit to creditors by requiring Debtor to pay additional amounts if actual performance exceeds projections. Such a provision is also attractive, superficially, considering creditors have little or no recourse should a debtor outperform projections.29 Still, such a provision does not alleviate Debtor‘s statutory obligation to devote its projected disposable income to plan payments. This Court agrees with Packet Construction that requiring post-petition adjustment of plan payments would “read the word ‘projected’ out of the statute.” 672 B.R. 905 at 909. In interpreting a statute, “[T]he plain meaning of
Turning to the case at hand, Debtor‘s “Surplus Income” provision alone cannot satisfy the fair and equitable requirement of
Creditors also object to a three-year plan term requesting the Court fix a longer term due to Debtor‘s unique business model and revenue cycle. Creditors assert the Plan does not fully capture Debtor‘s projected disposable income and pays too little to Class 3 creditors. The Court disagrees.
Section 1191(c)(2) requires the Plan provide for Debtor‘s projected disposable income “received in the 3-year period, or such longer period not to exceed 5 years as the court may fix.” The Court has broad discretion in deciding whether to fix a term longer than three years to make the Plan fair and equitable. In re Trinity Fam. Prac. & Urgent Care PLLC, 661 B.R. 793, 821 (Bankr. W.D. Tex. 2024). Most courts agree that a three-year term is the default. See Trinity Fam., 661 B.R. at 819 (language of
These courts disagree, however, on when it is appropriate to extend the three-year period. In Urgent Care, the court held three years was the default plan term absent “unusual circumstances.” 2021 WL 6090985 at *10. The court in Trinity rejected the “unusual circumstances” test in favor of a totality of circumstances analysis utilizing five factors. 661 B.R. at 818, 822-23. The Court further ruled that when a party objects to the length of the plan, debtor bears the burden of establishing that the plan term is fair and equitable. 661 B.R. at 823. The court in Dark Rhiino agreed with a totality of circumstances analysis but rejected Trinity‘s conclusion that the debtor bears the burden to establish the period of plan payments as adding a requirement to the statute that does not exist. 2026 WL 1020585 at *8.
The Court agrees that a totality of the circumstances approach is appropriate and the factors cited in Trinity are useful for this purpose. However, the Court disagrees that the burden is on the debtor to supply evidence in support of the default plan length. While a debtor has the burden to establish a plan being confirmed under
Turning to the case at hand, the Court will consider the totality of circumstances utilizing the Trinity factors. These factors are neither exhaustive nor dispositive:
- Capital reserves or capital expenditures during the period of plan payments;
- Reasonableness of income and expenses set forth in the plan projections during the period of plan payments as compared to historical operations and operations during the post-petition, pre-confirmation time period;
- Salary and/or other payments to insiders during the period of plan payments;
- Risks and consequences of a longer period of plan payments; and
- Any other unique or extraordinary facts specific to the case.
Trinity Fam., 661 B.R. at 822.
Courts applying the Trinity factors or a “totality of circumstances” approach have declined to extend the plan beyond a three-year term for a variety of reasons. See Matter of Edgewood Food Mart, Inc., 666 B.R. 418, 439-40 (Bankr. N.D. Ga. 2024)(court declined to extend term because debtor‘s principal made several concessions allowing creditors to receive more within a three year term); In re Dark Rhiino Sec., Inc., Case No. 24-54658, 2026 WL 1020585, at *9-10 (Bankr. S.D. Ohio Apr. 13, 2026) (court declined to extend term because it could not find debtor had a reasonable likelihood to be able to make payments longer than a three-year period).
Applying the Trinity factors and considering the totality of circumstances, the Court does not find a longer plan term is warranted. The Projections show no capital reserve or capital expenditure during the proposed plan term. Debtor provided a reasonable estimate of its income and expenses during the plan term. Salaries during the plan term are likewise reasonable. Watkins testified at
The Court understands Creditors’ position. Extending the plan term could provide additional recovery to all creditors. Creditors’ argument here is based on a simple supposition that a longer period would result in more payments and hence a better recovery. This argument fails for several reasons. First, if this supposition were true here, it would be true in every case and always justify an extended plan term. Yet, as discussed,
In their initial objection, Creditors argued other bases to deny confirmation including, lack of good faith under
Conclusion
The Court finds that Debtor has met the requirements for confirmation of the Plan under
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Attorney Daniel A. Velasquez is directed to serve a copy of this order on interested parties and file a proof of service within three (3) days of entry of the order.