In re Hyde

1

IN RE LORRAINE MAE HYDE, DEBTOR.

No. 20-11525

United States Bankruptcy Court, E.D. Louisiana

June 6, 2022

CHAPTER 11

SECTION A

MEMORANDUM OPINION

MEREDITH S. GRABILL, UNITED STATES BANKRUPTCY JUDGE

Before the Court is the Chapter 11 Small Business SubChapter V Plan, [ECF Doc. 58], filed on behalf of the Debtor Lorraine Mae Hyde, and the amendments thereto (as amended the "Plan"), [ECF Docs. 81, 92, 115, 116 149, 172 & 173]; the Response and/or Objection of Clayton Law Firm, LLC To Plan of Reorganization Under Subchapter V, [ECF Doc. 121], filed by the Clayton Law Firm;^[1] the Objection, [ECF Doc. 122], filed by interested party Ryan Stumphauzer (the "Receiver");^[2] the Objection to Confirmation of the Plan, [ECF Doc. 124], filed by Creditor River Ventures, LLC ("River Ventures"); and the Objection to Confirmation of the Plan, [ECF Doc. 125], filed by Creditor RJ's Transportation.

On January 28, 2022, this Court held an evidentiary hearing to consider these matters (the "Hearing"). Afterward, the Court issued an Order identifying the exhibits admitted into evidence and allowing the filing of a post-trial brief on the issue of good faith and feasibility. [ECF Doc. 171]. At the instruction of the Court at the Hearing, the Debtor filed the Fourth Modified Plan of Reorganization Under Subchapter V Dated Monday, February 7, 2022 Filed by Lorraine Mae Hyde and a red-lined version of the Plan.^[3] [ECF Docs. 172 & 173]. On February 11, 2022, the Court issued an Order taking the matter under submission. [ECF Doc. 175]. On April 7, the Court granted the Debtor's Ex Parte Motion To Supplement the Record, which supplemented the Debtor's record with notification of the dismissal of the criminal matter pending in state court against the Debtor. [ECF Docs. 184 & 186].

After considering the pleadings, the exhibits introduced into evidence, the testimony and demeanor of the witnesses, the record in this case, applicable law, and the arguments of counsel, this Court OVERRULES the remaining objection and CONFIRMS the Debtor's Plan.

JURISDICTION AND VENUE

This Court has jurisdiction to grant the relief provided for herein pursuant to 28 U.S.C. § 1334. The matters presently before the Court constitute core proceedings that this Court may hear and determine on a final basis under 28 U.S.C. § 157(b)(2)(L). The venue of the Debtor's chapter 11 case is proper under 28 U.S.C. §§ 1408 and 1409(a).

FINDINGS OF FACT^[4]

A. The Debtor's Bankruptcy Filing and Post-Petition Activity

Prior to filing for bankruptcy relief, the Debtor principally earned income through a wholly owned limited liability company, Genesis Venture Logistics ("GVL"). GVL operated pursuant to several government and state contracts, but on August 7, 2020, GVL filed a voluntary petition in this District under subchapter V of chapter 11 of the Bankruptcy Code (the "GVL Case"), but that case was converted to chapter 7 on June 21, 2021. See In re Genesis Venture Logistics No. 20-11419, ECF Doc. 287.

The Debtor followed suit and on August 31, 2020, filed for bankruptcy relief under subchapter V of chapter 11 of the Bankruptcy Code, principally to deal with her guarantor liability for GVL's debts. [ECF Doc. 1].

In her Schedules, the Debtor lists her primary assets to be: (a) a residential lot and home located at 7101 Edgewater Drive, Mandeville, Louisiana, encumbered by a mortgage from Rocket Mortgage, LLC (the "Home"); (b) a 2017 GMC Sierra (the "Sierra"); and (c) a 2016 GMC Yukon (the "Yukon"). The Debtor valued the Home at $472, 000, the Sierra at $27, 000, and the Yukon at $39, 025. [ECF Docs. 32 & 172].

According to the Claims Register, 17 proofs of claim have been filed against the estate in this case. On September 25, 2020, Rocket Mortgage filed a proof of claim asserting a claim of $228, 046.25 secured by the mortgage on the Home; it later amended its proof of claim on October 20, 2021, to assert a secured claim of $260, 170.75. On October 1, 2020, Citizens Bank & Trust Co. filed a proof of claim in the amount of $632, 535.42; the basis for Citizen Bank & Trust's claim is the Debtor's personal guaranty of debts owed by GVL and secured by property held by non-debtor affiliate, Genesis Venture Investments, L.L.C. See Plan Art. IV; Proof of Claim No. 9. General unsecured claims total an estimated amount of $2, 277, 821.96, of which objecting creditor River Ventures holds a $287, 875.00 claim and claimant AmeriFactors Financial Group, LLC ("AmeriFactors") holds a $768, 940.05 claim; both River Ventures and AmeriFactors, however, have been classified separately as discussed below. Two priority unsecured claims have been filed: one from the Internal Revenue Service for $6, 529.30; and one from the Louisiana Department of Revenue for $1, 000.

The Debtor filed her first plan of reorganization on November 29, 2020, and amended that plan on September 20, 2021, September 29, 2021, November 4, 2021, December 22, 2021, and again on February 7, 2022, after the Hearing. [ECF Docs. 58, 81, 92, 115, 116, 149, 172 & 173].

B. The Debtor's Plan

The Debtor has reduced her monthly expenses and proposes to fund the Plan using her income from Social Security benefits and part-time work, as well as her non-filing spouse's income. See Plan § A. If the Debtor receives any income from another source, including annual bonuses received by the Debtor's non-filing spouse, the Plan proposes that the Debtor shall apply 50% of any such disposable income to the Plan. See Plan § A.

The Plan provides for the following treatment of claims:

Priority unsecured claims owed to the Internal Revenue service will be paid in full no later than thirty days after the effective date of the Plan. See Plan § 7.1.

After application of any retainer by the holder of an administrative expense claim, allowed administrative claimants shall receive a pro rata share of $24, 000 being held by the Debtor and her non-filing spouse from the refinance of their Home. See Plan § 7.1. Distributions to the remaining allowed administrative expense claimants will receive quarterly distributions of disposable income until paid in full. See Plan § 7.1.

The Debtor's secured lender, Rocket Mortgage (Class 1) is deemed unimpaired, will retain its lien, and will receive full payments of the remaining balance of its secured claim per the terms of its agreements. See Plan § 4. As a guarantor, the Debtor will continue to pay Citizens Bank & Trust (Class 2) pursuant to its agreement with GVL and will retain its mortgage and assignment of rents related to the office building held by Genesis Venture Investments, LLC.

General unsecured claims are classified into three classes: Class 4 consists of undisputed, noncontingent, and liquidated claims estimated to be $2, 227, 821.96; Class 5 consists of River Ventures' disputed claim; and Class 7 consists of AmeriFactors' claim. See Plan § 6.2(A). The Plan estimates the total amount of general unsecured claims in Classes 4, 5, and 7 to be $2, 227, 821.96. See Plan § 6.2(A). Under the proposed Plan, Class 4 will receive a pro rata share of projected quarterly disposable income after the holders of administrative expense claims are paid in full. See Plan § 6.2(A). The proposed Plan estimates that the holders of Class 4 claims will receive a total distribution of approximately $135, 300.80. See Plan § 6.2(A). Class 5 claimant, River Ventures, has two avenues of treatment under the proposed Plan. If River Ventures voted to accept the Plan, its claim would be treated under Class 4 as a general unsecured claim and would receive a pro rata distribution. See Plan § 6.2(A)(i). Because River Ventures voted to reject the Plan, the Plan sets aside and reserves for the benefit of River Ventures an amount equal to the distributions to which River Ventures would be entitled if it had accepted the Plan, but does not provide distributions until the resolution of the dispute between the Debtor and River Ventures by agreement or Final Order. See Plan § 6.2(A)(ii). The proposed Plan states River Ventures will only receive a pro rata share of the Debtor's projected quarterly disposable income if the claim is allowed. See Plan § 6.2(A)(ii).

Under the Plan, the Debtor (Class 6) will retain her interests in the property listed in the Schedules. See Plan § 4. AmeriFactors' claim of $755, 357 is classified separately in Class 7 because AmeriFactors has an independent right of recovery against third party Dunham Price Group LLC.^[5] AmeriFactors will receive a pro rata distribution with the same treatment of Class 4; however, AmeriFactors will reimburse the Debtor for any recoveries in excess of $755, 357.00 against Dunham Price Group LLC in the GVL Case. See Plan § 4.

The Plan proposes that the Debtor will make all Plan payments even though the Plan is proposed to be confirmed on a non-consensual basis. See Plan Art. VII. According to the Plan, in the event of a default of those Plan payments, the Debtor and her non-filing spouse shall grant a second mortgage on their Home not to exceed $200, 000 to be used for the benefit of holders of unpaid allowed administrative claims and the holders of allowed general unsecured claims. See Plan § 8.10.^[6] The Plan states the Debtor shall have 35 days from the receipt of a default notice, received via e-mail and U.S. mail by the Debtor, her non-filing spouse, the Debtor's general bankruptcy counsel, the Trustee, and the United States Trustee, to cure any payment default. See Plan § 8.10. If the Debtor fails to cure the payment default, then: (a) the Debtor and her non-filing spouse may obtain financing necessary to satisfy the unpaid balance of projected disposable income to be distributed under the proposed Plan within 63 days following the end of the...